THRUSTMASTER INC
8-K, 1999-02-16
COMPUTER PERIPHERAL EQUIPMENT, NEC
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<PAGE>

                        SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549


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


                                    Form 8-K
                                 CURRENT REPORT


                     Pursuant to Section 13 or 15(d) of the
                        Securities Exchange Act of 1934


                               FEBRUARY 16, 1999
                             ---------------------
                                (Date of Report)


                               THRUSTMASTER, INC.
    ------------------------------------------------------------------------
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

           OREGON                 0-25520                  93-1040330
    ---------------------  -------------------------  ----------------------
       (State or Other       (Commission File No.)        (IRS Employer 
        Jurisdiction                                    Identification No.)
      of Incorporation)

        SUITE 400, 7175 N.W. EVERGREEN PARKWAY, HILLSBORO, OREGON  97124
  ----------------------------------------------------------------------------
               (Address of principal executive offices)(Zip Code)

                                 (503) 615-3200
  ----------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

<PAGE>

ITEM 5.    OTHER EVENTS

     On January 28, 1999, ThrustMaster, Inc. (the "Company") and three private
investors entered into a Securities Purchase Agreement pursuant to which the
investors agreed to provide equity line financing to the Company in an aggregate
amount up to $16 million.

     The equity line provides for three potential tranches of investment by the
investors in Common Stock of the Company.  Each tranche of investment is made
solely at the Company's election, subject to certain conditions, including the
market price of the Common Stock.  The amount of the initial tranche, which was
funded on January 28, 1998, was $4 million.  The 250,000 shares of Common Stock
issued on the closing date were priced at $16.00 per share, the closing bid
price of the Common Stock on the Nasdaq National Market on January 27, 1998. 
Shares issued upon any closing of tranches two or three will also be priced at
the closing bid price of the Common Stock on the trading day preceding the
applicable closing date.

     If specified closing conditions are satisfied, the Company will be
entitled, at its sole election, to request tranche two and three investments
during applicable periods ending 150 days after the closing date for the
preceding tranche.  The amount of the investment in each subsequent tranche
would range from $1.0 million to $6.0 million, depending upon the closing bid
price of the Common Stock at the time of the investment.  The Company may elect
that the minimum amount be invested if the average closing bid price per share
for the 10 business days preceding the applicable closing date is at least
$7.00; the Company may elect that up to the maximum amount be invested if the
closing bid price on the trading day preceding the closing date exceeds $20.00. 
The closing conditions applicable to the second and third tranches include,
among others, that the registration statement required to be filed by the
Company with the SEC in connection with the previous tranche has been effective
for at least 25 days and that the average daily trading volume of the Common
Stock on the Nasdaq National Market has met certain thresholds for the
20 business days preceding the applicable investment.  The Company, at its sole
election, may accelerate 50% of the tranche two investment if certain Common
Stock price-related thresholds have been satisfied.

     The equity line includes a "reset" mechanism which may result in the
issuance to the investors of additional shares of Common Stock at no additional
cost.  There are two reset periods for each tranche, each covering 50% of the
shares issued on the applicable closing date.  The first reset period is the 25
days after the effective date of a registration statement to be filed in
connection with that tranche.  The second reset period is the 25 days after the
end of the first reset period.  For each reset period, the reset price is the
average of the lowest ten trading days' closing bid prices during the related
25-day period.


                                       2
<PAGE>

The number of shares to be issued at the end of each reset is calculated by 
(a) multiplying the number of shares subject to price adjustment by (b) (i) 
an amount equal to 112.5% of the applicable tranche purchase price less the 
reset price divided by (ii) the reset price.

     The investors have agreed that, until the expiration of the final reset
period in connection with the equity line, they will not enter into certain
short sales of the Company's Common Stock.  These restrictions are set forth in
the Securities Purchase Agreement attached as an exhibit to this report.

     The equity line also provides for the issuance to the investors of warrants
to purchase Common Stock.  At the closing of the first tranche, warrants were
issued to purchase an aggregate of 70,754 shares of Common Stock.  The exercise
price applicable to 50% of such warrant shares is $20.00 per share; the exercise
price applicable to the remaining warrant shares is $22.40 per share.  The
warrants expire five years after the closing date.  To the extent the aggregate
investments in tranches one, two and three were to exceed $12 million,
additional warrants would be issued on the tranche three closing date to
purchase shares of Common Stock.  The exercise price for 50% of such shares
would be 125% of the closing bid price on the trading day preceding the tranche
three closing date, and the exercise price for the remaining 50% would be 140%
of such bid price.  The warrants are callable by the Company if the Common Stock
trades at or above 130% of the applicable exercise price for ten consecutive
trading days at any time 18 months after the applicable closing date.

     The initial sale of securities issued in connection with the equity line
was not registered under the Securities Act of 1933, as amended.  The Company
will register for resale by the investors all shares of Common Stock issued or
issuable in connection with the equity line by filing one or more registration
statements in connection with each tranche.  Each registration statement is
required to remain in effect for three years.

     The Company has granted a right of first refusal in favor of the investors
with respect to non-public issuances of its securities during the period
beginning on the tranche one closing date and ending 180 days after the
effective date of the first registration statement filed by the Company in
connection with the equity line.  Issuances of securities not subject to the
right of first refusal include securities issued under the Company's stock
option plans, shares issued upon exercise of currently outstanding warrants and
securities issued in connection with strategic transactions involving the
Company.


                                       3
<PAGE>

ITEM 7.   FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS

     Listed below are the exhibits filed as a part of this report.

     (c)  EXHIBITS

          EXHIBIT NO.         DESCRIPTION
          -----------         -----------

             4.5              Securities Purchase Agreement dated as of 
                              January 28, 1999 among ThrustMaster, Inc. and
                              the Purchasers party thereto.

             4.6              Form of Callable Warrant.

             4.7              Registration Rights Agreement dated as of
                              January 28, 1999 among ThrustMaster, Inc. and 
                              the Purchasers party thereto.


                                       4
<PAGE>

                                    SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                        THRUSTMASTER, INC.


Dated:  February 16, 1999               By /s/ Frank G. Hausmann
                                           -------------------------------------
                                           Frank G. Hausmann, 
                                           President and CEO


                                       5

<PAGE>

                                                                   EXHIBIT 4.5


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


                         SECURITIES PURCHASE AGREEMENT

                                     Among

                              THRUSTMASTER, INC., 

                        STRONG RIVER INVESTMENTS, INC.,

                           WESTOVER INVESTMENTS L.P.

                                      and

                           MONTROSE INVESTMENTS L.P.




                                January 28, 1999


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

                                       1
<PAGE>

     SECURITIES PURCHASE AGREEMENT, dated as of January 28, 1999 (this 
"AGREEMENT"), among ThrustMaster, Inc., an Oregon corporation (the 
"COMPANY"), Strong River Investments Inc. ("STRONG RIVER"), a corporation 
organized under the laws of the British Virgin Islands, Westover Investments 
L.P. ("WESTOVER"), a Delaware limited partnership, and Montrose Investments 
L.P. ("MONTROSE"), a Cayman Islands exempt limited partnership. Strong River, 
Westover and Montrose are each referred to herein as a "PURCHASER" and are 
collectively referred to herein as the "PURCHASERS".

     WHEREAS, subject to the terms and conditions set forth in this 
Agreement, the Company desires to issue and the Purchasers desire to purchase 
shares (the "SHARES") of the Company's common stock, no par value (the 
"COMMON STOCK").

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

                                   ARTICLE I
                        PURCHASE AND SALE OF SECURITIES

     1.1  PURCHASE OF SHARES.  Subject to the terms and conditions set forth 
herein, the Company shall issue and sell to the Purchasers and the Purchasers 
shall purchase the Shares.

     For purposes of this Agreement, "BUSINESS DAY" and "PER SHARE MARKET 
VALUE" shall have the meanings set forth in EXHIBIT A.  Each of the Tranche 1 
Closing, the Tranche 2 Closing and Tranche 3 Closing are sometimes 
individually referred to herein as a "CLOSING". Each of the First Tranche 1 
Warrant, Second Tranche 1 Warrant, First Tranche 3 Warrant and Second Tranche 
3 Warrant are sometimes collectively referred to herein as the "WARRANTS".  
Each of the First Tranche 1 Adjustment Shares, Second Tranche 1 Adjustment 
Shares, First Tranche 2 Adjustment Shares, Second Tranche 2 Adjustment 
Shares, First Tranche 3 Adjustment Shares and Second Tranche 3 Adjustment 
Shares are sometimes collectively referred to herein as the "ADJUSTMENT 
SHARES".

     1.2  THE TRANCHE 1 CLOSING.  (a)  Subject to the terms and conditions 
set forth herein, the Company shall issue and sell to the Purchasers and the 
Purchasers shall purchase 250,000 Shares (the "TRANCHE 1 SHARES") for a 
purchase price of $4,000,000 (the "PURCHASE PRICE").  The closing of the 
purchase and sale of the Tranche 1 Shares (the "TRANCHE 1 CLOSING") shall 
take place at the offices of Robinson Silverman Pearce Aronsohn & Berman LLP 
("RSPAB"), 1290 Avenue of the Americas, New York, New York 10104, immediately 
following the execution hereof or such later date as the parties shall agree. 
 The date of the Tranche 1 Closing is hereinafter referred to as the "TRANCHE 
1 CLOSING DATE."

               (b)  At the Tranche 1 Closing, (i) the Company shall deliver 
to or cause to be delivered to (A) Strong River (1) a stock certificate, 
registered in the name of Strong River representing 125,000 Tranche 1 Shares 
to be acquired at the Tranche 1 Closing by it, (2) a

                                       2
<PAGE>

common stock purchase warrant (the "FIRST TRANCHE 1 WARRANT"), in the form of 
EXHIBIT D-1, registered in the name of Strong River, entitling the holder 
thereof to acquire 17,689 shares of Common Stock upon the terms set forth 
therein, (3) a common stock purchase warrant (the "SECOND TRANCHE 1 
WARRANT"), in the form of EXHIBIT D-2, registered in the name of Strong 
River, entitling the holder thereof to acquire 17,689 shares of Common Stock 
upon the terms set forth therein, (4) the legal opinion of Perkins Coie LLP 
outside counsel to the Company, addressed to the Strong River, substantially 
in the form attached hereto as EXHIBIT C, and (5) all other documents, 
instruments and writings required to have been delivered at or prior to the 
Tranche 1 Closing by the Company pursuant to this Agreement,  including 
without limitation, executed originals of each of the Registration Rights 
Agreement, dated the date hereof, between the Company and the Purchasers in 
the form of EXHIBIT A attached hereto (the "REGISTRATION RIGHTS AGREEMENT") 
and the Irrevocable Transfer Agent Instructions, in the form of EXHIBIT B 
attached hereto (the "TRANSFER AGENT INSTRUCTIONS"), delivered to and 
acknowledged by the Company and the Company's transfer agent, to (B) Westover 
(1) a stock certificate, registered in the name of Westover representing 
43,750 Tranche 1 Shares to be acquired at the Tranche 1 Closing by it, (2) a 
First Tranche 1 Warrant registered in the name of Westover, entitling the 
holder thereof to acquire 6,191 shares of Common Stock upon the terms set 
forth therein, (3) a Second Tranche 1 Warrant registered in the name of 
Westover, entitling the holder thereof to acquire 6,191 shares of Common 
Stock upon the terms set forth therein, (4) the legal opinion of Perkins Coie 
LLP outside counsel to the Company, addressed to Westover, substantially in 
the form attached hereto as EXHIBIT C, and (5) all other documents, 
instruments and writings required to have been delivered at or prior to the 
Tranche 1 Closing by the Company pursuant to this Agreement,  including 
without limitation, executed originals of each of the Registration Rights 
Agreement and the Irrevocable Transfer Agent Instructions, delivered to and 
acknowledged by the Company and the Company's transfer agent, and to (C) 
Montrose (1) a stock certificate, registered in the name of Westover 
representing 81,250 Tranche 1 Shares to be acquired at the Tranche 1 Closing 
by it, (2) a First Tranche 1 Warrant registered in the name of Montrose, 
entitling the holder thereof to acquire 11,497 shares of Common Stock upon 
the terms set forth therein, (3) a Second Tranche 1 Warrant registered in the 
name of Montrose, entitling the holder thereof to acquire 11,497 shares of 
Common Stock upon the terms set forth therein, (4) the legal opinion of 
Perkins Coie LLP outside counsel to the Company, addressed to Montrose, 
substantially in the form attached hereto as EXHIBIT C, and (5) all other 
documents, instruments and writings required to have been delivered at or 
prior to the Tranche 1 Closing by the Company pursuant to this Agreement,  
including without limitation, executed originals of each of the Registration 
Rights Agreement and the Irrevocable Transfer Agent Instructions, delivered 
to and acknowledged by the Company and the Company's transfer agent, (b) the 
Purchasers shall deliver or cause to be delivered to the Company (1) 
$4,000,000 (the "TRANCHE 1 PURCHASE PRICE") in immediately available funds 
by wire transfer to an account designated in writing by the Company for such 
purpose on or prior to the Tranche 1 Closing Date, and (2) all documents, 
instruments and writings required to have been delivered at or prior to the 
Tranche 1 Closing by the Purchasers pursuant to this Agreement, including, 
without limitation, an executed Registration Rights Agreement.

     1.3    THE TRANCHE 2 CLOSING.  (a)  Subject to the terms and conditions 
set forth in this Agreement, the Company shall have the right to deliver a 
written notice to the Purchasers (a

                                       3
<PAGE>

"SUBSEQUENT FINANCING NOTICE") requiring the Purchasers or any other fund 
under common management with any of the Purchasers (a "Designee") to purchase 
such number of shares of Common Stock, for an aggregate purchase price of no 
less than $1,000,000 and no more than $6,000,000 (the "TRANCHE 2 PURCHASE 
PRICE"), equal to the Tranche 2 Purchase Price divided by the Per Share 
Market Value of the Common Stock on the trading day immediately preceding the 
Tranche 2 Closing Date (the "TRANCHE 2 SHARES") or, if applicable, 50% of the 
Tranche 2 Purchase Price (the "EARLY TRANCHE 2 PURCHASE PRICE") divided by 
the Per Share Market Value of the Common Stock on the trading day immediately 
preceding the Early Tranche 2 Closing Date (the "EARLY TRANCHE 2 SHARES"),  
PROVIDED, HOWEVER that the Tranche 2 Purchase Price shall not be in excess of 
(i) $1,000,000 if the Per Share Market Value on the trading day immediately 
preceding the Tranche 2 Closing Date, or the Early Tranche 2 Closing Date, if 
applicable, is less than or equal to $8.00, (ii) $2,000,000 if the Per Share 
Market Value on the trading day immediately preceding the Tranche 2 Closing 
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than 
$8.00 but less than or equal to $9.00, (iii) $3,000,000 if the Per Share 
Market Value on the trading day immediately preceding the Tranche 2 Closing 
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than 
$9.00 but less than or equal to $10.00, (iv) $4,000,000 if the Per Share 
Market Value on the trading day immediately preceding the Tranche 2 Closing 
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than 
$10.00 but less than or equal to $17.00, (v) $4,500,000 if the Per Share 
Market Value on the trading day immediately preceding the Tranche 2 Closing 
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than 
$17.00 but less than or equal to $18.00, (vi) $5,000,000 if the Per Share 
Market Value on the trading day immediately preceding the Tranche 2 Closing 
Date, or the Early Tranche 2 Closing Date, if applicable, is greater than 
$18.00 but less than or equal to $19.00, (vii) $5,500,000 if the Per Share 
Market Value on the Tranche 2 Closing Date, or the Early Tranche 2 Closing 
Date, if applicable, is greater than $19.00 but less than or equal to $20.00, 
and (viii) $6,000,000 if the Per Share Market Value on the trading day 
immediately preceding the Tranche 2 Closing Date, or the Early Tranche 2 
Closing Date, if applicable, is greater than $20.00.  The Company may not 
deliver the Subsequent Financing Notice relating to the Tranche 2 Shares 
earlier than five (5) Business Days after the Second Tranche 1 Adjustment 
Date or, if such day is not a Business Day, the next succeeding Business Day. 
Notwithstanding anything to the contrary ontained herein, in the event that 
the average Per Share Market Value for the 25 calendar days immediately 
preceding the First Tranche 1 Adjustment Date is greater than $12.00 and the 
Per Share Market Value on the First Tranche 1 Adjustment Date is greater than 
$10.00, the Company shall have the right to deliver a Subsequent Financing 
Notice commencing one trading day after the First Tranche 1 Adjustment Date 
(the "EARLY NOTICE DATE") requiring the Purchasers to purchase the Early 
Tranche 2 Shares.  The closing of the purchase and sale of the Early Tranche 
2 Shares (the "EARLY TRANCHE 2 CLOSING"), if applicable, shall take place at 
the offices of RSPAB on the fifth Business Day after the Subsequent Financing 
Notice relating to the Early Tranche 2 Shares is deemed delivered hereunder 
or on such other date as otherwise agreed to by the parties; PROVIDED, 
HOWEVER, that in no case shall the Early Tranche 2 Closing take place unless 
and until the conditions listed in SECTION 4.1 have been satisfied by the 
Company or waived by the Purchasers and in no event shall the Early Tranche 2 
Closing occur subsequent to the 10th Business Day after the Early Notice Date 
(such date, the "EARLY TRANCHE 2 CLOSING EXPIRATION DATE").  The date of the 
Early Tranche 2 Closing is hereinafter referred to as the "EARLY TRANCHE 2 

                                       4
<PAGE>

CLOSING DATE." The closing of the purchase and sale of all of the Tranche 2 
Shares, or the remaining 50% of the Tranche 2 Shares, if applicable, (the 
"TRANCHE 2 CLOSING") shall take place at the offices of RSPAB on the fifth 
Business Day after the Subsequent Financing Notice requiring the purchase of 
such Shares is deemed delivered hereunder or on such other date as otherwise 
agreed to by the parties; PROVIDED, HOWEVER, that in no case shall the 
Tranche 2 Closing take place unless and until the conditions listed in 
SECTION 4.1 have been satisfied by the Company or waived by the Purchasers 
and in no event shall the Tranche 2 Closing occur subsequent to the 150th day 
after the Tranche 1 Closing Date or, if such day is not a Business Day, the 
next succeeding Business Day (such date, the "TRANCHE 2 CLOSING EXPIRATION 
DATE").  The date of the Tranche 2 Closing is hereinafter referred to as the 
"TRANCHE 2 CLOSING DATE."

               (b)(i)    At the Early Tranche 2 Closing, if applicable, (i) 
the Company shall deliver to or cause to be delivered to each Purchaser (1) a 
stock certificate, registered in the name of such Purchaser or such 
Purchaser's Designee representing such number of Early Tranche 2 Shares equal 
to the Early Tranche 2 Purchase Price paid by such Purchaser or such 
Purchaser's Designee divided by the Per Share Market Value of the Common 
Stock on the trading day immediately preceding the Early Tranche 2 Closing 
Date, (2) the legal opinion referred to in Section 4.1(xi), and (3) all other 
documents, instruments and writings required to have been delivered at or 
prior to the Early Tranche 2 Closing Date by the Company pursuant to this 
Agreement, including the Transfer Agent Instructions referenced in Section 
4.1(xvi), and (b) the Purchasers shall deliver or cause to be delivered to 
the Company (1) the Early Tranche 2 Purchase Price, in immediately available 
funds by wire transfer to an account designated in writing by the Company for 
such purpose on or prior to the Early Tranche 2 Closing Date, and (2) all 
documents, instruments and writings required to have been delivered at or 
prior to the Early Tranche 2 Closing Date by the Purchasers pursuant to this 
Agreement.

               (ii) At the Tranche 2 Closing, (i) the Company shall deliver 
to or cause to be delivered to each Purchaser (1) a stock certificate, 
registered in the name of such Purchaser or such Purchaser's Designee 
representing such number of Tranche 2 Shares equal to the Tranche 2 Purchase 
Price (or 50% of the Tranche 2 Purchase Price if there has been an Early 
Tranche 2 Closing pursuant to Section 1.3(b)(i) above) paid by such Purchaser 
or such Purchaser's Designee divided by the Per Share Market Value of the 
Common Stock on the trading day immediately preceding the Tranche 2 Closing 
Date, (2) the legal opinion referred to in Section 4.1(xi), and (3) all other 
documents, instruments and writings required to have been delivered at or 
prior to the Tranche 2 Closing Date by the Company pursuant to this 
Agreement, including the Transfer Agent Instructions referenced in Section 
4.1(xvi), and (b) the Purchasers shall deliver or cause to be delivered to 
the Company (1) the Tranche 2 Purchase Price (or 50% of the Tranche 2 
Purchase Price if there has been an Early Tranche 2 Closing pursuant to 
Section 1.3(b)(i) above), in immediately available funds by wire transfer to 
an account designated in writing by the Company for such purpose on or prior 
to the Tranche 2 Closing Date, and (2) all documents, instruments and 
writings required to have been delivered at or prior to the Tranche 2 Closing 
Date by the Purchasers pursuant to this Agreement.

                                       5
<PAGE>

     1.4    THE TRANCHE 3 CLOSING.  (a)  Subject to the terms and conditions 
set forth in this Agreement, the Company shall have the right to deliver a 
Subsequent Financing Notice requiring the Purchasers to purchase such number 
of shares of Common Stock (the "TRANCHE 3 SHARES"), for an aggregate purchase 
price of no less than $1,000,000 and no more than $6,000,000 (the "TRANCHE 3 
PURCHASE PRICE"), equal to the Tranche 3 Purchase Price divided by the Per 
Share Market Value of the Common Stock on the trading day immediately 
preceding the Tranche 3 Closing Date, PROVIDED, HOWEVER that the Tranche 3 
Purchase Price shall not be in excess of (i) $1,000,000 if the Per Share 
Market Value on the trading day immediately preceding the Tranche 3 Closing 
Date is less than or equal to $8.00, (ii) $2,000,000 if the Per Share Market 
Value on the trading day immediately preceding the Tranche 3 Closing Date is 
greater than $8.00 but less than or equal to $9.00, (iii) $3,000,000 if the 
Per Share Market Value on the trading day immediately preceding the Tranche 3 
Closing Date is greater than $9.00 but less than or equal to $10.00, (iv) 
$4,000,000 if the Per Share Market Value on the trading day immediately 
preceding the Tranche 3 Closing Date is greater than $10.00 but less than or 
equal to $17.00, (v) $4,500,000 if the Per Share Market Value on the trading 
day immediately preceding the Tranche 3 Closing Date is greater than $17.00 
but less than or equal to $18.00, (vi) $5,000,000 if the Per Share Market 
Value on the trading day immediately preceding the Tranche 3 Closing Date is 
greater than $18.00 but less than or equal to $19.00, (vii) $5,500,000 if the 
Per Share Market Value on the trading day immediately preceding the Tranche 3 
Closing Date is greater than $19.00 but less than or equal to $20.00, and 
(viii) $6,000,000 if the Per Share Market Value on the trading day 
immediately preceding the Tranche 3 Closing Date is greater than $20.00.  The 
Company may not deliver the Subsequent Financing Notice relating to the 
Tranche 3 Shares earlier than 5 Business Days after the earlier to occur of 
the Tranche 2 Closing Expiration Date or the Second Tranche 2 Adjustment Date 
or, if such day is not a Business Day, the next succeeding Business Day.  The 
closing of the purchase and sale of the Tranche 3 Shares (the "TRANCHE 3 
CLOSING") shall take place at the offices of RSPAB on the fifth Business Day 
after the Subsequent Financing Notice is deemed delivered hereunder or on 
such other date as otherwise agreed to by the parties; PROVIDED, HOWEVER, 
that in no case shall the Tranche 3 Closing take place unless and until the 
conditions listed in SECTION 4.2 have been satisfied by the Company or waived 
by the Purchasers and in no event shall the Tranche 3 Closing occur 
subsequent to the 150th day after the earlier to occur of the Tranche 2 
Closing Expiration Date or the Tranche 2 Closing Date or, if such day is not 
a Business Day, the next succeeding Business Day (such date, the "TRANCHE 3 
CLOSING EXPIRATION DATE"). The date of the Tranche 3 Closing is hereinafter 
referred to as the "TRANCHE 3 CLOSING DATE."

               (b)  At the Tranche 3 Closing, (i) the Company shall deliver 
to or cause to be delivered to each Purchaser (1) a stock certificate, 
registered in the name of such Purchaser or such Purchaser's Designee 
representing such number of Tranche 3 Shares equal to the Tranche 3 Purchase 
Price paid by such Purchaser or such Purchaser's Designee divided by the Per 
Share Market Value of the Common Stock on the trading day immediately 
preceding the Tranche 3 Closing Date to be acquired at the Tranche 3 Closing 
by the Purchasers, (2) a common stock purchase warrant (the "FIRST TRANCHE 3 
WARRANT"), in the form of EXHIBIT E-1, registered in the name of each 
Purchaser or the name of each Purchaser's Designee, entitling the Purchasers 
to acquire an aggregate number of shares of Common Stock equal to 6.25% of 
the quotient obtained

                                       6
<PAGE>

by dividing (A) (1) the sum of (i) the Tranche 1 Purchase Price, (ii) the 
Tranche 2 Purchase Price and (iii) the Tranche 3 Purchase Price less (2) 
$12,000,000, by (B) 132.5% times the Per Share Market Value of the Common 
Stock on the trading day immediately preceding the Tranche 3 Closing Date, at 
an exercise price equal to 125% of the Per Share Market Value of the Common 
Stock on the trading day immediately preceding the Tranche 3 Closing Date, 
upon the terms set forth therein, (3) a common stock purchase warrant (the 
"SECOND TRANCHE 3 WARRANT"), in the form of EXHIBIT E-2, registered in the 
name of each Purchaser or the name of each Purchaser's Designee, entitling 
the Purchasers to acquire an aggregate number of shares of Common Stock equal 
to 6.25% of the quotient obtained by dividing (A) (1) the sum of (i) the 
Tranche 1 Purchase Price, (ii) the Tranche 2 Purchase Price and (iii) the 
Tranche 3 Purchase Price less (2) $12,000,000, by (B) 132.5% times the Per 
Share Market Value of the Common Stock on the trading day immediately 
preceding the Tranche 3 Closing Date, at an exercise price equal to 140% of 
the Per Share Market Value of the Common Stock on the trading day immediately 
preceding the Tranche 3 Closing Date upon the terms set forth therein, (4) 
the legal opinion referred to in Section 4.2(xi), and (5) all other 
documents, instruments and writings required to have been delivered at or 
prior to the Tranche 3 Closing Date by the Company pursuant to this 
Agreement, including the Transfer Agent Instructions referenced in Section 
4.1(xvi), and (b) the Purchasers shall deliver or cause to be delivered to 
the Company (1) the Tranche 3 Purchase Price, in immediately available funds 
by wire transfer to an account designated in writing by the Company for such 
purpose on or prior to the Tranche 3 Closing Date, and (2) all documents, 
instruments and writings required to have been delivered at or prior to the 
Tranche 3 Closing Date by the Purchasers pursuant to this Agreement.

                                    ARTICLE II
                          REPRESENTATIONS AND WARRANTIES

     2.1  REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.  The 
Company hereby makes the following representations and warranties to the 
Purchasers:

          (a)  ORGANIZATION AND QUALIFICATION.  The Company is a corporation, 
duly incorporated and validly existing under the laws of the jurisdiction of 
its incorporation, with the requisite corporate power and authority to own 
and use its properties and assets and to carry on its business as currently 
conducted.  The Company has no subsidiaries other than those set forth on 
Schedule 2.1(a) (collectively the "SUBSIDIARIES").  Each of the Subsidiaries 
is an entity, duly incorporated or otherwise organized, validly existing and 
in good standing under the laws of the jurisdiction of its incorporation or 
organization (as applicable), with the requisite power and authority to own 
and use its properties and assets and to carry on its business as currently 
conducted.  Each of the Company and the Subsidiaries is duly qualified to do 
business and is in good standing as a foreign corporation in each 
jurisdiction in which the nature of the business conducted or property owned 
by it makes such qualification necessary, except where the failure to be so 
qualified or in good standing, as the case may be, could not, individually or 
in the aggregate, be reasonably expected to have or result in a material 
adverse effect on the results of operations,

                                       7
<PAGE>

assets, prospects, or condition (financial or otherwise) of the Company and 
the Subsidiaries, taken as a whole (a "MATERIAL ADVERSE EFFECT").

          (b)  AUTHORIZATION; ENFORCEMENT.  The Company has the requisite 
corporate power and authority to enter into and to consummate the 
transactions contemplated by each of this Agreement, the Registration Rights 
Agreement and the Warrants (collectively, the "TRANSACTION DOCUMENTS"), and 
otherwise to carry out its obligations thereunder.  The execution and 
delivery of each of the Transaction Documents by the Company and the 
consummation by it of the transactions contemplated thereby have been duly 
authorized by all necessary corporate action on the part of the Company and 
no further corporate action is required by the Company.  Each of the 
Transaction Documents has been duly executed by the Company and, when 
delivered (or filed, as the case may be) in accordance with the terms hereof, 
will constitute the valid and binding obligation of the Company enforceable 
against the Company in accordance with its terms.  Neither the Company nor 
any Subsidiary is in violation of any of the provisions of its respective 
articles of incorporation, by-laws or other charter documents.

          (c)  CAPITALIZATION.  The number of authorized, issued and 
outstanding capital stock of the Company is set forth in SCHEDULE 2.1(c).  No 
shares of Common Stock are entitled to statutory preemptive or similar 
rights, nor is any holder of the Common Stock entitled to preemptive or 
similar rights arising out of any agreement or understanding with the Company 
by virtue of any of the Transaction Documents.  Except as disclosed in 
SCHEDULE 2.1(c), there are no outstanding options, warrants, script rights to 
subscribe to, calls or commitments of any character whatsoever relating to, 
or, except as a result of the purchase and sale of the Securities, rights or 
obligations convertible into or exchangeable for, or giving any Person any 
right to subscribe for or acquire any shares of Common Stock, or contracts, 
commitments, understandings, or arrangements by which the Company or any 
Subsidiary is or may become bound to issue additional shares of Common Stock, 
or securities or rights convertible or exchangeable into shares of Common 
Stock.  To the knowledge of the Company, except as specifically disclosed in 
the SEC Reports  (as defined below) or SCHEDULE 2.1(c), no Person or group of 
related Persons beneficially owns (as determined pursuant to Rule 13d-3 
promulgated under the Securities Exchange Act of 1934, as amended (the 
"EXCHANGE ACT")) or has the right to acquire by agreement with or by 
obligation binding upon the Company beneficial ownership of in excess of 5% 
of the Common Shares.  A "PERSON" means an individual or corporation, 
partnership, trust, incorporated or unincorporated association, joint 
venture, limited liability company, joint stock company, government (or an 
agency or subdivision thereof) or other entity of any kind.

          (d)  ISSUANCE OF THE SECURITIES  The Securities are duly 
authorized, and, when issued and paid for in accordance with the terms 
hereof, shall have been validly issued, fully paid and nonassessable, free 
and clear of all liens, encumbrances and rights of first refusal of any kind 
created by the Company (collectively, "LIENS").  The Company has on the date 
hereof and will on each Closing Date, at all times while the Warrants are 
outstanding, maintain an adequate reserve of duly authorized Common Stock, to 
enable it to perform its exercise and other obligations under this Agreement 
and the Warrants on each such Closing Date.  With respect to the Securities 
to be issued at or in connection with each Closing hereunder, such number of  
reserved and available

                                       8
<PAGE>

shares of Common Stock is not less than the sum (i) the maximum number of 
shares of Common Stock which may be issued to the Purchasers pursuant to 
Section 1.3 on the Tranche 2 Closing Date and pursuant to Section 1.4 on the 
Tranche 3 Closing Date, respectively, assuming, that each of the Tranche 2 
Purchase Price and the Tranche 3 Purchase Price equals $6,000,000, (ii) the 
maximum number of Adjustment Shares which may be issued to the Purchasers 
pursuant to Section 3.15 at any time after the Tranche 1 Closing Date, the 
Tranche 2 Closing Date and Tranche 3 Closing Date, respectively, assuming 
that the Per Share Market Value of the Common Stock utilized to determine any 
such Adjustment Price on each such date is 50% of the Per Share Market Value 
on the trading day immediately preceding the Tranche 1 Closing Date and (iii) 
the number of shares of Common Stock issuable upon exercise of the First 
Tranche 1 Warrants and Second Tranche 1 Warrants and (iv) the number of 
shares of Common Stock issuable upon exercise of the First Tranche 3 Warrants 
and Second Tranche 3 Warrants assuming that the Tranche 2 Purchase Price is 
equal to $6,000,000 and the Tranche 3 Purchase Price is equal to $6,000,000 
and the Per Share Market Value of the Common Stock on the trading day 
immediately preceding the Tranche 3 Closing Date is $20.01 (such number of 
shares of Common Stock to be reserved prior to each Closing Date shall be 
referred to as the "INITIAL MINIMUM").  All such authorized shares of Common 
Stock shall be duly reserved for issuance to the holders of the  Shares, 
Adjustment Shares and the Warrants.  The shares of Common Stock issuable upon 
exercise of the Warrants are referred to herein as the "UNDERLYING SHARES".  
The Shares, the Adjustment Shares, the Warrants and the Underlying Shares are 
collectively referred to as, the "SECURITIES."

          (e)  NO CONFLICTS.  The execution, delivery and performance of the 
Transaction Documents by the Company and the consummation by the Company of 
the transactions contemplated thereby do not and will not (i) conflict with 
or violate any provision of its Articles of Incorporation (as amended through 
the date hereof), or (ii) subject to obtaining the Required Approvals (as 
defined below), 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 
(with or without notice, lapse of time or both) of, any agreement, credit 
facility,  indenture or instrument (evidencing a Company debt or otherwise) 
to which the Company or any Subsidiary is a party or by which any property or 
asset of the Company or any Subsidiary is bound or affected, or (iii) result 
in a violation of any law, rule, regulation, order, judgment, injunction, 
decree or other restriction of any court or governmental authority to which 
the Company is subject (including federal and state securities laws and 
regulations and the rules and regulations of the principal market or exchange 
on which the Common Stock is listed or traded), or by which any property or 
asset of the Company is bound or affected, except in the case of each of 
clauses (ii) and (iii), as could not, individually or in the aggregate, 
reasonably be expected to have or result in a Material Adverse Effect.  The 
business of the Company is not being conducted in violation of any law, 
ordinance or regulation of any governmental authority, except for violations 
which, individually or in the aggregate, could not reasonably be expected to 
have or result in a Material Adverse Effect.

          (f)  FILINGS, CONSENTS AND APPROVALS.  Neither the Company nor any 
Subsidiary is required to obtain any consent, waiver, authorization or order 
of, give any notice to, or make

                                       9
<PAGE>

any filing or registration with, any court or other federal, state, local or 
other governmental authority or other Person in connection with the 
execution, delivery and performance by the Company of the Transaction 
Documents, other than (i) the filing of the registration statements with the 
Commission meeting the requirements set forth in the Registration Rights 
Agreement and covering the resale of the Shares, the Adjustment Shares and 
the Underlying Shares by the Purchasers, (ii) the application(s) to the 
Nasdaq National Market (the "NASDAQ") for the listing of the Shares, the 
Adjustment Shares and the Underlying Shares with the NASDAQ (and with any 
other national securities exchange or market on which the Common Stock is 
then listed), (iii) applicable Blue Sky filings, (iv) the filing of Current 
Reports on Form 8-K with the Commission disclosing the transaction 
contemplated hereby, (v) the filing of Forms D with the Commission as 
required by Regulation D promulgated under the Securities Act and (vi) in all 
other cases where the failure to obtain such consent, waiver, authorization 
or order, or to give such notice or make such filing or registration could 
not have or result in, individually or in the aggregate, a Material Adverse 
Effect (the consents, waivers,  authorizations, orders, notices and filings 
referred to in (i)-(iv) of this Section are, collectively, the "REQUIRED 
APPROVALS").

          (g)   LITIGATION; PROCEEDINGS.  There is no action, suit, notice of 
violation, proceeding or investigation pending or, to the knowledge of the 
Company, threatened against or affecting the Company or any of its 
Subsidiaries or any of their respective properties before or by any court, 
governmental or administrative agency or regulatory authority (federal, 
state, county, local or foreign) which (i) adversely affects or challenges 
the legality, validity or enforceability of any of the Transaction Documents 
or the Securities or (ii) could, individually or in the aggregate, be 
reasonably expected to have or result in a Material Adverse Effect.

          (h)  NO DEFAULT OR VIOLATION.  Neither the Company nor any 
Subsidiary (i) is in default under or in violation of (and no event has 
occurred which has not been waived which, with notice or lapse of time or 
both, would result in a default by the Company or any Subsidiary under), nor 
has the Company or any Subsidiary received notice of a claim that it is in 
default under or that it is in violation of, any indenture, loan or credit 
agreement or any other agreement or instrument to which it is a party or by 
which it or any of its properties is bound, (ii) is in violation of any order 
of any court, arbitrator or governmental body, or (iii) is in violation of 
any statute, rule or regulation of any governmental authority, except, in 
each case as could not individually or in the aggregate, reasonably be 
expected to, have or result in a Material Adverse Effect.

          (i)  PRIVATE OFFERING.  Assuming the accuracy of the 
representations and warranties of the Purchasers set forth in Sections 
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers 
as contemplated hereby are exempt from the registration requirements of the 
Securities Act of 1933, as amended (the "SECURITIES ACT").  Neither the 
Company nor, to the Company's knowledge, any Person acting on its behalf has 
taken any action which could subject the offering, issuance or sale of the 
Securities to the registration requirements of the Securities Act.  Neither 
the Company nor, to the Company's knowledge, any Person acting on the 
Company's behalf has solicited any offer to buy or sell the Securities by 
means of any form of general solicitation or advertising.

                                      10
<PAGE>

          (j)   SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all 
reports required to be filed by it under the Exchange Act, including pursuant 
to Section 13(a) or 15(d) thereof, for the three years preceding the date 
hereof (or such shorter period as the Company was required by law to file 
such material) (the foregoing materials being collectively referred to herein 
as the "SEC REPORTS" and, together with the Schedules to this Agreement the 
"DISCLOSURE MATERIALS") on a timely basis or has received a valid extension 
of such time of filing and has filed any such SEC Reports prior to the 
expiration of any such extension.  As of their respective dates, the SEC 
Reports complied in all material respects with the requirements of the 
Exchange Act and, the rules and regulations promulgated thereunder, and none 
of the SEC Reports, when filed, 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. All material 
agreements to which the Company is a party or to which the property or assets 
of the Company are subject have been filed as exhibits to the SEC Reports to 
the extent required.  The financial statements of the Company included in the 
SEC Reports comply in all material respects with applicable accounting 
requirements and the rules and regulations of the Commission with respect 
thereto as in effect at the time of filing.  Such financial statements have 
been prepared in accordance with generally accepted accounting principles 
("GAAP") applied on a consistent basis during the periods involved, except as 
may be otherwise specified in such financial statements or the notes thereto 
and the unaudited financial statement do not contain footnotes required by 
GAAP, and fairly present in all material respects the financial position of 
the Company and its consolidated subsidiaries as of and for the dates thereof 
and the results of operations and cash flows for the periods then ended, 
subject, in the case of unaudited statements, to normal, immaterial, year-end 
audit adjustments. Since September 30, 1998, except as specifically disclosed 
in the SEC Reports or SCHEDULE 2.1(j) annexed hereto, (a) there has been no 
event, occurrence or development that has had or that could reasonably be 
expected to have or result in a Material Adverse Effect, (b) the Company has 
not incurred any liabilities (contingent or otherwise) other than (x) 
liabilities incurred in the ordinary course of business consistent with past 
practice and (y) liabilities not required to be reflected in the Company's 
financial statements pursuant to GAAP or required to be disclosed in filings 
made with the Commission, (c) the Company has not altered its method of 
accounting or the identity of its auditors and (d) the Company has not 
declared or made any payment or distribution of cash or other property to its 
stockholders or officers or directors (other than in compliance with existing 
Company stock option plans) with respect to its capital stock, or purchased, 
redeemed (or made any agreements to purchase or redeem) any shares of its 
capital stock.  The Company last filed audited financial statements with the 
Commission on March 26, 1998, and has not received any comments from the 
Commission in respect thereof.

          (k)  INVESTMENT COMPANY.  The Company is not, and is not an 
Affiliate (as defined in Rule 405 under the Securities Act) of, an 
"investment company" within the meaning of the Investment Company Act of 
1940, as amended.

          (l)   CERTAIN FEES.  No fees or commissions will be payable by the 
Company to any broker, financial advisor or consultant, finder, placement 
agent, investment banker, or bank

                                      11
<PAGE>

with respect to the transactions contemplated by this Agreement.  The 
Purchasers shall have no obligation with respect to any fees or with respect 
to any claims made by or on behalf of other Persons for fees of a type 
contemplated in this Section that may be due in connection with the 
transactions contemplated by this Agreement as a result of action by or on 
behalf of the Company or any of its Affiliates.

          (m)  FORM S-3 ELIGIBILITY.  The Company is eligible to register 
securities for resale with the Commission under Form S-3 promulgated under 
the Securities Act.

          (n)  LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE.  The Company 
has not, in the two years preceding the date hereof, received notice (written 
or oral) from the NASDAQ or any other stock exchange, market or trading 
facility on which the Common Stock is or has been listed (or on which it has 
been quoted) to the effect that the Company is not in compliance with the 
listing or maintenance requirements of such exchange or market.  The Company 
is currently in compliance with all such maintenance requirements and no fact 
or circumstances currently exist which could reasonably be expected to result 
in noncompliance with such maintenance requirements in the foreseeable future.

          (o)  PATENTS AND TRADEMARKS.  The Company has, or has rights to 
use, all patents, patent applications, trademarks, trademark applications, 
service marks, trade names, copyrights, licenses and rights (collectively, 
the "INTELLECTUAL PROPERTY RIGHTS") which are necessary or material for use 
in connection with its business, and which the failure to so have would have 
a Material Adverse Effect.  To the best knowledge of the Company, all such 
Intellectual Property Rights are enforceable and there is no existing 
infringement by another Person of any of the Intellectual Property Rights.

          (p)  REGISTRATION RIGHTS; RIGHTS OF PARTICIPATION.  Except as set 
forth on SCHEDULE 6(b) to the Registration Rights Agreement, (i) the Company 
has not granted or agreed to grant to any Person any rights (including 
"piggy-back" registration rights) to have any securities of the Company 
registered with the Commission or any other governmental authority which has 
not been satisfied and (ii) no Person, has any right of first refusal, 
preemptive right, right of participation, or any similar right to participate 
in the transactions contemplated by the Transaction Documents.

          (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 as described in the SEC Reports, except where the 
failure to possess such permits could not, individually or in the aggregate, 
have or result in a Material Adverse Effect ("MATERIAL PERMITS"), and neither 
the Company nor any such Subsidiary has received any notice of proceedings 
relating to the revocation or modification of any Material Permit.

          (r)  TITLE.  The Company and the Subsidiaries have good and 
marketable title in fee simple to all real property and personal property 
owned by them which is material to the

                                      12
<PAGE>

business of the Company and its Subsidiaries, in each case free and clear of 
all Liens, except for liens, claims or encumbrances 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 its Subsidiaries.  
Any real property and facilities held under lease by the Company and its 
Subsidiaries are held by them under valid, subsisting and enforceable leases 
with such exceptions as are not material and do not materially interfere with 
the use made and proposed to be made of such property and buildings by the 
Company and its Subsidiaries.

          (s)  DISCLOSURE.  All disclosure provided to the Purchasers 
regarding the Company, its business and the transactions contemplated hereby, 
including the  Schedules to this Agreement, furnished by or on behalf of the 
Company are true and correct and do not contain any untrue statement of a 
material fact or omit to state any material fact necessary in order to make 
the statements made therein, in light of the circumstances under which they 
were made, not misleading.

     2.2  REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.  The Purchasers 
hereby jointly and severally represent and warrant to the Company as follows:

          (a)  ORGANIZATION; AUTHORITY.  Such Purchaser is duly organized, 
validly existing and in good standing under the laws of the jurisdiction of 
its organization with the requisite corporate power and authority, to enter 
into and to consummate the transactions contemplated by the Transaction 
Documents and otherwise to carry out its obligations thereunder.  The 
purchase by each Purchaser of the Securities hereunder has been duly 
authorized by all necessary action on the part of such Purchaser.  Each of 
this Agreement and the Registration Rights Agreement has been duly executed 
and delivered by such Purchaser and constitutes the valid and legally binding 
obligation of such Purchaser, enforceable against it in accordance with its 
terms.

          (b)  INVESTMENT INTENT.  Such Purchaser is acquiring the Securities 
as principal for its own account for investment purposes only and not with a 
view to or for distributing or reselling such Securities or any part thereof 
or interest therein, without prejudice, however, to such Purchaser's right, 
subject to the provisions of this Agreement and the Registration Rights 
Agreement, to sell or otherwise dispose of all or any part of such Securities 
pursuant to an effective registration statement under the Securities Act and 
in compliance with applicable federal and state securities laws or under an 
exemption from such registration.

          (c)  PURCHASER STATUS.  At the time such Purchaser was offered the 
Securities, it was, and at the date hereof, it is, and at each Closing Date, 
Adjustment Date and each exercise date under its Warrant, it will be, an 
"accredited investor" as defined in Rule 501(a) under the Securities Act.

          (d)  EXPERIENCE OF THE PURCHASER.  Such Purchaser, either alone or 
together with its representatives, has such knowledge, sophistication and 
experience in business and financial matters so as to be capable of 
evaluating the merits and risks of the prospective investment in the

                                      13
<PAGE>

Securities, and has so evaluated the merits and risks of such investment.  
Such Purchaser has not been organized for the sole purpose of acquiring the 
Securities.

          (e)  ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT.  Such 
Purchaser is able to bear the economic risk of an investment in the 
Securities and, at the present time, is able to afford a complete loss of 
such investment.

          (f)  ACCESS TO INFORMATION.  Such Purchaser acknowledges receipt of 
the Disclosure Materials and further acknowledges that it has reviewed the 
Disclosure Materials and has been afforded (i) the opportunity to ask such 
questions as it has deemed necessary of, and to receive answers from, 
representatives of the Company concerning the terms and conditions of the 
offering of the Securities and the merits and risks of investing in the 
Securities; (ii) access to information about the Company and the Company's 
financial condition, results of operations, business, properties, management 
and prospects sufficient to enable it to evaluate its investment; and (iii) 
the opportunity to obtain such additional information which the Company 
possesses or can acquire without unreasonable effort or expense that is 
necessary to make an informed investment decision with respect to the 
investment and to verify the accuracy and completeness of the information 
contained in the Disclosure Materials.  Neither such inquiries nor any other 
investigation conducted by or on behalf of such Purchaser or its 
representatives or counsel shall modify, amend or affect such Purchaser's 
right to rely on the truth, accuracy and completeness of the Disclosure 
Materials and the Company's representations and warranties contained in the 
Transaction Documents.

          (g)  GENERAL SOLICITATION.  Such Purchaser is not purchasing the 
Securities as a result of or subsequent to any advertisement, article, notice 
or other communication regarding the Securities published in any newspaper, 
magazine or similar media or broadcast over television or radio or presented 
at any seminar. 

          (h)  RELIANCE.  Such Purchaser understands and acknowledges that 
(i) the Securities are being offered and sold to it without registration 
under the Securities Act in a private placement that is exempt from the 
registration provisions of the Securities Act and (ii) the availability of 
such exemption, depends in part on, and the Company will rely upon the 
accuracy and truthfulness of, the foregoing representations and such 
Purchaser hereby consents to such reliance.

          (i)  INVOLVEMENT IN CERTAIN PROCEEDINGS.  Neither the Purchasers 
nor any of their Affiliates has been involved in any of the proceedings 
described in Section 401(f) of Regulation S-K under the Securities Act during 
the periods described therein.

          (j)  CERTAIN FEES. Except with respect to fees payable to Ram 
Capital Resources LLC, the Purchasers have not entered into any written 
agreement with any Person with respect to fees or commissions payable to any 
broker, financial advisor or consultant, finder, placement agent, investment 
banker, or bank with respect to the transactions contemplated by this 
Agreement.

                                      14
<PAGE>

          (k)  BENEFICIAL OWNERSHIP.  Neither the Purchasers nor any of their 
Affiliates is  the beneficial owner of any shares of the Company's Common 
Stock as of the trading day immediately preceding the Tranche 1 Closing Date.

     The Company acknowledges and agrees that the Purchasers make no 
representations or warranties with respect to the transactions contemplated 
hereby other than those specifically set forth in this Section 2.2.

                                  ARTICLE III
                        OTHER AGREEMENTS OF THE PARTIES

     3.1  TRANSFER RESTRICTIONS.  (a) Securities may only be disposed of 
pursuant to an effective registration statement under the Securities Act, to 
the Company or pursuant to an available exemption from or in a transaction 
not subject to the registration requirements of the Securities Act, and in 
compliance with any applicable federal and state securities laws.  In 
connection with any transfer of Securities other than pursuant to an 
effective registration statement or to the Company, except as otherwise set 
forth herein, the Company may require the transferor thereof to provide to 
the Company an opinion of counsel selected by the transferor, the form and 
substance of which opinion shall be reasonably satisfactory to the Company, 
to the effect that such transfer does not require registration of such 
transferred securities under the Securities Act.  Notwithstanding the 
foregoing, the Company hereby consents to and agrees to register on the books 
of the Company and with any transfer agent for the securities of the Company 
any transfer of Securities by such Purchaser to a Designee of such Purchaser 
or any transfer among any such Designees, provided that transferee certifies 
to the Company that it is an "accredited investor" within the meaning of Rule 
501(a) under the Securities Act and that it is acquiring the Securities 
solely for investment purposes.  Any such transferee shall agree in writing 
to be bound by the terms of this Agreement and shall have the rights of a 
Purchaser under this Agreement and the Registration Rights Agreement.   

          (b)  The Purchasers agree to the imprinting, so long as is required 
by this Section 3.1(b), of the following legend on the Securities: 

          NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE 
     SECURITIES ARE EXERCISABLE] HAVE BEEN REGISTERED WITH THE SECURITIES 
     AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN 
     RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT 
     OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT 
     BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION 
     STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE 
     EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION 

                                      15
<PAGE>

     REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE 
     STATE SECURITIES LAWS.

     The legend set forth above shall be removed from the Shares and the 
Adjustment Shares, and the Company shall cause its transfer agent to issue a 
certificate or certificates without any legend (upon surrender of the 
legended certificates duly endorsed) to each holder of the Shares and/or 
Adjustment Shares  upon which it is stamped if such legend is not required 
under applicable requirements of the Securities Act and other applicable 
securities laws. Underlying Shares shall not contain the legend set forth 
above nor any other legend if the exercise of Warrants or other issuances of 
Underlying Shares as contemplated by the Warrants occurs at any time such 
legend is not required under applicable requirements of the Securities Act 
and the applicable securities laws.

     3.2  ACKNOWLEDGMENT OF DILUTION.  The Company acknowledges that the 
issuance of the  Adjustment Shares on any Adjustment Date and the issuance of 
Underlying Shares upon exercise of the Warrants  may result in dilution of 
the outstanding shares of Common Stock, which dilution may be substantial 
under certain market conditions. 

     3.3  FURNISHING OF INFORMATION.  As long as the Company is subject to 
Sections 13(a) and 15(d) of the Exchange Act, the Company covenants to timely 
file (or obtain extensions in respect thereof and file within the applicable 
grace period) all reports required to be filed by the Company after the date 
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act.  So long as 
any of the Purchasers owns Securities, if the Company is not required to file 
reports pursuant to such laws, it will prepare and furnish to such Purchaser 
and make publicly available in accordance with Rule 144(c) promulgated under 
the Securities Act annual and quarterly financial statements, together with a 
discussion and analysis of such financial statements in form and substance 
substantially similar to those that would otherwise be required to be 
included in reports required by Section 13(a) or 15(d) of the Exchange Act, 
as well as any other information required thereby, in the time period that 
such filings would have been required to have been made under the Exchange 
Act.  The Company further covenants that it will take such further action as 
any holder of Securities may reasonably request, all to the extent required 
from time to time to enable such Person to sell Securities without 
registration under the Securities Act within the limitation of the exemptions 
provided by Rule 144 promulgated under the Securities Act.  Upon the request 
of any such Person, the Company shall deliver to such Person a written 
certification of a duly authorized officer as to whether it has complied with 
such requirements. 

     3.4  [INTENTIONALLY OMITTED.]

     3.5  INTEGRATION.  The Company shall not, and shall use its best efforts 
to ensure that, no Affiliate shall, sell, offer for sale or solicit offers 
to buy or otherwise negotiate in respect of any security (as defined in 
Section 2 of the Securities Act) that would be integrated with the offer or 
sale of the Securities in a manner that would require the registration under 
the Securities Act of the sale of the Securities to the Purchasers.

                                      16
<PAGE>

     3.6  STOCKHOLDER APPROVAL UNDER THE RULES AND REGULATIONS OF THE NASDAQ 
STOCK MARKET.  If on any Adjustment Date or Closing Date (other than the 
Tranche 1 Closing Date) (A) the Common Stock is listed for trading on NASDAQ, 
(B) the Adjustment Price or Purchase Price, as the case may be, then in 
effect is such that the aggregate number of shares of Common Stock that would 
then be issuable as Adjustment Shares and/or Shares, as the case may be, 
together with any Adjustment Shares and Shares previously issued at a 
discount to the Tranche 1 Shares, would equal or exceed 20% of the number of 
shares of Common Stock outstanding on the Tranche 1 Closing Date (such number 
of shares as would not equal or exceed such 20% limit, the "ISSUABLE 
MAXIMUM"), and (C) the Company shall not have previously obtained the vote of 
shareholders (the "SHAREHOLDER APPROVAL"), if any, as may be required by the 
applicable rules and regulations of the Nasdaq Stock Market, Inc. (or any 
successor entity) applicable to approve the issuance of shares of Common 
Stock in excess of the Issuable Maximum pursuant to the terms hereof, then 
the Company shall issue to the holder so requesting Adjustment Shares or 
Shares, as the case may be, a number of shares of Common Stock equal to the 
Issuable Maximum and, with respect to the remainder of Adjustment Shares or 
Shares, as the case may be,  which would result in an issuance of shares of 
Common Stock in excess of the Issuable Maximum (the "EXCESS SHARES"), the 
Company shall have the option to either (1) use its best efforts to obtain 
the Shareholder Approval applicable to such issuance as soon as is possible, 
but in any event not later than the 90th day after such request, or (2) 
deliver to such holder cash in an amount equal to the product of (x) the Per 
Share Market Value on the applicable Adjustment Date or Closing Date, as 
applicable, and (y) the number of shares of Common Stock in excess of such 
holder's pro rata portion of the Issuable Maximum that would have otherwise 
been issuable to the holder but for the provisions of this Section (such 
amount of cash being hereinafter referred to as the "DISCOUNT EQUIVALENT").  
If the Company fails to pay the Discount Equivalent in full pursuant to this 
Section within fifteen (15) days after the Company fails to obtain 
Shareholder Approval pursuant to (1) above or the date payable pursuant to 
(2) above, the Company will pay interest thereon at a rate of 9% per annum to 
the holder, accruing daily from the applicable Adjustment Date or Closing 
Date, as the case may be, until such amount, plus all such interest thereon, 
is paid in full.

     3.7  INCREASE IN AUTHORIZED SHARES.  At such times as the Company would 
be, if a notice  of  exercise were to be delivered on such date or Adjustment 
Date, precluded from issuing such number of Underlying Shares as would be 
issuable upon exercise in full of the Warrants or issuing all of the 
Adjustment Shares due to the unavailability of a sufficient number of shares 
of authorized but unissued or reserved shares of Common Stock, the Company 
shall promptly (and in any case, within 30 Business Days from such date) 
prepare and mail to the stockholders of the Company proxy materials 
requesting authorization to amend the Company's Articles of Incorporation to 
increase the number of shares of Common Stock which the Company is authorized 
to issue to at least such number of shares as reasonably requested by the 
Purchasers in order to provide for such number of authorized and unissued 
shares of Common Stock to enable the Company to comply with its exercise and 
reservation of shares obligations as set forth in this Agreement and the 
Warrants.  In connection therewith, the Board of Directors shall (a) adopt 
proper resolutions authorizing such increase, (b) recommend to and otherwise 
use its best efforts to promptly and duly obtain stockholder approval to 
carry out such resolutions (and hold a special meeting of the stockholders no 
later than the 60th day after delivery of the proxy materials 

                                      17
<PAGE>

relating to such meeting) and (c) within five (5) Business Days of obtaining 
such stockholder authorization, file an appropriate amendment to the 
Company's Articles of Incorporation to evidence such increase.

     3.8  LISTING AND RESERVATION OF UNDERLYING SHARES.  (a)  The Company 
shall (i) not later than the tenth Business Day following the Closing Date 
prepare and file with the NASDAQ (or such other national securities exchange 
or market or trading or quotation facility on which the Common Stock is then 
listed) an additional shares listing application covering a number of shares 
of Common Stock which is not less than the Initial Minimum applicable to each 
such Closing, (ii) take all steps necessary to cause  such shares to be 
approved for listing in the NASDAQ (or on the other primary national 
securities exchange or market or trading or quotation facility on which the 
Common Stock is then listed) as soon as possible thereafter, and (iii) 
provide to the Purchasers evidence of such listing, and the Company shall 
maintain the listing of its Common Stock thereon.

          (b)  The Company shall maintain a reserve of shares of Common Stock 
for issuance pursuant to Section 3.15 and upon exercise of the Warrant in 
accordance with its terms, in such amount as may be required to fulfill 
obligations in full under the Transaction Documents, which reserve shall 
include, with respect to each Closing, a number of shares of Common Stock 
equal to no less than the Initial Minimum, with respect to each Closing.

     3.9  EXERCISE AND ISSUANCE PROCEDURES.  The Warrants set forth the 
totality of the procedures with respect to the exercise of the Warrants, 
including such other information and instructions as may be reasonably 
necessary to enable the Purchasers to exercise the Warrants in accordance 
with their terms.  The Company shall honor any exercise of the Warrants and 
shall deliver Underlying Shares in accordance with the terms, conditions and 
time periods set forth in the Warrants and shall issue Adjustment Shares in 
accordance with Section 3.15.

     3.10 [INTENTIONALLY OMITTED]

     3.11 RIGHT OF FIRST REFUSAL; SUBSEQUENT REGISTRATIONS.  (a)  The Company 
shall not, directly or indirectly, without the prior written consent of the 
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose 
of (or announce any offer, sale, grant or any option to purchase or other 
disposition) any of its or its Affiliates' equity or equity-equivalent 
securities in a transaction intended to be exempt or not subject to 
registration under the Securities Act (a "SUBSEQUENT PLACEMENT") for a period 
of 180 days after the effective date of the registration statement covering 
the underlying Shares issued pursuant to the Tranche 1 Closing (the 
"UNDERLYING SECURITIES REGISTRATION STATEMENT"), except (i) the granting of 
options or warrants to employees, officers and directors, and the issuance of 
shares upon exercise of options granted, under any stock option plan 
heretofore or hereinafter duly adopted by the Company, (ii) shares of Common 
Stock issued upon exercise of any currently outstanding warrants and upon 
conversion of any currently outstanding convertible securities of the 
Company, in each case disclosed in SCHEDULE 2.1(c), (iii) the Securities, and 
(iv) equity or equity-equivalent securities issued in connection with 
strategic transactions involving the Company and other entities, including, 

                                      18
<PAGE>

without limitation, joint ventures, marketing or distribution agreement, 
technology transfer or development arrangements unless (A) the Company 
delivers to the Purchasers a written notice (the "SUBSEQUENT PLACEMENT 
NOTICE") of its intention effect such Subsequent Placement, which Subsequent 
Placement Notice shall describe in reasonable detail the proposed terms of 
such Subsequent Placement, the amount of proceeds intended to be raised 
thereunder, the Person with whom such Subsequent Placement shall be effected, 
and attached to which shall be a term sheet or similar document relating 
thereto and (B) no Purchaser shall have notified the Company by 5:00 p.m. 
(New York City time) on the fifth (5th) Business Day after its receipt of the 
Subsequent Placement Notice of its willingness to cause such Purchaser to 
provide (or to cause its Designee to provide), subject to completion of 
mutually acceptable documentation, financing to the Company on terms no less 
favorable to the Company than those terms set forth in the Subsequent 
Placement Notice.  If the Purchasers shall fail to notify the Company of its 
intention to provide such financing within such time period or shall fail to 
provide such financing within thirty (30) Business Days after notifying the 
Company of its intention to provide such financing (the "PURCHASERS RIGHT 
EXPIRATION DATE"), the Company may effect the Subsequent Placement 
substantially upon the terms and to the Persons (or Affiliates of such 
Persons) set forth in the Subsequent Placement Notice; PROVIDED, that the 
Company shall provide the Purchasers with a second Subsequent Placement 
Notice, and the Purchasers shall again have the right of first refusal set 
forth above in this paragraph (a), if the Subsequent Placement subject to the 
initial Subsequent Placement Notice shall not have been consummated for any 
reason on the terms set forth in such Subsequent Placement Notice within 
thirty (30) Business Days after (x) the date the Purchasers notify the 
Company of their unwillingness to provide such financing or (y) the 
Purchasers Right Expiration Date, as the case may be.

          (b)  Except for (x) Underlying Shares, (y) other "Registrable 
Securities" (as such term is defined in the Registration Rights Agreement) to 
be registered, and securities of the Company permitted pursuant to Schedule 
6(b) of the Registration's Rights Agreement to be registered in the 
Underlying Securities Registration Statement in accordance with the 
Registration Rights Agreement, and (z) Common Stock to be registered for 
resale in connection with financings permitted pursuant to paragraph (a)(i), 
(iii) and (iv) of Section 3.11(a), the Company shall not, without the prior 
written consent of the Purchasers (i) issue or sell any of its or any of its 
Affiliates' equity or equity-equivalent securities pursuant to Regulation S 
promulgated under the Securities Act, or (ii) register for resale any 
securities of the Company, in each case, for a period of not less than 90 
Business Days after the date that any registration statement covering the 
resale of any of the Shares, Adjustment Shares and the Underlying Shares by 
the Purchasers meeting the requirement of the Registration Rights Agreement 
is declared effective by the Commission.  Any days that any Purchaser is 
unable to sell Underlying Securities under any such registration statement 
shall be added to such 90 Business Day period for the purposes of (i) and 
(ii) above.

     3.12 CERTAIN SECURITIES LAWS DISCLOSURES; PUBLICITY.   The Company 
shall: (i) issue within one (1) Business Day of each Closing a press release 
acceptable to the Purchasers disclosing the transactions contemplated hereby, 
(ii) file within ten (10) Business Days after each Closing Date with the 
Commission a Current Report on Form 8-K disclosing the transactions 

                                      19
<PAGE>

contemplated hereby, and (iii) timely file with the Commission a Form D 
promulgated under the Securities Act as required under Regulation D 
promulgated under the Securities Act and provide a copy thereof to the 
Purchasers promptly after the filing thereof.  The Company shall, no less 
than two (2) Business Days prior to the filing of any disclosure required by 
clauses (ii) and (iii) above, provide a copy thereof to the Purchasers. 

     3.13   USE OF PROCEEDS.  The Company shall not use the net proceeds form 
the sale of Securities hereunder to redeem any Company equity or 
equity-equivalent securities.  Pending application of the proceeds of this 
placement in the manner permitted hereby, the Company will invest such 
proceeds in interest bearing accounts and/or short-term, investment grade 
interest bearing securities.

     3.14   REIMBURSEMENT. If either Purchaser, other than by reason of its 
negligence or willful misconduct, becomes involved in any capacity in any 
action, proceeding or investigation brought by or against any Person, 
including stockholders of the Company, in connection with or as a result of 
the consummation of the transactions contemplated by Transaction Documents, 
the Company will reimburse such Purchaser for its reasonable legal and other 
expenses (including the cost of any investigation and preparation) incurred 
in connection therewith, as such expenses are incurred in an amount not to 
exceed $200,000 in the aggregate.  The reimbursement obligations of the 
Company under this paragraph shall be in addition to any liability which the 
Company may otherwise have, shall extend upon the same terms and conditions 
to any Affiliate of such Purchaser who are actually named in such action, 
proceeding or investigation, and partners, directors, agents, employees and 
controlling persons (if any), as the case may be, of such Purchaser and any 
such Affiliate, and shall be binding upon and inure to the benefit of any 
successors, assigns, heirs and personal representatives of the Company, such 
Purchaser and any such Affiliate and any such Person.  The Company also 
agrees that neither such Purchaser nor any Affiliate, partners, directors, 
agents, employees or controlling persons shall have any liability to the 
Company or any person asserting claims on behalf of or in right of the 
Company in connection with or as a result of the consummation of the 
Transaction Documents except to the extent that any losses, claims, damages, 
liabilities or expenses incurred by the Company result from the negligence or 
willful misconduct of such Purchaser. Notwithstanding anything to the 
contrary, the Company shall not be obligated to pay any reimbursements 
hereunder in the event that a court, in a final unappealable judgement, 
determines that such Purchaser is liable for the act upon which reimbursement 
is sought and the Company may condition payment of any reimbursemnt hereunder 
upon receipt of an undertaking reasonably satisfactory to the Company to 
repay any such reimbursement.

     3.15   ISSUANCE OF ADJUSTMENT SHARES.  (a) The Company shall, on the 
twenty-fifth (25th) day following the date the Underlying Securities 
Registration Statement, covering the Tranche 1 Shares, has been declared 
effective by the Commission (the "FIRST TRANCHE 1 ADJUSTMENT DATE"), issue to 
the Purchasers for no additional consideration such aggregate number of 
shares of Common Stock (the "FIRST TRANCHE 1 ADJUSTMENT SHARES") as equals 
the quotient obtained by dividing (i) the product of (A) 50% of the Tranche 1 
Shares and (B) an amount equal to (x) the difference of (1) 112 1/2% of the 
Per Share Market Value of the Common Stock on the Tranche 1 

                                      20
<PAGE>

Closing Date less (2) the average of the lowest ten (10) Per Share Market 
Values during the twenty-five (25) days immediately preceding the First 
Tranche 1 Adjustment Date (the "FIRST TRANCHE 1 ADJUSTMENT PRICE" and (ii) 
the First Tranche 1 Adjustment Price.

          (b)  The Company shall, on the twenty-fifth (25th) day following 
the First Tranche 1 Adjustment Date (the "SECOND TRANCHE 1 ADJUSTMENT DATE"), 
issue to the Purchasers for no additional consideration such aggregate number 
of shares of Common Stock (the "SECOND TRANCHE 1 ADJUSTMENT SHARES") as 
equals the quotient obtained by dividing (i) the product of (A) 50% of the 
Tranche 1 Shares and (B) an amount equal to (x) the difference of 
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the 
Tranche 1 Closing Date less (2) the average of the lowest ten (10) Per Share 
Market Values during the twenty-five (25) days immediately preceding the 
Second Tranche 1 Adjustment Date (the "SECOND TRANCHE 1 ADJUSTMENT PRICE") 
and (ii) the Second Tranche 1 Adjustment Price.

          (c)  The Company shall, on the twenty-fifth (25th) day following 
the date the Underlying Securities Registration Statement, covering the 
Tranche 2 Shares, has been declared effective by the Commission (the "FIRST 
TRANCHE 2 ADJUSTMENT DATE"), issue to the Purchasers for no additional 
consideration such aggregate number of shares of  Common Stock (the "FIRST 
TRANCHE 2 ADJUSTMENT SHARES") as equals the quotient obtained by dividing (i) 
the product of (A) 50% of the Tranche 2 Shares and (B) an amount equal to (x) 
the difference of (1) 112 1/2% of the Per Share Market Value of the Common 
Stock on the Tranche 2 Closing Date less (2) the average of the lowest ten 
(10) Per Share Market Values during the twenty-five (25) days immediately 
preceding the First Tranche 2 Adjustment Date (the "FIRST TRANCHE 2 
ADJUSTMENT PRICE") and (ii) the First Tranche 2 Adjustment Price.

          (d)  The Company shall, on the twenty-fifth (25th) day following 
the First Tranche 2 Adjustment Date (the "SECOND TRANCHE 2 ADJUSTMENT DATE"), 
issue to the Purchasers for no additional consideration such aggregate number 
of shares of Common Stock (the "SECOND TRANCHE 2 ADJUSTMENT SHARES") as 
equals the quotient obtained by dividing (i) the product of (A) 50% of the 
Tranche 2 Shares and (B) an amount equal to (x) the difference of 
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the 
Tranche 2 Closing Date less (2) the average of the lowest ten (10) Per 
Share Market Values during the twenty-five (25) days immediately preceding 
the Second Tranche 2 Adjustment Date (the "SECOND TRANCHE 2 ADJUSTMENT PRICE") 
and (ii) the Second Tranche 2 Adjustment Price.

          (e)  The Company shall, on the twenty-fifth (25th) day following 
the date the Underlying Securities Registration Statement, covering the 
Tranche 3 Shares, has been declared effective by the Commission (the "FIRST 
TRANCHE 3 ADJUSTMENT DATE"), issue to the Purchasers for no additional 
consideration such aggregate number of shares of  Common Stock (the "FIRST 
TRANCHE 3 ADJUSTMENT SHARES") as equals the quotient obtained by dividing (i) 
the product of (A) 50% of the Tranche 3 Shares and (B) an amount equal to (x) 
the difference of (1) 112 1/2 % of the Per Share Market Value of the Common 
Stock on the Tranche 3 Closing Date less (2) the average of the lowest ten 
(10) Per Share Market Values during the twenty-five (25) days immediately 
preceding the First Tranche 3 Adjustment Date (the "FIRST TRANCHE 3 
ADJUSTMENT PRICE") and (ii) the First Tranche 3 Adjustment Price.

                                      21
<PAGE>

          (f)  The Company shall, on the twenty-fifth (25th) day following 
the First Tranche 3 Adjustment Date (the "SECOND TRANCHE 3 ADJUSTMENT DATE"), 
issue to the Purchasers for no additional consideration such aggregate number 
of shares of Common Stock (the "SECOND TRANCHE 3 ADJUSTMENT SHARES") as 
equals the quotient obtained by dividing (i) the product of (A) 50% of the 
Tranche 3 Shares and (B) an amount equal to (x) the difference of 
(1) 112 1/2% of the Per Share Market Value of the Common Stock on the 
Tranche 3 Closing Date less (2) the average of the lowest ten (10) Per Share 
Market Values during the twenty-five (25) days immediately preceding the 
Second Tranche 3 Adjustment Date (the "SECOND TRANCHE 3 ADJUSTMENT PRICE") 
and (ii) the Second Tranche 3 Adjustment Price.

     3.16 LIMITATIONS ON SHORT SALES.  Each Purchaser agrees that it will not 
enter into any Short Sales (as hereinafter defined) from the period 
commencing on the First Tranche 1 Closing Date and ending on the last 
applicable Adjustment Date.  For purposes of this Section 3.16, a "SHORT 
SALE" by a Purchaser shall mean a sale of Common Stock by such Purchaser that 
is marked as a short sale and that is made at a time when there is no 
equivalent offsetting long position in Common Stock held by the Purchaser.  
For purposes of determining whether there is an equivalent offsetting long 
position in Common Stock held by a Purchaser, Adjustment Shares that have not 
yet been issued in connection with the immediately preceding Closing Date 
shall be deemed to be held long by the Purchaser, and the number of 
Adjustment Shares then held by a Purchaser on any particular date of 
computation shall be equal to the number of Adjustment Shares issuable 
pursuant to Section 3.15 on the next Adjustment Date calculated as if such 
computation date were such Adjustment Date (e.g. using the lowest ten (10) 
Per Share Market Values during the twenty-five (25) days immediately 
preceding such computation date). 

                                    ARTICLE IV
                                    CONDITIONS

     4.1  CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO 
PURCHASE THE EARLY TRANCHE 2 SHARES OR THE TRANCHE 2 SHARES.  The obligation 
of the Purchasers to acquire the Early Tranche 2 Shares or the Tranche 2 
Shares is subject to the satisfaction or waiver by the Purchasers, at or 
before the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as the 
case may be, of each of the following conditions:

          (i)   TRANCHE 1 CLOSING.  The Tranche 1 Closing shall have occurred;

          (ii)  ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The 
representations and warranties of the Company contained herein shall be true 
and correct as of the date when made and as of the Early Tranche 2 Closing 
Date or the Tranche 2 Closing Date, as the case may be, as though made on and 
as of the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as the 
case may be;

          (iii) PERFORMANCE BY THE COMPANY.  The Company shall have 
performed, satisfied and complied with all covenants, agreements and 
conditions required by the Transaction 

                                      22
<PAGE>

Documents to be performed, satisfied or complied with by the Company at or 
prior to the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as 
the case may be;

          (iv)   UNDERLYING SECURITIES REGISTRATION STATEMENT.  The Underlying 
Securities Registration Statement covering the Tranche 1 Shares, Warrant 
Shares and Adjustment Shares issuable in connection with the Tranche 1 
Closing shall have been declared effective under the Securities Act by the 
Commission for at least twenty-five (25) days and shall have remained 
effective at all times, not subject to any actual or threatened stop order or 
subject to any actual or threatened suspension at any time prior to the Early 
Tranche 2 Closing Date or the Tranche 2 Closing Date, as the case may be;

          (v)    NO INJUNCTION.  No statute, rule, regulation, executive order, 
decree, ruling or injunction shall have been enacted, entered, promulgated or 
endorsed by any court or governmental authority of competent jurisdiction 
which prohibits the consummation of any of the transactions contemplated by 
the Transaction Documents, including the issuance of any of the Shares, 
Adjustment Shares or exercise of the Warrants;

          (vi)   ADVERSE CHANGES.  Since the Tranche 1 Closing Date, no event 
or series of events which reasonably would be expected to have or result in a 
Material Adverse Effect shall have occurred.

          (vii)  MANAGEMENT.  Frank G. Housmann, Jr. shall not have left the 
Company or suffered a voluntary or involuntary material lessening of 
responsibility as Chief Executive Officer of the Company;

          (viii) NO SUSPENSIONS OF TRADING IN COMMON STOCK.  The trading in 
the Common Stock shall not have been suspended by the Commission or on the 
NASDAQ (except for any suspension of trading of limited duration solely to 
permit dissemination of material information regarding the Company) at any 
time since the Tranche 1 Closing Date;

          (ix)   LISTING OF COMMON STOCK.  The Common Stock shall have been 
at all times since the Tranche 1 Closing Date listed for trading on the 
NASDAQ;  

          (x)    CHANGE OF CONTROL.  No Change of Control in the Company 
shall have occurred.  "CHANGE OF CONTROL" means the occurrence of any of (i) 
an acquisition after the date hereof by an individual or legal entity or 
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) 
of in excess of 50% of the voting securities of the Company, (ii) a 
replacement of more than one-half of the members of the Company's board of 
directors which is not approved by those individuals who are members of the 
board of directors on the date hereof in one or a series of related 
transactions, (iii) the merger of the Company with or into another entity, 
consolidation or sale of all or substantially all of the assets of the 
Company in one or a series of related transactions or (iv) the execution by 
the Company of an agreement to which the Company is a party or by which it is 
bound, providing for any of the events set forth above in (i), (ii) or (iii); 

                                      23
<PAGE>

          (xi)   LEGAL OPINION.  The Company shall have delivered to the 
Purchaser the opinion of the Company's outside counsel, in substantially the 
form of EXHIBIT C, dated the Early Tranche 2 Closing Date or the Tranche 2 
Closing Date, as the case may be;

          (xii)  REQUIRED APPROVALS.  All Required Approvals shall have been 
obtained; 

          (xiii) DELIVERY OF STOCK CERTIFICATE.  The Company shall have 
delivered to the Purchaser or its Designee the stock certificate(s) 
representing the Early Tranche 2 Shares or the Tranche 2 Shares registered in 
the name of the Purchaser or its Designee,  in form satisfactory to the 
Purchasers; 

          (xiv)  PERFORMANCE OF ISSUANCE AND EXERCISE OBLIGATIONS.  The 
Company shall have (a) delivered Adjustment Shares, as applicable, upon each 
Tranche 1 Adjustment Date and otherwise performed its obligations in 
accordance with the terms, conditions and timing requirements of this 
Agreement and (b) delivered Underlying Shares upon exercise of the Warrants 
and otherwise performed its obligations in accordance with the terms of the 
Warrants; PROVIDED, HOWEVER that in the event there is an Early Tranche 2 
Closing, the Company's obligation to deliver the Second Tranche 1 Adjustment 
Shares prior to the Early Tranche 2 Closing Date shall be waived.

          (xv)   CLOSING THRESHOLDS.  For the 20 Business Days immediately 
preceding the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as 
the case may be, the average daily trading volume of the Common Stock on 
NASDAQ shall be at least 50,000 shares and there shall be no five (5) 
consecutive Business Days within such twenty (20) Business Day period where 
the average daily volume is less than 30,000 shares per day and the average 
of the Per Share Market Values for the ten (10) Business Days immediately 
preceding the Early Tranche 2 Closing Date or the Tranche 2 Closing Date, as 
the case may be, shall be greater than $7.00; and

          (xvi)  TRANSFER AGENT INSTRUCTIONS.  The Transfer Agent 
Instructions, dated the Early Tranche 2 Closing Date or the Tranche 2 Closing 
Date, as the case may be, shall have been delivered to and acknowledged in 
writing by the Company's transfer agent.

     4.2  CONDITIONS PRECEDENT TO THE OBLIGATION OF THE PURCHASERS TO 
PURCHASE TRANCHE 3 SHARES.  The obligation of the Purchasers to acquire 
Tranche 3 Shares is subject to the satisfaction or waiver by the Purchasers, 
at or before the Tranche 3 Closing Date of each of the following conditions:

          (ii)  TRANCHE 2 CLOSING.  The Tranche 2 Closing or the Tranche 2 
Closing Expiration Date shall have occurred;

          (iii) ACCURACY OF THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The 
representations and warranties of the Company contained herein shall be true 
and correct as of the 

                                      24
<PAGE>

date when made and as of the Tranche 3 Closing Date as though made on and as 
of the Tranche 3 Closing Date.

          (iv)   PERFORMANCE BY THE COMPANY.  The Company shall have 
performed, satisfied and complied with all covenants, agreements and 
conditions required by the Transaction Documents to be performed, satisfied 
or complied with by the Company at or prior to the Tranche 3 Closing Date;

          (v)    UNDERLYING SECURITIES REGISTRATION STATEMENT.  The Underlying 
Securities Registration Statement covering the Shares, Warrant Shares and 
Adjustment Shares issuable in connection with the Tranche 1 Closing and 
Tranche 2 Closing shall each have been declared effective under the 
Securities Act by the Commission for at least twenty-five (25) days and shall 
each have remained effective at all times, not subject to any actual or 
threatened stop order or subject to any actual or threatened suspension at 
any time prior to the Tranche 3 Closing Date;

          (vi)   NO INJUNCTION.  No statute, rule, regulation, executive 
order, decree, ruling or injunction shall have been enacted, entered, 
promulgated or endorsed by any court or governmental authority of competent 
jurisdiction which prohibits the consummation of any of the transactions 
contemplated by the Transaction Documents, including the issuance of any of 
the Shares, Adjustment Shares or exercise of the Warrants;

          (vii)  ADVERSE CHANGES.  Since the Tranche 2 Closing Date or the 
Tranche 2 Closing Expiration Date, as the case may be, no event or series of 
events which reasonably would be expected to have or result in a Material 
Adverse Effect shall have occurred;

          (viii) MANAGEMENT.  Frank G. Housmann, Jr. shall not have left the 
Company or suffered a voluntary or involuntary material lessening of 
responsibility as Chief Executive Officer of the Company;

          (ix)   NO SUSPENSIONS OF TRADING IN COMMON STOCK.  The trading in 
the Common Stock shall not have been suspended by the Commission or on the 
NASDAQ (except for any suspension of trading of limited duration solely to 
permit dissemination of material information regarding the Company) at any 
time since the Tranche 2 Closing Date or the Tranche 2 Closing Expiration 
Date, as the case may be;

          (x)    LISTING OF COMMON STOCK.  The Common Stock shall have been 
at all times since the Tranche 2 Closing Date or the Tranche 2 Closing 
Expiration Date, as the case may be, listed for trading on the NASDAQ;  

          (xi)   CHANGE OF CONTROL.  No Change of Control in the Company 
shall have occurred. 

                                      25
<PAGE>

          (xii)  LEGAL OPINION.  The Company shall have delivered to the 
Purchaser the opinion of the Company's outside counsel, in substantially the 
form of EXHIBIT C, dated the Tranche 3 Closing Date;

          (xiii) REQUIRED APPROVALS.  All Required Approvals shall have been 
obtained; 

          (xiv)  DELIVERY OF STOCK CERTIFICATE.  The Company shall have 
delivered to the Purchaser or its Designee the stock certificate(s) 
representing the Tranche 3 Shares registered in the name of the Purchaser or 
its Designee, in form satisfactory to the Purchasers; 

          (xv)   PERFORMANCE OF ISSUANCE AND EXERCISE OBLIGATIONS.  The 
Company shall have (a) delivered Adjustment Shares, as applicable upon each 
Tranche 2 Adjustment Date and otherwise performed its obligations in 
accordance with the terms, conditions and timing requirements of this 
Agreement and (b) delivered Underlying Shares upon exercise of the Warrants 
and otherwise performed its obligations in accordance with the terms of the 
Warrants; 

          (xvi)  CLOSING THRESHOLD.  For the 20 Business Days immediately 
preceding the Tranche 3 Closing Date, the average daily trading volume of the 
Common Stock on NASDAQ shall be at least 50,000 shares and there shall be no 
five (5) consecutive Business Days within such twenty (20) Business Day 
period where the average daily volume is less than 30,000 shares per day and 
the average of the Per Share Market Values for the ten (10) Business Days 
immediately preceding the Tranche 3 Closing Date shall be greater than $7.00; 
and

          (xvii) TRANSFER AGENT INSTRUCTIONS.  The Transfer Agent 
Instructions, dated the Tranche 3 Closing Date, shall have been delivered to 
and acknowledged in writing by the Company's transfer agent.

                                    ARTICLE V
                                  MISCELLANEOUS

     5.1  FEES AND EXPENSES.  The Company has paid $30,000 to RAM Capital 
Resources, LLP, which amount shall be paid to RSPAB, in connection with the 
preparation and negotiation of the Transaction Documents.  Other than the 
amounts contemplated in the immediately preceding sentence, each party shall 
pay the fees and expenses of its advisers, counsel, accountants and other 
experts, if any, and all other expenses incurred by such party incident to 
the negotiation, preparation, execution, delivery and performance of this 
Agreement. The Company shall pay all stamp and other taxes and duties levied 
in connection with the issuance of the Securities.

     5.2  ENTIRE AGREEMENT; AMENDMENTS.  This Agreement, together with the 
Exhibits and Schedules hereto, the Registration Rights Agreement and the 
Warrants contain the entire understanding of the parties with respect to the 
subject matter hereof and supersede all prior agreements and understandings, 
oral or written, with respect to such matters.

                                      26
<PAGE>

     5.3  NOTICES.  Any and all notices or other communications or deliveries 
required or permitted to be provided hereunder shall be in writing and shall 
be deemed given and effective on the earliest of (i) the date of 
transmission, if such notice or communication is delivered via facsimile at 
the facsimile telephone number specified in this Section prior to 6:00 p.m. 
(New York City time) on a Business Day, (ii) the Business Day after the date 
of transmission, if such notice or communication is delivered via facsimile 
at the facsimile telephone number specified in the Purchase Agreement later 
than 6:00 p.m. (New York City time) on any date and earlier than 11:59 p.m. 
(New York City time) on such date, (iii) the Business Day following the date 
of mailing, if sent by nationally recognized overnight courier service, or 
(iv) upon actual receipt by the party to whom such notice is required to be 
given.  The address for such notices and communications shall be as follows:

     If to the Company:       ThrustMaster, Inc.
                              7175 N.W. Evergreen Parkway #400
                              Hillsboro, Oregon 97124-5839
                              Facsimile:  (503) 615-3297
                              Attention:  Frank G. Hausmann, Jr., CEO

     With copies to:          Perkins Coie LLP
                              1211 SW Fifth Ave., Suite 1500
                              Portland, OR  97204
                              Facsimile:  (503) 727-2222
                              Attention:  Patrick Simpson

     If to Strong River:      Strong River Investments Inc.
                              c/o Cavallo Capital Corp.
                              630 Fifth Avenue, Suite 2000
                              New York, New York 10111
                              Facsimile:  (212) 332-3256
                              Attention:  Avi Vigder

     If to Montrose:          Montrose Investments, Ltd.
                              300 Crescent Court, Suite 700
                              Dallas, TX 75201
                              Facsimile:  (214) 758-1221
                              Attn:  Will Rose

     If to Westover:          Westover Investments L.P.
                              300 Crescent Court, Suite 700
                              Dallas, TX 75201
                              Facsimile:  (214) 758-1221
                              Attn:  Will Rose

     With copies to (for all
                                      27
<PAGE>

     communications to each
     of the Purchasers):      Robinson Silverman Pearce Aronsohn &
                                Berman LLP
                              1290 Avenue of the Americas
                              New York, NY  10104
                              Facsimile:  (212) 541-4630
                              Attention:  Kenneth L. Henderson

     or such other address as may be designated in writing hereafter, in the 
same manner, by such Person.

     5.4  AMENDMENTS; WAIVERS.  No provision of this Agreement may be waived 
or amended except in a written instrument signed, in the case of an 
amendment, by both the Company and the Purchasers, or, in the case of a 
waiver, by the party against whom enforcement of any such waiver is sought.  
No waiver of any default with respect to any provision, condition or 
requirement of this Agreement shall be deemed to be a continuing waiver in 
the future or a waiver of any other provision, condition or requirement 
hereof, nor shall any delay or omission of either party to exercise any right 
hereunder in any manner impair the exercise of any such right accruing to it 
thereafter.  

     5.5  HEADINGS.  The headings herein are for convenience only, do not 
constitute a part of this Agreement and shall not be deemed to limit or 
affect any of the provisions hereof.

     5.6  SUCCESSORS AND ASSIGNS.  This Agreement shall be binding upon and 
inure to the benefit of the parties and their successors and permitted 
assigns. The Company may not assign this Agreement or any rights or 
obligations hereunder without the prior written consent of the Purchasers.  
Except as set forth in Section 3.1(a), the Purchasers may not assign this 
Agreement or any of the rights or obligations hereunder or under the 
Transaction Documents (other than to a Designee of the respective Purchaser) 
without the consent of the Company, except that the Purchasers may assign 
their respective rights hereunder and, subject to the terms thereof, under 
the Transaction Documents without the consent of the Company as long as such 
assignee demonstrates to the reasonable satisfaction of the Company its 
satisfaction of the representations and warranties set forth in Section 2.2. 

     5.7  NO THIRD-PARTY BENEFICIARIES.  This Agreement is intended for the 
benefit of the parties hereto and their respective successors and permitted 
assigns and is not for the benefit of, nor may any provision hereof be 
enforced by, any other Person.

     5.8  GOVERNING LAW. This Agreement shall be governed by and construed 
and enforced in accordance with the internal laws of the State of New York 
without regard to the principles of conflicts of law thereof.  Each party 
hereby irrevocably submits to the non-exclusive jurisdiction of the state and 
federal courts sitting in the City of New York, borough of Manhattan, for the 
adjudication of any dispute hereunder or in connection herewith or with any 
transaction contemplated hereby or discussed herein (including with respect 
to the enforcement of the any of 

                                      28
<PAGE>

the Transaction Documents), and hereby irrevocably waives, and agrees not to 
assert in any suit, action or proceeding, any claim that it is not personally 
subject to the jurisdiction of any such court, that such suit, action or 
proceeding is improper.  Each party hereby irrevocably waives personal 
service of process and consents to process being served in any such suit, 
action or proceeding by mailing a copy thereof to such party at the address 
in effect for notices to it under this Agreement and agrees that such service 
shall constitute good and sufficient service of process and notice thereof.  
Nothing contained herein shall be deemed to limit in any way any right to 
serve process in any manner permitted by law.

     5.9  SURVIVAL.  The representations, warranties, agreements and 
covenants contained herein shall survive the Closings and the issuances of 
the Adjustment Shares.

     5.10 EXECUTION.  This Agreement may be executed in two or more 
counterparts, all of which when taken together 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, it being understood 
that both parties need not sign the same counterpart.  In the event that any 
signature is delivered by facsimile transmission, such signature shall create 
a valid and binding obligation of the party executing (or on whose behalf 
such signature is executed) the same with the same force and effect as if 
such facsimile signature page were an original thereof.

     5.11 PUBLICITY.  The Company and the Purchasers shall consult with each 
other in issuing any press releases or otherwise making public statements or 
filings and other communications  with the Commission or any regulatory 
agency or stock market or trading facility with respect to the transactions 
contemplated hereby and neither party shall issue any such press release or 
otherwise make any such public statement, filings or other communications 
without the prior written consent of the other, which consent shall not be 
unreasonably withheld or delayed, except that no prior consent shall be 
required if such disclosure is required by law, in which such case the 
disclosing party shall provide the other party with prior notice of such 
public statement, filing or other communication.  Notwithstanding the 
foregoing, the Company shall not publicly disclose the name of any of the 
Purchasers, or include the name of any of the Purchasers in any filing with 
the Commission, or any regulatory agency, trading facility or stock market  
without the prior written consent of the respective Purchaser, except to the 
extent such disclosure (but not any disclosure as to the controlling Persons 
thereof) is required by law or by applicable rules, bylaws or policies of the 
NASDAQ, in which case the Company shall provide the respective Purchaser with 
prior notice of such disclosure.

     5.12 SEVERABILITY.  In case any one or more of the provisions of this 
Agreement shall be invalid or unenforceable in any respect, the validity and 
enforceability of the remaining terms and provisions of this Agreement shall 
not in any way be affecting or impaired thereby and the parties will attempt 
to agree upon a valid and enforceable provision which shall be a reasonable 
substitute therefor, and upon so agreeing, shall incorporate such substitute 
provision in this Agreement.

     5.13 REMEDIES.  In addition to being entitled to exercise all rights 
provided herein or granted by law, including recovery of damages, the 
Purchasers will be entitled to specific 

                                      29
<PAGE>

performance of the obligations of the Company under the Transaction 
Documents.  Each of the Company and the Purchasers agree that monetary 
damages may not be adequate compensation for any loss incurred by reason of 
any breach of its obligations described in the foregoing sentence and hereby 
agrees to waive in any action for specific performance of any such obligation 
the defense that a remedy at law would be adequate.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                             SIGNATURE PAGE FOLLOWS]

                                      30
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Securities 
Purchase Agreement to be duly executed by their respective authorized 
signatories as of the date first indicated above.


                                       COMPANY:

                                       THRUSTMASTER, INC.


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


                                       PURCHASERS:

                                       STRONG RIVER INVESTMENTS, INC.


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


                                       WESTOVER INVESTMENTS L.P.


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


                                       MONTROSE INVESTMENTS L.P.


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

                                      31


<PAGE>

                                                                   EXHIBIT 4.6


                                                                   EXHIBIT D-1


     NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES 
ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE 
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN 
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE 
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT 
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR 
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS 
THEREUNDER AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY 
LAWS.

                                THRUSTMASTER, INC.

                                 CALLABLE WARRANT

                             Dated: January 28, 1999


     ThrustMaster, Inc., an Oregon corporation (the "Company"), hereby 
certifies that, for value received, [____________], or its registered assigns 
("Holder"), is entitled, subject to the terms set forth below, to purchase 
from the Company up to a total of [       ](1)shares of Common Stock, no par 
value (the "Common Stock"), of the Company (each such share, a "Warrant 
Share" and all such shares, the "Warrant Shares") at an exercise price equal 
to [$     ](2) (as adjusted from 

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

     (1)  This Warrant and Warrant D-2 shall be for the purchase of an 
aggregate amount of shares of Common Stock equal to 6.25% of (A) $12,000,000, 
divided by (B) 132.5% times the closing bid price of the Common Stock on the 
Tranche 1 Closing Date.

     (2)  The Exercise Price for this Warrant shall be equal to 125% of the 
closing bid price of the Common Stock on the Tranche 1 Closing Date and the 
Exercise Price for Warrant D-2 shall be equal to 140% of the closing bid 
price of the Common Stock on the Tranche 1 Closing Date.

                                       1
<PAGE>

time to time pursuant to the terms hereunder, the "Exercise Price"), at any 
time and from time to time from and after the date hereof and through and 
including January [    ], 2004 (the "Expiration Date"), and subject to the 
following terms and conditions:

          1.   REGISTRATION OF WARRANT.  The Company shall register this 
Warrant, upon records to be maintained by the Company for that purpose (the 
"Warrant Register"), in the name of the record Holder hereof from time to 
time. The Company may deem and treat the registered Holder of this Warrant as 
the absolute owner hereof for the purpose of any exercise hereof or any 
distribution to the Holder, and for all other purposes, and the Company shall 
not be affected by notice to the contrary.

          2.   REGISTRATION OF TRANSFERS AND EXCHANGES.  

               (a)  This is one of the Warrants as defined and issued 
pursuant to that certain Securities Purchase Agreement dated as of January 
[____], 1999 (the "Purchase Agreement") among the Company, Strong River 
Investments, Inc. ("Strong River"), Westover Investments L.P. ("Westover") 
and Montrose Investments L.P. ("Montrose").  Neither this Warrant nor any 
interest herein may be transferred except in compliance with the provisions 
of Section 3.1 of the Purchase Agreement and the provisions hereof.  The 
Company shall register the transfer of any portion of this Warrant in the 
Warrant Register, upon surrender of this Warrant, with the Form of Assignment 
attached hereto duly completed and signed, to the Transfer Agent or to the 
Company at the office specified in or pursuant to Section 3(b).  Upon any 
such registration or transfer, a new warrant to purchase Common Stock, in 
substantially the form of this Warrant (any such new warrant, a "New 
Warrant"), evidencing the portion of this Warrant so transferred shall be 
issued to the transferee and a New Warrant evidencing the remaining portion 
of this Warrant not so transferred, if any, shall be issued to the 
transferring Holder.  The acceptance of the New Warrant by the transferee 
thereof shall be deemed the acceptance of such transferee of all of the 
rights and obligations of a holder of a Warrant.

               (b)  This Warrant is exchangeable, upon the surrender hereof 
by the Holder to the office of the Company specified in or pursuant to 
Section 3(b) for one or more New Warrants, evidencing in the aggregate the 
right to purchase the number of Warrant Shares which may then be purchased 
hereunder.  Any such New Warrant will be dated the date of such exchange.

          3.   DURATION, EXERCISE AND REDEMPTION OF WARRANTS.  

               (a)  Subject to the terms and conditions of this Warrant, this 
Warrant shall be exercisable by the registered Holder on any business day 
before 5:30 P.M., New York City time, at any time and from time to time on or 
after the date hereof to and including the Expiration Date.  At 5:30 P.M., 
New York City time on the Expiration Date, the portion of this Warrant not 
exercised prior thereto shall be and become void and of no value. 

                                       2
<PAGE>

               (b)  Subject to Sections 2(b), 6, 10 and 11, upon surrender of 
this Warrant, with the Form of Election to Purchase attached hereto duly 
completed and signed, to the Company at its address for notice set forth in 
Section 12 and upon payment of the Exercise Price multiplied by the number 
of Warrant Shares that the Holder intends to purchase hereunder, in the 
manner provided hereunder, all as specified by the Holder in the Form of 
Election to Purchase, the Company shall promptly (but in no event later than 
5 business days after the Date of Exercise (as defined herein)) issue or 
cause to be issued and cause to be delivered to or upon the written order of 
the Holder and in such name or names as the Holder may designate, a 
certificate for the Warrant Shares issuable upon such exercise, free of 
restrictive legends if such legend is not required under applicable 
requirements of the Securities Act of 1933, as amended (the "Securities Act") 
and other applicable securities laws.  Any person so designated by the Holder 
to receive Warrant Shares shall be deemed to have become holder of record of 
such Warrant Shares as of the Date of Exercise of this Warrant.

               A "Date of Exercise" means the date on which the Company shall 
have received (i) this Warrant (or any New Warrant, as applicable), with the 
Form of Election to Purchase attached hereto (or attached to such New 
Warrant) appropriately completed and duly signed, and (ii) payment of the 
Exercise Price for the number of Warrant Shares so indicated by the holder 
hereof to be purchased.

               (c)  This Warrant shall be exercisable, either in its entirety 
or, from time to time, for a portion of the number of Warrant Shares.  If 
less than all of the Warrant Shares which may be purchased under this Warrant 
are exercised at any time, the Company shall issue or cause to be issued, at 
its expense, a New Warrant evidencing the right to purchase the remaining 
number of Warrant Shares for which no exercise has been evidenced by this 
Warrant.

               (d)  Commencing on August 1, 2000 (the "Trigger Date"), if (i) 
the average closing bid price of the Common Stock on the Nasdaq National 
Market (or such other national securities exchange on which the Common Stock 
is then listed or quoted) for any ten (10) consecutive trading day period 
equals or exceeds 130% of the  Exercise Price (a "Trigger Period"), and (ii) 
the Warrant Shares are registered for resale pursuant to an effective 
registration statement naming the Holder as a selling stockholder thereunder, 
then the Company shall have the right, upon 30 days' notice to the Holder 
given at any time after the Trigger Date but not later than twenty (20) days 
after the conclusion of any such Trigger Period (the "Redemption Notice"), to 
redeem this Warrant or any portion thereof at a price of $.01 per Warrant 
Share (the "Redemption Price"), on the date set forth in the Redemption 
Notice, but in no event earlier than 30 days following the date of the 
Redemption Notice (the "Redemption Date").  The Holder may exercise this 
Warrant at any time prior to the Redemption Date.  Any portion of this 
Warrant not exercised by 5:00 p.m. (New York City time) on the Redemption 
Date shall no longer be exercisable and shall be returned to the Company, and 
the Company, upon its receipt of the unexercised portion of this Warrant, 
shall issue therefor in full and complete satisfaction of its obligations 
under such remaining portion of this Warrant to the Holder an amount equal to 
the number of shares of Common Stock then issuable hereunder multiplied by 
the Redemption Price.

                                       3
<PAGE>

The Redemption Price shall be mailed to such Holder at its address of record, 
and the Warrant shall be canceled. 

          4.   PIGGYBACK REGISTRATION RIGHTS. During the term of this 
Warrant, at any time when there is not an effective registration statement 
covering the resale of the Warrant Shares and naming the Holder as a selling 
stockholder thereunder, the Holder shall be entitled to the Piggyback 
registration rights afforded to a holder pursuant to Section 6(d) of that 
certain Registration Rights Agreement among the Company, Strong River, 
Westover and Montrose dated as of January [___], 1999.

          5.   [INTENTIONALLY OMITTED]

          6.   PAYMENT OF TAXES.  The Company will pay all documentary stamp 
taxes attributable to the issuance of Warrant Shares upon the exercise of 
this Warrant; provided, however, that the Company shall not be required to 
pay any tax or other charge which may be payable in respect of any transfer 
of any certificates for Warrant Shares or Warrants in a name other than that 
of the Holder, and the Company shall not be required to issue or cause to be 
issued or deliver or cause to be delivered the certificates for Warrant 
Shares unless or until the person or persons requesting the issuance thereof 
shall have paid to the Company the amount of such tax or other charge or 
shall have established to the satisfaction of the Company that such tax or 
other charge has been paid. The Holder shall be responsible for all other tax 
liability that may arise as a result of holding or transferring this Warrant 
or receiving Warrant Shares upon exercise hereof.

          7.   REPLACEMENT OF WARRANT.  If this Warrant is mutilated, lost, 
stolen or destroyed, the Company shall issue or cause to be issued in 
exchange and substitution for and upon cancellation hereof, or in lieu of and 
substitution for this Warrant, a New Warrant, but only upon receipt of 
evidence reasonably satisfactory to the Company of such loss, theft or 
destruction and indemnity, if requested, satisfactory to it.  Applicants for 
a New Warrant under such circumstances shall also comply with such other 
reasonable regulations and procedures and pay such other reasonable charges 
as the Company may prescribe.

          8.   RESERVATION OF WARRANT SHARES.  The Company covenants that it 
will at all times reserve and keep available out of the aggregate of its 
authorized but unissued Common Stock, solely for the purpose of enabling it 
to issue Warrant Shares upon exercise of this Warrant as herein provided, the 
number of Warrant Shares which are then issuable and deliverable upon the 
exercise of this entire Warrant, free from preemptive rights or any other 
actual contingent purchase rights of persons other than the Holder (taking 
into account the adjustments and restrictions of Section 9) created by the 
Company.  The Company covenants that all Warrant Shares that shall be so 
issuable and deliverable shall, upon issuance and the payment of the 
applicable Exercise Price in accordance with the terms hereof, be duly and 
validly authorized, issued and fully paid and nonassessable.

                                       4
<PAGE>

          9.   CERTAIN ADJUSTMENTS.  The Exercise Price and number of Warrant 
Shares issuable upon exercise of this Warrant are subject to adjustment from 
time to time as set forth in this Section 9.  Upon each such adjustment of 
the Exercise Price pursuant to this Section 9, the Holder shall thereafter 
prior to the Expiration Date be entitled to purchase, at the Exercise Price 
resulting from such adjustment, the number of Warrant Shares obtained by 
multiplying the Exercise Price in effect immediately prior to such adjustment 
by the number of Warrant Shares issuable upon exercise of this Warrant 
immediately prior to such adjustment and dividing the product thereof by the 
Exercise Price resulting from such adjustment.  

               (a)  If the Company, at any time while this Warrant is 
outstanding, (i) shall pay a stock dividend or otherwise make a distribution 
or distributions on shares of its Common Stock or on any other class of 
capital stock payable in shares of Common Stock, (ii) subdivide outstanding 
shares of Common Stock into a larger number of shares, or (iii) combine 
outstanding shares of Common Stock into a smaller number of shares, the 
Exercise Price shall be multiplied by a fraction of which the numerator shall 
be the number of shares of Common Stock outstanding before such event and of 
which the denominator shall be the number of shares of Common Stock 
outstanding after such event.  Any adjustment made pursuant to this Section 
shall become effective immediately after the record date for the 
determination of stockholders entitled to receive such dividend or 
distribution and shall become effective immediately after the effective date 
in the case of a subdivision or combination, and shall apply to successive 
subdivisions and combinations.

               (b)  In case of any reclassification of the Common Stock, any 
consolidation or merger of the Company with or into another person, the sale 
or transfer of all or substantially all of the assets of the Company or any 
compulsory share exchange pursuant to which the Common Stock is converted 
into other securities, cash or property, then the Holder shall have the right 
thereafter to exercise this Warrant (at the aggregate Exercise Price in 
effect for all shares of Common Stock issuable upon such exercise immediately 
prior to such consummation as adjusted to the time of such transaction) only 
into the shares of stock and other securities and property receivable upon or 
deemed to be held by holders of Common Stock following such reclassification, 
consolidation, merger, sale, transfer or share exchange, and the Holder shall 
be entitled upon such event to receive such amount of securities or property 
equal to the amount of Warrant Shares such Holder would have been entitled to 
had such Holder exercised this Warrant immediately prior to such 
reclassification, consolidation, merger, sale, transfer or share exchange.  
The terms of any such consolidation, merger, sale, transfer or share exchange 
shall include such terms so as to continue to give to the Holder the right to 
receive the securities or property set forth in this Section 9(b) upon any 
exercise following any such reclassification, consolidation, merger, sale, 
transfer or share exchange.  

               (c)   If the Company, at any time while this Warrant is 
outstanding, shall distribute to all holders of Common Stock (and not to 
holders of this Warrant) evidences of its indebtedness or assets or rights or 
warrants to subscribe for or purchase any security (excluding those referred 
to in Sections 9(a) and (b), then in each such case the Exercise Price shall 
be determined by multiplying the Exercise Price in effect immediately prior 
to the record date fixed

                                       5
<PAGE>

for determination of stockholders entitled to receive such distribution by a 
fraction of which the denominator shall be the Exercise Price determined as 
of the record date mentioned above, and of which the numerator shall be such 
Exercise Price on such record date less the then fair market value at such 
record date of the portion of such assets or evidence of indebtedness so 
distributed applicable to one outstanding share of Common Stock as determined 
by the Company's independent certified public accountants that regularly 
examines the financial statements of the Company (an "Appraiser"). 

               (d)  For the purposes of this Section 9, in case the Company 
shall take a record of the holders of its Common Stock for the purpose of 
entitling them (A) to receive a dividend or other distribution payable in 
Common Stock or in securities convertible or exchangeable into shares of 
Common Stock, or (B) to subscribe for or purchase Common Stock or securities 
convertible or exchangeable into shares of Common Stock, then such record 
date shall be deemed to be the date of the issue or sale of the shares of 
Common Stock deemed to have been issued or sold upon the declaration of such 
dividend or the making of such other distribution or the date of the granting 
of such right of subscription or purchase, as the case may be.

               (e)  All calculations under this Section 9 shall be made to 
the nearest cent or the nearest 1/100th of a share, as the case may be.

               (f)  Whenever the Exercise Price is adjusted pursuant to 
Section 9(c) above, the Holder, after receipt of the determination by the 
Appraiser, shall have the right to select an additional appraiser (which 
shall be a nationally recognized accounting firm), in which case the 
adjustment shall be equal to the average of the adjustments recommended by 
each of the Appraiser and such appraiser.  The Holder shall promptly mail or 
cause to be mailed to the Company, a notice setting forth the Exercise Price 
after such adjustment and setting forth a brief statement of the facts 
requiring such adjustment.  Such adjustment shall become effective 
immediately after the record date mentioned above.  The Holder shall pay the 
expenses of such second appraiser.

               (g)  If:

                           (i)  the Company shall declare a dividend (or any
                                other distribution) on its Common Stock; or

                          (ii)  the Company shall declare a special
                                nonrecurring cash dividend on or a redemption
                                of its Common Stock; or

                         (iii)  the Company shall authorize the granting to all
                                holders of the Common Stock rights or warrants
                                to subscribe for or purchase any shares of
                                capital stock of any class or of any rights; or


                                       6
<PAGE>

                         (iv)   the approval of any stockholders of the Company
                                shall be required in connection with any
                                reclassification of the Common Stock of the
                                Company, any consolidation or merger to which
                                the Company is a party, any sale or transfer of
                                all or substantially all of the assets of the
                                Company, or any compulsory share exchange
                                whereby the Common Stock is converted into
                                other securities, cash or property; or

                         (v)    the Company shall authorize the voluntary
                                dissolution, liquidation or winding up of the
                                affairs of the Company,

     then the Company shall cause to be mailed to the Holder at its last 
address as it shall appear upon the Warrant Register, at least 20 calendar 
days prior to the applicable record or effective date hereinafter specified, 
a notice stating (x) the date on which a record is to be taken for the 
purpose of such dividend, distribution, redemption, rights or warrants, or if 
a record is not to be taken, the date as of which the holders of Common Stock 
of record to be entitled to such dividend, distributions, redemption, rights 
or warrants are to be determined or (y) the date on which such 
reclassification, consolidation, merger, sale, transfer or share exchange is 
expected to become effective or close, and the date as of which it is 
expected that holders of Common Stock of record shall be entitled to exchange 
their shares of Common Stock for securities, cash or other property 
deliverable upon such reclassification, consolidation, merger, sale, 
transfer, share exchange, dissolution, liquidation or winding up; PROVIDED, 
HOWEVER, that the failure to mail such notice or any defect therein or in the 
mailing thereof shall not affect the validity of the corporate action 
required to be specified in such notice. 

          10.  PAYMENT OF EXERCISE PRICE.  The Holder may pay the Exercise 
Price in one of the following manners:

               (a)  CASH EXERCISE.  The Holder shall deliver immediately 
available funds; or                

               (b)  CASHLESS EXERCISE.  The Holder shall surrender this 
Warrant to the Company together with a notice of cashless exercise, in which 
event the Company shall issue to the Holder the number of Warrant Shares 
determined as follows:

                    X = Y (A-B)/A
     where:
                    X = the number of Warrant Shares to be issued to the Holder.

                    Y = the number of Warrant Shares with respect to which this
                    Warrant is being exercised.


                                       7
<PAGE>

                    A = the average of the closing sale prices of the Common
                    Stock on the Nasdaq National Market for the five (5) trading
                    days immediately prior to (but not including) the Date of
                    Exercise as reported by Bloomberg Information Systems, Inc.
                    (or any successor to its function of reporting stock
                    prices).

                    B = the Exercise Price.

     For purposes of Rule 144 promulgated under the Securities Act, it is 
intended, understood and acknowledged that the Warrant Shares issued in a 
cashless exercise transaction shall be deemed to have been acquired by the 
Holder, and the holding period for the Warrant Shares shall be deemed to have 
been commenced, on the issue date.

          11.  FRACTIONAL SHARES.  The Company shall not be required to issue 
or cause to be issued fractional Warrant Shares on the exercise of this 
Warrant. The number of full Warrant Shares which shall be issuable upon the 
exercise of this Warrant shall be computed on the basis of the aggregate 
number of Warrant Shares purchasable on exercise of this Warrant so 
presented.  If any fraction of a Warrant Share would, except for the 
provisions of this Section 11, be issuable on the exercise of this Warrant, 
the Company shall pay an amount in cash equal to the Exercise Price 
multiplied by such fraction.

          12.  NOTICES.  Any and all notices or other communications or 
deliveries hereunder shall be in writing and shall be deemed given and 
effective on the earliest of (i) the date of transmission, if such notice or 
communication is delivered via facsimile at the facsimile telephone number 
specified in this Section prior to 6:00 p.m. (New York time) on a business 
day, (ii) the business day after the date of transmission, if such notice or 
communication is delivered via facsimile at the facsimile telephone number 
specified in this Section later than 6:00 p.m. (New York time) on any date 
and earlier than 11:59 p.m. (New York time) on such date, (iii) the business 
day following the date of mailing, if sent by nationally recognized overnight 
courier service, or (iv) upon actual receipt by the party to whom such notice 
is required to be given.  The addresses for such communications shall be:  
(i) if to the Company, to 7175 NW Evergreen Parkway #400, Hillsboro, Oregon, 
facsimile number (503) 615-3297, attention Chief Executive Officer, or (ii) 
if to the Holder, to the Holder at the address or facsimile number appearing 
on the Warrant Register or such other address or facsimile number as the 
Holder may provide to the Company in accordance with this Section 12.  

          13.  WARRANT AGENT.

               (a)  The Company shall serve as warrant agent under this 
Warrant. Upon thirty (30) days' notice to the Holder, the Company may appoint 
a new warrant agent.

               (b)  Any corporation into which the Company or any new warrant 
agent may be merged or any corporation resulting from any consolidation to 
which the Company or any

                                       8
<PAGE>

new warrant agent shall be a party or any corporation to which the Company or 
any new warrant agent transfers substantially all of its corporate trust or 
shareholders services business shall be a successor warrant agent under this 
Warrant without any further act.  Any such successor warrant agent shall 
promptly cause notice of its succession as warrant agent to be mailed (by 
first class mail, postage prepaid) to the Holder at the Holder's last address 
as shown on the Warrant Register.

          14.  MISCELLANEOUS.

               (a)  This Warrant shall be binding on and inure to the benefit 
of the parties hereto and their respective successors and permitted assigns.  
This Warrant may be amended only in writing signed by the Company and the 
Holder and their successors and assigns.

               (b)  Subject to Section 14(a), above, nothing in this Warrant 
shall be construed to give to any person or corporation other than the 
Company and the Holder any legal or equitable right, remedy or cause under 
this Warrant. This Warrant shall inure to the sole and exclusive benefit of 
the Company and the Holder.

               (c)  This Warrant shall be governed by and construed and 
enforced in accordance with the internal laws of the State of New York 
without regard to the principles of conflicts of law thereof.

               (d)  The headings herein are for convenience only, do not 
constitute a part of this Warrant and shall not be deemed to limit or affect 
any of the provisions hereof.

               (e)  In case any one or more of the provisions of this Warrant 
shall be invalid or unenforceable in any respect, the validity and 
enforceability of the remaining terms and provisions of this Warrant shall 
not in any way be affected or impaired thereby and the parties will attempt 
in good faith to agree upon a valid and enforceable provision which shall be 
a commercially reasonable substitute therefor, and upon so agreeing, shall 
incorporate such substitute provision in this Warrant.

               (f)  This Warrant shall terminate and be of no further force 
and effect on the earlier of 5:00 p.m. (New York time) on the Expiration Date 
or the date on which the Warrant has been exercised in full, except that the 
provisions of Sections 6 and 8 shall maintain in full force and effect after 
such termination date.

                     [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                               SIGNATURE PAGE FOLLOWS]


                                       9
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly 
executed by its authorized officer as of the date first indicated above.

                                       THRUSTMASTER, INC.

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

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

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


                                      10
<PAGE>

                          FORM OF ELECTION TO PURCHASE


     (To be executed by the Holder to exercise the right to purchase shares 
of Common Stock under the foregoing Warrant)

     To ThrustMaster, Inc.:

     In accordance with the Warrant enclosed with this Form of Election to 
Purchase, the undersigned hereby irrevocably elects to purchase  
_____________ shares of Common Stock ("Common Stock"), no par value, of 
ThrustMaster, Inc. and , if such Holder is not utilizing the cashless 
exercise provisions set forth in this Warrant, encloses herewith $________ in 
cash, certified or official bank check or checks, which sum represents the 
aggregate Exercise Price (as defined in the Warrant) for the number of shares 
of Common Stock to which this Form of Election to Purchase relates, together 
with any applicable taxes payable by the undersigned pursuant to the Warrant.

[The undersigned elects that this Warrant be exercised in accordance with 
Section 10(b) thereof.]

     The undersigned requests that certificates for the shares of Common 
Stock issuable upon this exercise be issued in the name of

                                       PLEASE INSERT SOCIAL SECURITY
OR
                                       TAX IDENTIFICATION NUMBER


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


     ------------------------------------------------------------------------
                           (Please print name and address)


     If the number of shares of Common Stock issuable upon this exercise 
shall not be all of the shares of Common Stock which the undersigned is 
entitled to purchase in accordance with the enclosed Warrant, the undersigned 
requests that a New Warrant (as defined in the Warrant) evidencing the right 
to purchase the shares of Common Stock not issuable pursuant to the exercise 
evidenced hereby be issued in the name of and delivered to:

     ------------------------------------------------------------------------
                           (Please print name and address)


     ------------------------------------------------------------------------
     Dated:              ,                        Name of Holder:
           -------------- ----

                                   (Print)
                                          -----------------------------------
                                   (By:)
                                        -------------------------------------
                                   (Name:)
                                   (Title:)
                                        (Signature must conform in all respects
                                   to name of holder as specified on the face of
                                   the Warrant)

<PAGE>

                               FORM OF ASSIGNMENT

           [To be completed and signed only upon transfer of Warrant]

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers 
unto ________________________________ the right represented by the within 
Warrant to purchase  ____________ shares of Common Stock of ThrustMaster, 
Inc. to which the within Warrant relates and appoints ________________ 
attorney to transfer said right on the books of ThrustMaster, Inc. with full 
power of substitution in the premises.  The undersigned hereby certifies that 
it has fully complied with Section 2 of the Warrant and Section 3.1 of the 
Purchase Agreement with respect to this transfer and assignment.

     Dated:

                    ,
     ---------------  ----


                                ---------------------------------------------
                                     (Signature must conform in all respects to
                                name of holder as specified on the face of the
                                Warrant)



                                ---------------------------------------------
                                Address of Transferee


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


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


In the presence of:


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


<PAGE>

                                                                 EXHIBIT 4.7

                            REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this "AGREEMENT") is made and 
entered into as of January 28, 1999, among ThrustMaster, Inc., an Oregon 
corporation (the "COMPANY"), Strong River Investment Inc.  ("STRONG RIVER"), 
a corporation organized under the laws of the British Virgin Islands, 
Westover Investments L.P. ("WESTOVER"), a Delaware limited partnership, and 
Montrose Investments L.P. ("MONTROSE"), a Cayman Islands exempt limited 
partnership. Strong River, Westover and Montrose are each referred to herein 
as a "PURCHASER" and are collectively referred to herein as the "PURCHASERS".

     This Agreement is made pursuant to the Common Stock Purchase Agreement, 
dated as of the date hereof, among the Company and the Purchasers (the 
"PURCHASE AGREEMENT").

     The Company and the Purchasers hereby agree as follows:

     1.   DEFINITIONS

          Capitalized terms used and not otherwise defined herein that are 
defined in the Purchase Agreement shall have the meanings given such terms in 
the Purchase Agreement. As used in this Agreement, the following terms shall 
have the following meanings:

          "ADVICE" shall have meaning set forth in Section 3(o).

          "AFFILIATE" means, with respect to any Person, any other Person 
that directly or indirectly controls or is controlled by or under common 
control with such Person.  For the purposes of this definition, "CONTROL," 
when used with respect to any Person, means the possession, direct or 
indirect, of the power to direct or cause the direction of the management and 
policies of such Person, whether through the ownership of voting securities, 
by contract or otherwise; and the terms of "AFFILIATED," "CONTROLLING" and 
"CONTROLLED" have meanings correlative to the foregoing.

          "BUSINESS DAY" means any day except Saturday, Sunday and any day 
which shall be a legal holiday or a day on which banking institutions in the 
state of New York or Oregon generally are authorized or required by law or 
other government actions to close.

          "COMMISSION" means the Securities and Exchange Commission.

          "COMMON STOCK" means the Company's common stock, no par value.

          "EFFECTIVENESS DATE" means (i) with respect to the Registration 
Statement to be filed with respect to the Tranche 1 Shares, the First Tranche 
1 Warrant Shares, the Second 

                                      1
<PAGE>

Tranche 1 Warrant Shares, the First Tranche 1 Adjustment Shares and the 
Second Tranche 1 Adjustment Shares, the 90th day following the Tranche 1 
Closing Date, (ii) with respect to the Registration Statement to be filed 
with respect to the Tranche 2 Shares, the First Tranche 2 Adjustment Shares 
and the Second Tranche 2 Adjustment Shares, the 90th day following the 
Tranche 2 Closing Date and (iii) with respect to the Registration Statement 
to be filed with respect to the Tranche 3 Shares, the First Tranche 3 Warrant 
Shares, the Second Tranche 3 Warrant Shares, the First Tranche 3 Adjustment 
Shares and the Second Tranche 3 Adjustment Shares, the 90th day following the 
Tranche 3 Closing Date.

          "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 
2(a).

          "EXCHANGE ACT" means the Securities Exchange Act of 1934, as 
amended.

          "FILING DATE" means (i) with respect to the Registration Statement 
to be filed with respect to the Tranche 1 Shares, the First Tranche 1 Warrant 
Shares, the Second Tranche 1 Warrant Shares, the First Tranche 1 Adjustment 
Shares and the Second Tranche 1 Adjustment Shares, the 35th day following the 
Tranche 1 Closing Date, (ii) with respect to the Registration Statement to be 
filed with respect to the Tranche 2 Shares, the First Tranche 2 Adjustment 
Shares and the Second Tranche 2 Adjustment Shares, the 35th day following the 
Tranche 2 Closing Date and (iii) with respect to the Registration Statement 
to be filed with respect to the Tranche 3 Shares, the First Tranche 3 Warrant 
Shares, the Second Tranche 3 Warrant Shares, the First Tranche 3 Adjustment 
Shares and the Second Tranche 3 Adjustment Shares, the 35th day following the 
Tranche 3 Closing Date.

          "HOLDER" or "HOLDERS" means the holder or holders, as the case may 
be, from time to time of Registrable Securities.

          "INDEMNIFIED PARTY" shall have the meaning set forth in Section 
5(c).

          "INDEMNIFYING PARTY" shall have the meaning set forth in Section 
5(c).

          "LOSSES" shall have the meaning set forth in Section 5(a).

          "MAXIMUM PURCHASE PRICE" shall have the meaning set forth in 
Section 2(d).

          "PER SHARE MARKET VALUE" means on any particular date (a) the 
closing bid price per share of the Common Stock on such date on the Nasdaq 
National Market or on any other stock market or trading facility on which the 
shares of Common Stock are primarily traded, listed or quoted (each a 
"SUBSEQUENT MARKET"), or if there is no such price on such date, then the 
closing bid price on the Nasdaq National Market or on such Subsequent Market 
on the date nearest preceding such date, or (b) if the Common Stock is not 
then listed or quoted on the Nasdaq National Market or a Subsequent Market, 
the closing bid price for a share of Common Stock in the over-the-counter 
market, as reported by the National Quotation Bureau Incorporated or 

                                      2
<PAGE>

similar organization or agency succeeding to its functions of reporting 
prices) at the close of business on such date, or (c) if the Common Stock is 
not then reported by the National Quotation Bureau Incorporated (or similar 
organization or agency succeeding to its functions of reporting prices), then 
the average of the "Pink Sheet" quotes for the relevant conversion period, as 
determined in good faith by the Holder, or (d) if the Common Stock is not 
then publicly traded the fair market value of a share of Common Stock as 
determined by an appraiser selected in good faith by the Holders of a 
majority of the applicable Registrable Securities.

          "PERSON" means an individual or a corporation, partnership, trust, 
incorporated or unincorporated association, joint venture, limited liability 
company, joint stock company, government (or an agency or political 
subdivision thereof) or other entity of any kind.

          "PROCEEDING" means an action, claim, suit, investigation or 
proceeding (including, without limitation, an investigation or partial 
proceeding, such as a deposition), whether commenced or threatened.

          "PROSPECTUS" means the prospectus included a Registration Statement 
(including, without limitation, a prospectus that includes any information 
previously omitted from a prospectus filed as part of an effective 
registration statement in reliance upon Rule 430A promulgated under the 
Securities Act), as amended or supplemented by any prospectus supplement, 
with respect to the terms of the offering of any portion of the Registrable 
Securities covered by such Registration Statement, and all other amendments 
and supplements to the Prospectus, including post-effective amendments, and 
all material incorporated by reference or deemed to be incorporated by 
reference in such Prospectus.

          "REGISTRATION DELAY PAYMENTS" shall have the meaning set forth in 
Section 2(d).

          "REGISTRABLE SECURITIES" means (a) with respect to the Registration 
Statement to be filed after the Tranche 1 Closing, (i) the Tranche 1 Shares, 
(ii) the shares of Common Stock issuable upon exercise of the First Tranche 1 
Warrants and the Second Tranche 1 Warrants and (iii) the First Tranche 1 
Adjustment Shares and the Second Tranche 1 Adjustment Shares, (b) with 
respect to the Registration Statement to be filed after the Tranche 2 
Closing, if applicable, (i) the Tranche 2 Shares and (ii) the First Tranche 2 
Adjustment Shares and the Second Tranche 2 Adjustment Shares and (c) with 
respect to the Registration Statement to be filed after the Tranche 3 
Closing, if applicable, (i) the Tranche 3 Shares, (ii) the shares of Common 
Stock issuable upon exercise of the First Tranche 3 Warrants and the Second 
Tranche 3 Warrants and (iii) the First Tranche 3 Adjustment Shares and the 
Second Tranche 3 Adjustment Shares; PROVIDED, HOWEVER that in order to 
account for the fact that the number of Adjustment Shares that are issuable 
pursuant to the Purchase Agreement is determined in part upon the Per Share 
Market Value of the Common Stock at the time of issuance, Registrable 
Securities, shall include (but not be limited to), in the case of each of (1) 
(a)(iii) above, such number of Adjustment Shares which may be issued to the 
Purchasers pursuant to the Purchase Agreement on the First Tranche 1 
Adjustment Date and the Second Tranche 1 Adjustment Date, respectively, 
assuming, for the purposes of this definition, that the First Tranche 1 
Adjustment Price and the Second Tranche 1 Adjustment Price 

                                      3
<PAGE>

is 50% of the Per Share Market Value on the trading day immediately preceding 
the Tranche 1 Closing Date, (2) (b)(ii) above, such number of Adjustment 
Shares which may be issued to the Purchasers pursuant to the Purchase 
Agreement on the First Tranche 2 Adjustment Date and the Second Tranche 2 
Adjustment Date, respectively, assuming, for the purposes of this definition, 
that the First Tranche 2 Adjustment Price and the Second Tranche 2 Adjustment 
Price is 50% of the Per Share Market Value on the trading day immediately 
preceding the Tranche 2 Closing Date and (3) (c)(iii) above, such number of 
Adjustment Shares which may be issued to the Purchasers pursuant to the 
Purchase Agreement on the First Tranche 3 Adjustment Date and the Second 
Tranche 3 Adjustment Date, respectively, assuming, for the purposes of this 
definition, that the First Tranche 3 Adjustment Price and the Second Tranche 
3 Adjustment Date is 50% of the Per Share Market Value on the trading day 
immediately preceding the Tranche 3 Closing Date.  The Company shall be 
required to file additional Registration Statements to the extent the sum of 
the shares of Common Stock issuable as Adjustment Shares in connection with 
the Tranche 1 Closing, the Tranche 2 Closing or the Tranche 3 Closing, as 
applicable, exceeds the number of shares initially registered in accordance 
with the proviso in the immediatel prior sentence.  The Company shall have 
twenty-five (25) days to file such additional Registration Statements after 
notice of the requirement thereof, which the Holders may give at such time 
when the number of shares of Common Stock referenced in the preceding 
sentence exceeds 85% of the number of shares of Common Stock then registered 
in a Registration Statement hereunder. Notwithstanding the foregoing, shares 
of Common Stock shall no longer be treated as Registrable Securities when (x) 
a registration statement covering such Registrable Securities has been 
declared effective and such Registrable Securities have been disposed of 
pursuant to such effective registration statement, (y) such Registrable 
Securities are sold or otherwise transferred by a person or entity in a 
transaction in which the rights under this Agreement are not assigned in 
accordance with Section 6(h) or (z) the Holder of such Registrable Securities 
is able to dispose of all Registrable Securities held by such Holder in one 
three-month period pursuant to Rule 144(k) (or any similar provision then in 
force) under the Securities Act without registration under the Securities Act.

          "REGISTRATION STATEMENTS" means the registration statements and any 
additional registration statements contemplated by Section 2(a), including 
(in each case) the Prospectus, amendments and supplements to such 
registration statements or Prospectus, including pre- and post-effective 
amendments, all exhibits thereto, and all material incorporated by reference 
or deemed to be incorporated by reference in such registration statements.

          "RULE 144" means Rule 144 promulgated by the Commission pursuant to 
the Securities Act, as such Rule may be amended from time to time, or any 
similar rule or regulation hereafter adopted by the Commission having 
substantially the same effect as such Rule.

          "RULE 415" means Rule 415 promulgated by the Commission pursuant to 
the Securities Act, as such Rule may be amended from time to time, or any 
similar rule or regulation hereafter adopted by the Commission having 
substantially the same effect as such Rule.

          "SECURITIES ACT" means the Securities Act of 1933, as amended.

                                      4
<PAGE>

          "SHARES" means the shares of Common Stock issued to and/or to be 
issued to the Purchaser on the Tranche 1 Closing Date, the Tranche 2 Closing 
Date and the Tranche 3 Closing Date, pursuant to the Purchase Agreement.

          "SPECIAL COUNSEL" means one special counsel to all Holders of 
Registrable Securities, for which the Holders will be reimbursed by the 
Company pursuant to Section 4.

          "UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" means a 
registration in connection with which securities of the Company are sold to 
an underwriter for reoffering to the public pursuant to an effective 
registration statement.

          "WARRANTS" means the Common Stock purchase warrants issued or 
issuable to the Purchaser pursuant to the Purchase Agreement.

          "WARRANT SHARES" means the shares of Common Stock issuable upon 
exercise in full of the Warrants.

     2.   SHELF REGISTRATION

          (a)  On or prior to each applicable Filing Date, the Company shall 
prepare and file with the Commission a "Shelf" Registration Statement 
covering such Registrable Securities applicable to the Tranche 1 Closing, the 
Tranche 2 Closing or the Tranche 3 Closing, as the case may be, for an 
offering to be made on a continuous basis pursuant to Rule 415.  The 
Registration Statement shall be on Form S-3 (except if the Company is not 
then eligible to register for resale the Registrable Securities on Form S-3, 
in which case such registration shall be on another appropriate form in 
accordance herewith).   The Company shall use its best efforts to cause the 
Registration Statement to be declared effective under the Securities Act as 
promptly as possible after the filing thereof, but in any event prior to the 
applicable Effectiveness Date, and shall use its best efforts to keep such 
Registration Statement continuously effective under the Securities Act until 
the date which is three years after the date that such Registration Statement 
is declared effective by the Commission or such earlier date when all 
Registrable Securities covered by such Registration Statement have been sold 
or may be sold without volume restrictions pursuant to Rule 144(k) as 
determined by the counsel to the Company pursuant to a written opinion letter 
 to such effect, addressed and acceptable to the Company's transfer agent 
(the "EFFECTIVENESS PERIOD"), PROVIDED, HOWEVER, that the Company shall not 
be deemed to have used its best efforts to keep the Registration Statement 
effective during the Effectiveness Period if it voluntarily takes any action 
that would result in the Holders not being able to sell the Registrable 
Securities covered by such Registration Statement during the Effectiveness 
Period, unless such action is required under applicable law or the Company 
has filed a post-effective amendment to the Registration Statement and the 
Commission has not declared it effective.  The aggregate number of 
Registrable Securities under a Registration Statement shall be allocated 
among Holders pro rata based on the total number of Registrable Securities 
issued or issuable as of the date such Registration Statement is declared 
effective by the Commission.  All of the provisions of this 

                                      5
<PAGE>

Section 2(a) relating to a Registration Statement shall apply to any 
additional Registration Statement covering any Adjustment Shares as described 
in the definition of Registrable Securities.

          (b)  If the Holders of a majority of the Registrable Securities 
then outstanding so elect, an offering of Registrable Securities pursuant to 
a Registration Statement may be effected in the form of an Underwritten 
Offering. In such event, and, if the managing underwriters advise the Company 
and such Holders in writing that in their opinion the amount of Registrable 
Securities proposed to be sold in such Underwritten Offering exceeds the 
amount of Registrable Securities which can be sold in such Underwritten 
Offering, there shall be included in such Underwritten Offering the amount of 
such Registrable Securities which in the opinion of such managing 
underwriters can be sold, and such amount shall be allocated pro rata among 
the Holders proposing to sell Registrable Securities in such Underwritten 
Offering. 

          (c)  If any of the Registrable Securities are to be sold in an 
Underwritten Offering, the underwriter(s) will be selected by the Holders of 
a majority of the Registrable Securities included in such offering and, 
except in connection with a block trade, such investment banker shall be 
subject to approval by the Company, which approval shall not be unreasonably 
withheld or delayed.  No Holder may participate in any Underwritten Offering 
hereunder unless such Holder (i) agrees to sell its Registrable Securities on 
the basis provided in any underwriting agreements approved by the Persons 
entitled hereunder to approve such arrangements and (ii) completes and 
executes all questionnaires, powers of attorney, indemnities, underwriting 
agreements and other documents required under the terms of such arrangements.

          (d)  If (i) a Registration Statement covering Registrable 
Securities, to be covered thereby as set forth herein, is not filed on or 
before the applicable Filing Date (if the Company files such Registration 
Statement without affording the Holder the opportunity to review and comment 
on the same as required by Section 3(a) hereof, the Company shall not be 
deemed to have satisfied this clause (i)), or (ii) the Company fails to file 
with the Commission a request for acceleration in accordance with Rule 12d1-2 
promulgated under the Exchange Act within five (5) Business Days of the date 
that the Company is notified (orally or in writing, whichever is earlier) by 
the Commission that a Registration Statement will not be "reviewed" or is not 
subject to further review; or (iii) a Registration Statement covering 
Registrable Securities is not declared effective by the Commission on or 
before the applicable Effectiveness Date, or (iv) after a Registration 
Statement has been declared effective by the Commission, such Registration 
Statement is either not effective as to all Registrable Securities to be 
covered thereby as set forth herein throughout the applicable Effectiveness 
Period for a period of more than ten (10) days or the Holders are not 
permitted by reason of the last paragraph of Section 3 to make sales 
thereunder for a period of ten (10) days during such period, or (v) an 
amendment to the Registration Statement is not filed by the Company with the 
Commission within ten (10) days of the Commission's notifying the Company 
that such amendment is required in order for a Registration Statement to be 
declared effective (any such failure or breach being referred to as an 
"EVENT," and for purposes of clauses (i) and (iii) the date on which such 
Event occurs, or for purposes of clause (ii) the date on which such five (5) 
Business Day period is exceeded, or for purposes of clauses (iv) and (v) the 
date on which such ten (10) day period is exceeded, being 

                                      6
<PAGE>

referred to as "EVENT DATE"), then, in any such case, as partial relief for 
the damages suffered therefrom by the Holders (which remedy shall not be 
exclusive of any other remedies available at law or in equity), the Company 
shall, on the Event Date and on each monthly anniversary following the Event 
Date until the triggering Event in cured, pay to the Holders an aggregate 
amount, in cash, as liquidated damages and not as a penalty equal to 2.0% of  
the purchase price paid by the Purchasers pursuant to the Purchase Agreement 
on the Tranche 1 Closing Date, Tranche 2 Closing Date or Tranche 3 Closing 
Date (the "PURCHASE PRICE"), PROVIDED, HOWEVER that in the event that the 
Registration Statement is filed on or before the applicable Filing Date and 
the Company has breached any one or more of its requirements pursuant to 
clause (ii) through (v) herein, the Company shall pay to the Holders an 
aggregate amount equal to 1% of the Purchase Price on the Event Date and 2% 
of the Purchase Price on each monthly anniversary following the Event Date 
until the triggering Event is cured.  The payments to which a Holder shall be 
entitled pursuant to this Section are referred to herein as "REGISTRATION 
DELAY PAYMENTS."  Registration Delay Payments shall be calculated on a 
cumulative basis and paid within five (5) Business Days of the Event Date and 
each monthly anniversary thereof.  If the Company fails to make Registration 
Delay Payments in a timely manner, such Registration Delay Payments shall 
bear interest at the rate of 9.0% per annum until paid in full. 
Notwithstanding anything to the contrary, the Company shall not be required 
to make any Registration Delay Payments if an Event described above arises as 
a result of (i) any comments by the Commission relating to or directed at any 
of the Holders in connection with a Registration Statement or (ii) the fact 
that the Commission refuses to accept or review a Registration Statement 
because Adjustment Shares are being included in such Registration Statement.

     3.   REGISTRATION PROCEDURES

          In connection with the Company's registration obligations 
hereunder, the Company shall:

          (a)  Prepare and file with the Commission on or prior to the 
applicable Filing Date, a Registration Statement on Form S-3 (or if the 
Company is not then eligible to register for resale the Registrable 
Securities on Form S-3 such registration shall be on another appropriate form 
in accordance herewith, or, in connection with an Underwritten Offering 
hereunder, such other form agreed to by the Company and the Holders) which 
shall contain the "Plan of Distribution" attached hereto as ANNEX A  (except 
if otherwise directed by the Holders), and cause the Registration Statement 
to become effective and remain effective as provided herein; PROVIDED, 
HOWEVER, that not less than five (5) Business Days prior to the filing of a 
Registration Statement or any related Prospectus or any amendment or 
supplement thereto, the Company shall, (i) furnish to the Holders, their 
Special Counsel and any managing underwriters, copies of all such documents 
proposed to be filed, which documents  will be subject to the review of such 
Holders, their Special Counsel and such managing underwriters, and (ii) cause 
its officers and directors, counsel and independent certified public 
accountants to respond to such inquiries as shall be necessary, in the 
reasonable opinion of respective counsel to such Holders and such 
underwriters, to conduct a reasonable investigation within the meaning of the 
Securities Act.  The Company shall not file the Registration Statement or any 
such Prospectus or any amendments or 

                                      7
<PAGE>

supplements thereto to which the Holders of a majority of the Registrable 
Securities, their Special Counsel, or any managing underwriters, shall 
reasonably object on a timely basis.

          (b)  (i)  Prepare and file with the Commission such amendments, 
including post-effective amendments, to the Registration Statement as may be 
necessary to keep the Registration Statement continuously effective as to the 
applicable Registrable Securities for the Effectiveness Period; (ii) cause 
the related Prospectus to be amended or supplemented by any required 
Prospectus supplement, and as so supplemented or amended to be filed pursuant 
to Rule 424 (or any similar provisions then in force) promulgated under the 
Securities Act; (iii) respond as promptly as reasonably possible to any 
comments received from the Commission with respect to the Registration 
Statement or any amendment thereto and as promptly as reasonably possible 
provide the Holders true and complete copies of all correspondence from and 
to the Commission relating to the Registration Statement; and (iv) comply in 
all material respects with the provisions of the Securities Act and the 
Exchange Act with respect to the disposition of all Registrable Securities 
covered by the Registration Statement during the applicable period in 
accordance with the intended methods of disposition by the Holders thereof 
set forth in the Registration Statement as so amended or in such Prospectus 
as so supplemented.

          (c)  Notify the Holders of Registrable Securities to be sold, their 
Special Counsel and any managing underwriters as promptly as reasonably 
possible (and, in the case of (i)(A) below, not less than five (5) days prior 
to such filing) and (if requested by any such Person) confirm such notice in 
writing no later than one (1) Business Day following the day (i)(A) when a 
Prospectus or any Prospectus supplement or post-effective amendment to the 
Registration Statement is proposed to be filed; (B) when the Commission 
notifies the Company whether there will be a "review" of such Registration 
Statement and whenever the Commission comments in writing on such 
Registration Statement (the Company shall provide true and complete copies 
thereof and all written responses thereto to each of the Holders); and (C) 
with respect to the Registration Statement or any post-effective amendment, 
when the same has become effective; (ii) of any request by the Commission or 
any other Federal or state governmental authority for amendments or 
supplements to the Registration Statement or Prospectus or for additional 
information; (iii) of the issuance by the Commission of any stop order 
suspending the effectiveness of the Registration Statement covering any or 
all of the Registrable Securities or the initiation of any Proceedings for 
that purpose; (iv) of the receipt by the Company of any notification with 
respect to the suspension of the qualification or exemption from 
qualification of any of the Registrable Securities for sale in any 
jurisdiction, or the initiation or threatening of any Proceeding for such 
purpose; and (v) of the occurrence of any event that makes any statement made 
in the Registration Statement or Prospectus or any document incorporated or 
deemed to be incorporated therein by reference untrue in any material respect 
or that requires any revisions to the Registration Statement, Prospectus or 
other documents so that, in the case of the Registration Statement or the 
Prospectus, as the case may be, it will not contain any untrue statement of a 
material fact or omit to state any 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.

                                      8
<PAGE>

          (d)  Use its best efforts to avoid the issuance of, or, if issued, 
obtain the withdrawal of (i) any order suspending the effectiveness of the 
Registration Statement, or (ii) any suspension of the qualification (or 
exemption from qualification) of any of the Registrable Securities for sale 
in any jurisdiction, at the earliest practicable moment.

          (e)  If requested by any managing underwriter or the Holders of a 
majority in interest of the Registrable Securities to be sold in connection 
with an Underwritten Offering, (i) promptly incorporate in a Prospectus 
supplement or post-effective amendment to the Registration Statement such 
information as such managing underwriters and such Holders reasonably request 
should be included therein, and (ii) make all required filings of such 
Prospectus supplement or such post-effective amendment as soon as practicable 
after the Company has received notification of the matters to be incorporated 
in such Prospectus supplement or post-effective amendment; PROVIDED, HOWEVER, 
that the Company shall not be required to take any action pursuant to this 
Section 3(e) that would, in the opinion of counsel for the Company, violate 
applicable law or be materially detrimental to the business prospects of the 
Company.

          (f)  Furnish to each Holder, their Special Counsel and any managing 
underwriters, without charge, at least one conformed copy of each 
Registration Statement and each amendment thereto, including financial 
statements and schedules, all documents incorporated or deemed to be 
incorporated therein by reference, and all exhibits to the extent requested 
by such Person (including those previously furnished or incorporated by 
reference) promptly after the filing of such documents with the Commission.

          (g)  Promptly deliver to each Holder, their Special Counsel, and 
any underwriters, without charge, as many copies of the Prospectus or 
Prospectuses (including each form of prospectus) and each amendment or 
supplement thereto as such Persons may reasonably request; and the Company 
hereby consents to the use of such Prospectus and each amendment or 
supplement thereto by each of the selling Holders and any underwriters in 
connection with the offering and sale of the Registrable Securities covered 
by such Prospectus and any amendment or supplement thereto.

          (h)  Prior to any public offering of Registrable Securities, use 
its best efforts to register or qualify or cooperate with the selling 
Holders, any underwriters and their Special Counsel in connection with the 
registration or qualification (or exemption from such registration or 
qualification) of such Registrable Securities for offer and sale under the 
securities or Blue Sky laws of such jurisdictions within the United States as 
any Holder or underwriter requests in writing, to keep each such registration 
or qualification (or exemption therefrom) effective during the applicable 
Effectiveness Period and to do any and all other acts or things necessary or 
advisable to enable the disposition in such jurisdictions of the Registrable 
Securities covered by a Registration Statement; PROVIDED, HOWEVER, that the 
Company shall not be required to qualify generally to do business in any 
jurisdiction where it is not then so qualified or to take any action that 
would subject it to general service of process in any such jurisdiction where 
it is not then so subject or subject the Company to any material tax in any 
such jurisdiction where it is not then so subject.

                                      9
<PAGE>

          (i)  Cooperate with the Holders and any managing underwriters to 
facilitate the timely preparation and delivery of certificates representing 
Registrable Securities to be delivered to a transferee pursuant to a 
Registration Statement, which certificates shall be free, to the extent 
permitted by applicable law, of all restrictive legends, and to enable such 
Registrable Securities to be in such denominations and registered in such 
names as any such managing underwriters or Holders may request at least two 
Business Days prior to any sale of Registrable Securities.

          (j)  Upon the occurrence of any event contemplated by Section 
3(c)(v), as promptly as reasonably possible, prepare a supplement or 
amendment, including a post-effective amendment, to the Registration 
Statement or a supplement to the related Prospectus or any document 
incorporated or deemed to be incorporated therein by reference, and file any 
other required document so that, as thereafter delivered, neither the 
Registration Statement nor such Prospectus will contain an untrue statement 
of a material fact or omit to state a material fact required to be stated 
therein or necessary to make the statements therein, in light of the 
circumstances under which they were made, not misleading.

          (k)   Use its best efforts to cause all Registrable Securities 
relating to such Registration Statement to be listed on the Nasdaq National 
Market or any Subsequent Market, as and when required pursuant to the 
Purchase Agreement.

          (l)  In the case of an Underwritten Offering, enter into such 
agreements (including an underwriting agreement in form, scope and substance 
as is customary in Underwritten Offerings) and take all such other actions in 
connection therewith (including those reasonably requested by any managing 
underwriters and the Holders of a majority of the Registrable Securities 
being sold) in order to expedite or facilitate the disposition of such 
Registrable Securities, and whether or not an underwriting agreement is 
entered into, (i) make such representations and warranties to such Holders 
and such underwriters as are customarily made by issuers to underwriters in 
underwritten public offerings, and confirm the same if and when requested; 
(ii) obtain and deliver copies thereof to each Holder and the managing 
underwriters, if any, of opinions of counsel to the Company and updates 
thereof addressed to each Holder and each such underwriter, in form, scope 
and substance reasonably satisfactory to any such managing underwriters and 
Special Counsel to the selling Holders covering the matters customarily 
covered in opinions requested in Underwritten Offerings and such other 
matters as may be reasonably requested by such Special Counsel and 
underwriters; (iii) immediately prior to the effectiveness of the 
Registration Statement, and, in the case of an Underwritten Offering, at the 
time of delivery of any Registrable Securities sold pursuant thereto, use its 
reasonable best efforts to obtain and deliver copies to the Holders and the 
managing underwriters, if any, of "cold comfort" letters and updates thereof 
from the independent certified public accountants of the Company (and, if 
necessary, any other independent certified public accountants of any 
subsidiary of the Company or of any business acquired by the Company for 
which financial statements and financial data is, or is required to be, 
included in the Registration Statement), addressed to the Company in form and 
substance as are customary in connection with Underwritten Offerings; (iv) if 
an underwriting agreement is entered into, the same shall contain 
indemnification provisions and procedures no less favorable to the selling 
Holders and the underwriters, if any, than those set 

                                      10
<PAGE>

forth in Section 5 (or such other provisions and procedures acceptable to the 
managing underwriters, if any, and holders of a majority of Registrable 
Securities participating in such Underwritten Offering); and (v) deliver such 
documents and certificates as may be reasonably requested by the Holders of a 
majority of the Registrable Securities being sold, their Special Counsel and 
any managing underwriters to evidence the continued validity of the 
representations and warranties made pursuant to clause 3(l)(i) above and to 
evidence compliance with any customary conditions contained in the 
underwriting agreement or other agreement entered into by the Company.

          (m)  In connection with any Underwritten Offering, make available 
for inspection by the selling Holders, any representative of such Holders, 
any underwriter participating in any disposition of Registrable Securities, 
and any attorney or accountant retained by such selling Holders or 
underwriters, at the offices where normally kept, during reasonable business 
hours, all financial and other records, pertinent corporate documents and 
properties of the Company and its subsidiaries, and cause the officers, 
directors, agents and employees of the Company and its subsidiaries to supply 
all information in each case reasonably requested by any such Holder, 
representative, underwriter, attorney or accountant in connection with the 
Registration Statement; PROVIDED, HOWEVER, that any information that is 
determined in good faith by the Company in writing to be of a confidential 
non-public nature at the time of delivery of such information shall be kept 
confidential by such Persons, unless (i) disclosure of such information is 
required by court or administrative order or is necessary to respond to 
inquiries of regulatory authorities; (ii) disclosure of such information, in 
the opinion of counsel to such Person, is required by law; (iii) such 
information becomes generally available to the public other than as a result 
of a disclosure or failure to safeguard by such Person; or (iv) such 
information becomes available to such Person from a source other than the 
Company and such source is not known by such Person to be bound by a 
confidentiality agreement with the Company.

          (n)  Comply with all applicable rules and regulations of the 
Commission.

          (o)  The Company may require each selling Holder to furnish to the 
Company such information regarding the distribution of such Registrable 
Securities and the beneficial ownership of Common Stock held by such Holder 
and any other matter as is required by law to be disclosed in the 
Registration Statement, and the Company may exclude from such registration 
the Registrable Securities of any such Holder who unreasonably fails to 
furnish such information within a time after receiving such request.

          If the Registration Statement refers to any Holder by name or 
otherwise as the holder of any securities of the Company, then such Holder 
shall have the right to require (if such reference to such Holder by name or 
otherwise is not required by the Securities Act or any similar Federal 
statute then in force) the deletion of the reference to such Holder in any 
amendment or supplement to the Registration Statement filed or prepared 
subsequent to the time that such reference ceases to be required.

                                      11
<PAGE>

          Each Holder covenants and agrees that (i) it will not sell any 
Registrable Securities under the Registration Statement until it has received 
copies of the final Prospectus as then amended or supplemented as 
contemplated in Section 3(g) and notice from the Company that such 
Registration Statement and any post-effective amendments thereto have become 
effective as contemplated by Section 3(c) and (ii) it and its officers, 
directors or Affiliates, if any, will comply with the prospectus delivery 
requirements and all other provisions of the Securities Act as applicable to 
any of them in connection with sales of Registrable Securities pursuant to 
the Registration Statement.

          Each Holder agrees by its acquisition of such Registrable 
Securities that, upon receipt of a notice from the Company of the occurrence 
of any event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv) 
or 3(c)(v), such Holder will forthwith discontinue disposition of such 
Registrable Securities under the Registration Statement until such Holder's 
receipt of the copies of the supplemented Prospectus and/or amended 
Registration Statement contemplated by Section 3(j), or until it is advised 
in writing (the "ADVICE") by the Company that the use of the applicable 
Prospectus may be resumed, and, in either case, has received copies of any 
additional or supplemental filings that are incorporated or deemed to be 
incorporated by reference in such Prospectus or Registration Statement.

     4.   REGISTRATION EXPENSES

          (a)  All fees and expenses incident to the performance of or 
compliance with this Agreement by the Company, except as and to the extent 
specified in Section 4(b), shall be borne by the Company whether or not 
pursuant to an Underwritten Offering and whether or not the Registration 
Statement is filed or becomes effective and whether or not any Registrable 
Securities are sold pursuant to the Registration Statement.  The fees and 
expenses referred to in the foregoing sentence shall include, without 
limitation, (i) all registration and filing fees (including, without 
limitation, fees and expenses (A) with respect to filings required to be made 
with the Nasdaq National Market and any Subsequent Market on which the Common 
Stock is then listed for trading, and (B) reasonably incurred in compliance 
with state securities or Blue Sky laws (including, without limitation, 
reasonable fees and disbursements of Special Counsel for the Holders in 
connection with Blue Sky qualifications or exemptions of the Registrable 
Securities and determination of the eligibility of the Registrable Securities 
for investment under the laws of such jurisdictions as the managing 
underwriters, if any, or the Holders of a majority of Registrable Securities 
may designate)), (ii) printing expenses (including, without limitation, 
expenses of printing certificates for Registrable Securities and of printing 
prospectuses if the printing of prospectuses is reasonably requested by the 
managing underwriters, if any, or by the holders of a majority of the 
Registrable Securities included in the Registration Statement), (iii) 
messenger, telephone and delivery expenses of the Company, (iv) fees and 
disbursements of counsel for the Company and reasonable fees and expense 
disbursements of Special Counsel for the Holders, (v) Securities Act 
liability insurance, if the Company so desires such insurance, and (vi) fees 
and expenses of all other Persons retained by the Company in connection with 
the consummation of the transactions contemplated by this Agreement.  In 
addition, the Company shall be responsible for all of its internal expenses 
incurred in connection with the consummation of the transactions 

                                      12
<PAGE>

contemplated by this Agreement (including, without limitation, all salaries 
and expenses of its officers and employees performing legal or accounting 
duties), the expense of any annual audit, the fees and expenses incurred in 
connection with the listing of the Registrable Securities on any securities 
exchange as required hereunder.

          (b)  If the Holders require an Underwritten Offering pursuant to 
the terms hereof, the Company shall be responsible for all costs, fees and 
expenses in connection therewith, except for the fees and disbursements of 
the Underwriters (including any underwriting commissions and discounts) and 
their legal counsel and accountants which will be paid by the Holders.  The 
Holder shall pay all transfer taxes relating to the Registrable Securities.  
By way of illustration which is not intended to diminish from the provisions 
of Section 4(a), the Holders shall not be responsible for, and the Company 
shall be required to pay the fees or disbursements incurred by the Company 
(including by its legal counsel and accountants) in connection with, the 
preparation and filing of a Registration Statement and related Prospectus for 
such offering, the maintenance of such Registration Statement in accordance 
with the terms hereof, the listing of the Registrable Securities in 
accordance with the requirements hereof, and printing expenses incurred to 
comply with the requirements hereof. Notwithstanding the foregoing, except in 
connection with a block trade by a broker who as a result of the trade may be 
deemed an underwriter, if at any time the Company has (i) timely filed the 
Registration Statement on or prior to the applicable Filing Date, (ii) caused 
the Registration Statement to be declared effective as promptly as possible 
after the filing thereof but in any event prior to the applicable 
Effectiveness Date and (iii) kept the Registration Statement continuously 
effective under the Securities Act, all  in accordance with the terms of this 
Agreement, and if at any such time the Holders require an Underwritten 
Offering pursuant to the terms hereof, then Holders shall be responsible for 
all costs, fees and expenses in connection with such Underwritten Offering. 

     5.   INDEMNIFICATION

          (a)  INDEMNIFICATION BY THE COMPANY.  The Company shall, 
notwithstanding any termination of this Agreement, indemnify and hold 
harmless each Holder, the officers, directors, agents (including any 
underwriters retained by such Holder in connection with the offer and sale of 
Registrable Securities), brokers (including brokers who offer and sell 
Registrable Securities as principal as a result of a pledge or any failure to 
perform under a margin call of Common Stock), investment advisors and 
employees of each of them, each Person who controls any such Holder (within 
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange 
Act) and the officers, directors, agents and employees of each such 
controlling Person, to the fullest extent permitted by applicable law, from 
and against any and all losses, claims, damages, liabilities, costs 
(including, without limitation, costs of preparation and reasonable 
attorneys' fees) and expenses (collectively, "LOSSES"), as incurred, arising 
out of or relating to any untrue or alleged untrue statement of a material 
fact contained in the Registration Statement, any Prospectus or any form of 
prospectus or in any amendment or supplement thereto or, to the extent such 
untrue or alleged untrue statements or omissions or alleged omissions is not 
corrected in a subsequent prospectus, in any preliminary prospectus, or 
arising out of or relating to any omission or alleged omission of a material 
fact required to be stated therein or necessary to make the statements 
therein (in the 

                                      13
<PAGE>

case of any Prospectus or form of prospectus or supplement thereto, in light 
of the circumstances under which they were made) not misleading, except to 
the extent, but only to the extent, that such untrue statements or alleged 
untrue statements or omissions or alleged omissions are based upon 
information furnished in writing to the Company by such Holder or such other 
indemnified party expressly for use therein, which information was reasonably 
relied on by the Company for use therein, or to the extent that such 
information relates to such Holder or such Holder's proposed method of 
distribution of Registrable Securities and was reviewed and expressly 
approved in writing by or was furnished by such Holder expressly for use in 
the Registration Statement, such Prospectus or such form of Prospectus or in 
any amendment or supplement thereto.  The Company shall notify the Holders 
promptly of the institution, threat or assertion of any Proceeding of which 
the Company is aware in connection with the transactions contemplated by this 
Agreement.

          (b)  INDEMNIFICATION BY HOLDERS.  Each Holder shall, severally and 
not jointly, indemnify and hold harmless the Company, its directors, 
officers, agents and employees, each Person who controls the Company (within 
the meaning of Section 15 of the Securities Act and Section 20 of the 
Exchange Act), and the directors, officers, agents or employees of such 
controlling Persons, to the fullest extent permitted by applicable law, from 
and against all Losses (as determined by a court of competent jurisdiction in 
a final judgment not subject to appeal or review) arising out of or based 
upon any untrue statement or alleged untrue statement of a material fact 
contained in the Registration Statement, any Prospectus, or any form of 
prospectus, or in any amendment or supplement thereto, or arising out of or 
based upon any omission or alleged omission of a material fact required to be 
stated therein or necessary to make the statements therein not misleading to 
the extent, but only to the extent, that such untrue statement or alleged 
untrue statement or omission or alleged omission is contained in any 
information so furnished in writing by such Holder to the Company 
specifically for inclusion in the Registration Statement or such Prospectus 
and that such information was reasonably relied on by the Company for use in 
the Registration Statement, such Prospectus or such form of prospectus or to 
the extent that such information relates to such Holder or such Holder's 
proposed method of distribution of Registrable Securities and was reviewed 
and expressly approved in writing by or was furnished by such Holder 
expressly for use in the Registration Statement, such Prospectus or such form 
of Prospectus, or in any amendment or supplement thereto.  In no event shall 
the liability of any selling Holder hereunder be greater in amount than the 
dollar amount of the net proceeds received by such Holder upon the sale of 
the Registrable Securities giving rise to such indemnification obligation.

          (c)  CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding 
shall be brought or asserted against any Person entitled to indemnity 
hereunder (an "INDEMNIFIED PARTY"), such Indemnified Party shall promptly 
notify the Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in 
writing, and the Indemnifying Party shall assume the defense thereof, 
including the employment of counsel reasonably satisfactory to the 
Indemnified Party and the payment of all fees and expenses incurred in 
connection with defense thereof; provided, that the failure of any 
Indemnified Party to give such notice shall not relieve the Indemnifying 
Party of its obligations or liabilities pursuant to this Agreement, except 
(and only) to the extent that it shall be 

                                      14
<PAGE>

finally determined by a court of competent jurisdiction (which determination 
is not subject to appeal or further review) that such failure shall have 
proximately and materially adversely prejudiced the Indemnifying Party.

          An Indemnified Party shall have the right to employ separate 
counsel in any such Proceeding and to participate in the defense thereof, but 
the fees and expenses of such counsel shall be at the expense of such 
Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed 
in writing to pay such fees and expenses; or (2) the Indemnifying Party shall 
have failed promptly to assume the defense of such Proceeding and to employ 
counsel reasonably satisfactory to such Indemnified Party in any such 
Proceeding; or (3) the named parties to any such Proceeding (including any 
impleaded parties) include both such Indemnified Party and the Indemnifying 
Party, and such Indemnified Party shall have been advised by counsel (which 
shall be reasonably acceptable to the indemnifying party) that a conflict of 
interest is likely to exist if the same counsel were to represent such 
Indemnified Party and the Indemnifying Party (in which case, if such 
Indemnified Party notifies the Indemnifying Party in writing that it elects 
to employ separate counsel at the expense of the Indemnifying Party, the 
Indemnifying Party shall not have the right to assume the defense thereof and 
such counsel shall be at the expense of the Indemnifying Party). The 
Indemnifying Party shall not be liable for any settlement of any such 
Proceeding effected without its written consent, which consent shall not be 
unreasonably withheld.  No Indemnifying Party shall, without the prior 
written consent of the Indemnified Party, effect any settlement of any 
pending Proceeding in respect of which any Indemnified Party is a party, 
unless such settlement includes an unconditional release of such Indemnified 
Party from all liability on claims that are the subject matter of such 
Proceeding.

          All fees and expenses of the Indemnified Party (including 
reasonable fees and expenses to the extent incurred in connection with 
investigating or preparing to defend such Proceeding in a manner not 
inconsistent with this Section) shall be paid to the Indemnified Party, as 
incurred, within ten (10) Business Days of written notice thereof to the 
Indemnifying Party (regardless of whether it is ultimately determined that an 
Indemnified Party is not entitled to indemnification hereunder; PROVIDED, 
that the Indemnifying Party may require such Indemnified Party to undertake 
to reimburse all such fees and expenses to the extent it is finally 
judicially determined that such Indemnified Party is not entitled to 
indemnification hereunder).

          (d)  CONTRIBUTION.  If a claim for indemnification under Section 
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of public 
policy or otherwise), then each Indemnifying Party, in lieu of indemnifying 
such Indemnified Party, shall contribute to the amount paid or payable by 
such Indemnified Party as a result of such Losses, in such proportion as is 
appropriate to reflect the relative fault of the Indemnifying Party and 
Indemnified Party in connection with the actions, statements or omissions 
that resulted in such Losses as well as any other relevant equitable 
considerations. The relative fault of such Indemnifying Party and Indemnified 
Party shall be determined by reference to, among other things, whether any 
action in question, including any untrue or alleged untrue statement of a 
material fact or omission or alleged omission of a material fact, has been 
taken or made by, or relates to information supplied by, such Indemnifying 
Party or Indemnified Party, and the parties' relative intent, knowledge, 

                                      15
<PAGE>

access to information and opportunity to correct or prevent such action, 
statement or omission.  The amount paid or payable by a party as a result of 
any Losses shall be deemed to include, subject to the limitations set forth 
in Section 5(c), any reasonable attorneys' or other reasonable fees or 
expenses incurred by such party in connection with any Proceeding to the 
extent such party would have been indemnified for such fees or expenses if 
the indemnification provided for in this Section was available to such party 
in accordance with its terms.

          The parties hereto agree that it would not be just and equitable if 
contribution pursuant to this Section 5(d) were determined by PRO RATA 
allocation or by any other method of allocation that does not take into 
account the equitable considerations referred to in the immediately preceding 
paragraph. Notwithstanding the provisions of this Section 5(d), no Holder 
shall be required to contribute, in the aggregate, any amount in excess of 
the amount by which the proceeds actually received by such Holder from the 
sale of the Registrable Securities subject to the Proceeding exceeds the 
amount of any damages that such Holder has otherwise been required to pay by 
reason of such untrue or alleged untrue statement or omission or alleged 
omission.  No Person guilty of fraudulent misrepresentation (within the 
meaning of Section 11(f) of the Securities Act) shall be entitled to 
contribution from any Person who was not guilty of such fraudulent 
misrepresentation.

          The indemnity and contribution agreements contained in this Section 
are in addition to any liability that the Indemnifying Parties may have to 
the Indemnified Parties.

     6.   MISCELLANEOUS

          (a)  REMEDIES.  In the event of a breach by the Company or by a 
Holder, of any of their obligations under this Agreement, each Holder or the 
Company, as the case may be, in addition to being entitled to exercise all 
rights granted by law and under this Agreement, including recovery of 
damages, will be entitled to specific performance of its rights under this 
Agreement. The Company and each Holder agree that monetary damages would not 
provide adequate compensation for any losses incurred by reason of a breach 
by it of any of the provisions of this Agreement and hereby further agrees 
that, in the event of any action for specific performance in respect of such 
breach, it shall waive the defense that a remedy at law would be adequate.

          (b)  NO INCONSISTENT AGREEMENTS.  Neither the Company nor any of 
its subsidiaries has entered, as of the date hereof, nor shall the Company or 
any of its subsidiaries, on or after the date of this Agreement, enter into 
any agreement with respect to its securities that is inconsistent with the 
rights granted to the Holders in this Agreement or otherwise conflicts with 
the provisions hereof.  Except as and to the extent specified in SCHEDULE 
6(b) hereto, neither the Company nor any of its subsidiaries has previously 
entered into any agreement granting any registration rights with respect to 
any of its securities to any Person.  Without limiting the generality of the 
foregoing, without the written consent of the Holders of a majority of the 
then outstanding Registrable Securities, the Company shall not, except as set 
forth in Section 3.11(b) of the Purchase Agreement,  grant to any Person the 
right to request the Company to register any securities of the Company under 
the Securities Act unless the rights so granted are subject in all 

                                      16
<PAGE>

respects to the prior rights in full of the Holders set forth herein, and are 
not otherwise in conflict or inconsistent with the provisions of this 
Agreement.

          (c)  NO PIGGYBACK ON REGISTRATIONS.  Except as and to the extent 
specified in SCHEDULE 6(b) hereto, neither the Company nor any of its 
security holders (other than the Holders in such capacity pursuant hereto) 
may include securities of the Company in the Registration Statement other 
than the Registrable Securities, and, except as set forth in Section 3.11(b) 
of the Purchase Agreement,  the Company shall not after the date hereof enter 
into any agreement providing any such right to any of its security holders.

          (d)  PIGGY-BACK REGISTRATIONS.  (i)  If at any time when there is 
not an effective Registration Statement covering all of the Registrable 
Securities then outstanding, the Company shall determine to prepare and file 
with the Commission a registration statement relating to an offering for its 
own account or the account of others under the Securities Act of any of its 
equity securities, other than on Form S-4 or Form S-8 (each as promulgated 
under the Securities Act) or their then equivalents relating to equity 
securities to be issued solely in connection with any acquisition of any 
entity or business or equity securities issuable in connection with stock 
option or other employee benefit plans, then the Company shall send to each 
Holder of Registrable Securities written notice of such determination and, if 
within fifteen (15) days after receipt of such notice, any such holder shall 
so request in writing, the Company shall, subject to the provisions of this 
Section 6(d), include in such registration statement all or any part of such 
Registrable Securities such holder requests to be registered.  
Notwithstanding the foregoing, the Company may abandon or delay any such 
registration at any time.

               (ii) It shall be a condition precedent to the obligations of 
the Company to take any action pursuant to this Section 6(d) with respect to 
the Registrable Securities of any selling Holder, that such Holder shall 
furnish to the Company such information regarding it, the Registrable 
Securities held by it, and the intended method of disposition of such 
securities as shall be required to effect the registration of such Holder's 
Registrable Securities and to execute such documents (including, without 
limitation, any underwriting agreement) in connection with such registration 
as the Company may reasonably request.

          (e)  AMENDMENTS AND WAIVERS.  The provisions of this Agreement, 
including the provisions of this sentence, may not be amended, modified or 
supplemented, and waivers or consents to departures from the provisions 
hereof may not be given, unless the same shall be in writing and signed by 
the Company and the Holders of at least two-thirds of the then outstanding 
Registrable Securities; PROVIDED, HOWEVER, that, for the purposes of this 
sentence, Registrable Securities that are owned, directly or indirectly, by 
the Company, or an Affiliate of the Company are not deemed outstanding.  
Notwithstanding the foregoing, a waiver or consent to depart from the 
provisions hereof with respect to a matter that relates exclusively to the 
rights of Holders and that does not directly or indirectly affect the rights 
of other Holders may be given by Holders of at least a majority of the 
Registrable Securities to which such waiver or consent relates; PROVIDED, 
HOWEVER, that the provisions of this sentence may not be amended, modified, 
or supplemented except in accordance with the provisions of the immediately 
preceding sentence.

                                      17
<PAGE>

          (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) the date of transmission, if 
such notice or communication is delivered via facsimile at the facsimile 
telephone number specified in this Section prior to 6:00 p.m. (New York City 
time) on a Business Day, (iii) the Business Day after the date of 
transmission, if such notice or communication is delivered via facsimile at 
the facsimile telephone number specified in this Section later than 6:00 p.m. 
(New York City time) on any date and earlier than 11:59 p.m. (New York City 
time) on such date; or (iv) upon receipt, when delivered by a reputable 
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:       ThrustMaster, Inc.
                              7175 N.W. Evergreen Parkway #400
                              Hillsboro, Oregon 97124-5839
                              Facsimile:  (503) 615-3297
                              Attention:  Frank G. Hausmann, Jr., CEO

     With copies to:          Perkins Coie LLP
                              1211 SW Fifth Avenue, Suite 1500
                              Portland, OR 97204
                              Facsimile:  (503) 727-2222
                              Attention:  Patrick Simpson

     If to Strong River:      Strong River Investments Inc.
                              c/o Cavallo Capital Corp.
                              630 Fifth Avenue, Suite 2000
                              New York, New York 10111
                              Facsimile:  (212) 332-3256
                              Attention:  Avi Vigder

     If to Montrose:          Montrose Investments, Ltd.
                              300 Crescent Court, Suite 700
                              Dallas, TX 75201
                              Facsimile:  (214) 758-1221
                              Attention:  Will Rose

     If to Westover:          Westover Investments L.P.
                              300 Crescent Court, Suite 700
                              Dallas, TX 75201
                              Facsimile:  (214) 758-1221
                              Attention:  Will Rose

                                      18
<PAGE>

     With copies to (for all
     communications to each
     of the Purchasers):      Robinson Silverman Pearce Aronsohn &
                                Berman LLP
                              1290 Avenue of the Americas
                              New York, NY  10104
                              Facsimile:  (212) 541-4630
                              Attention:  Kenneth L. Henderson

          Each party shall provide five days' prior written notice to the 
other party of any change in address or facsimile number.

          If to any other Person who is then the registered Holder:

                    To the address of such Holder as it appears in the stock
               transfer books of the Company or such other address as may be
               designated in writing hereafter, in the same manner, by such
               Person.

          (g)  SUCCESSORS AND ASSIGNS.  This Agreement shall inure to the 
benefit of and be binding upon the successors and permitted assigns of each 
of the parties and shall inure to the benefit of each Holder.  The Company 
may not assign its rights or obligations hereunder without the prior written 
consent of Holders of a majority of Registrable Securities then outstanding. 
Each Holder may assign their respective rights hereunder in the manner and to 
the Persons as permitted under this Agreement and the Purchase Agreement.

          (h)  ASSIGNMENT OF REGISTRATION RIGHTS.  The rights of each Holder 
hereunder, including the right to have the Company register for resale 
Registrable Securities in accordance with the terms of this Agreement, shall 
be automatically assignable by each Holder to any Affiliate of such Holder, 
any other Holder or Affiliate of any other Holder if: (i) the Holder agrees 
in writing with the transferee or assignee to assign such rights, and a copy 
of such agreement is furnished to the Company within a reasonable time after 
such assignment, (ii) the Company is, within a reasonable time after such 
transfer or assignment, furnished with written notice of (a) the name and 
address of such transferee or assignee, and (b) the securities with respect 
to which such registration rights are being transferred or assigned, (iii) 
following such transfer or assignment the further disposition of such 
securities by the transferee or assignees is restricted under the Securities 
Act and applicable state securities laws, (iv) at or before the time the 
Company receives the written notice contemplated by clause (ii) of this 
Section, the transferee or assignee agrees in writing with the Company to be 
bound by all of the provisions of this Agreement, (v) such transfer shall 
have been made in accordance with the applicable requirements of the Purchase 
Agreement and (vi) at least 10,000 shares of Registrable Securities 
(appropriately adjusted for any stock dividend, split or combination of the 
Common Stock) are being transferred to such transferee or assignee in 
connection with such assignment of rights.  The rights to assignment shall 
apply to the Holders (and to subsequent) successors and assigns.

                                      19
<PAGE>

          (i)  COUNTERPARTS.  This Agreement may be executed in any number of 
counterparts, each of which when so executed shall be deemed to be an 
original and, all of which taken together shall constitute one and the same 
Agreement. In the event that any signature is delivered by facsimile 
transmission, such signature shall create a valid binding obligation of the 
party executing (or on whose behalf such signature is executed) the same with 
the same force and effect as if such facsimile signature were the original 
thereof.

          (j)  GOVERNING LAW.  This Agreement shall be governed by and 
construed and enforced in accordance with the internal laws of the State of 
New York without regard to the principles of conflicts of law thereof.  Each 
party hereby irrevocably submits to the non-exclusive jurisdiction of the 
state and federal courts sitting in the City of New York, borough of 
Manhattan, for the adjudication of any dispute hereunder or in connection 
herewith or with any transaction contemplated hereby or discussed herein 
(including with respect to the enforcement of the any of the Transaction 
Documents), and hereby irrevocably waives, and agrees not to assert in any 
suit, action or proceeding, any claim that it is not personally subject to 
the jurisdiction of any such court, that such suit, action or proceeding is 
improper.  Each party hereby irrevocably waives personal service of process 
and consents to process being served in any such suit, action or proceeding 
by mailing a copy thereof to such party at the address in effect for notices 
to it under this Agreement and agrees that such service shall constitute good 
and sufficient service of process and notice thereof.  Nothing contained 
herein shall be deemed to limit in any way any right to serve process in any 
manner permitted by law. 

          (k)  CUMULATIVE REMEDIES.  The remedies provided herein are 
cumulative and not exclusive of any remedies provided by law. 

          (l)  SEVERABILITY. If any term, provision, covenant or restriction 
of this Agreement is held by a court of competent jurisdiction to be invalid, 
illegal, void or unenforceable, the remainder of the terms, provisions, 
covenants and restrictions set forth herein shall remain in full force and 
effect and shall in no way be affected, impaired or invalidated, and the 
parties hereto shall use their reasonable efforts to find and employ an 
alternative means to achieve the same or substantially the same result as 
that contemplated by such term, provision, covenant or restriction.  It is 
hereby stipulated and declared to be the intention of the parties that they 
would have executed the remaining terms, provisions, covenants and 
restrictions without including any of such that may be hereafter declared 
invalid, illegal, void or unenforceable.

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

          (n)  SHARES HELD BY THE COMPANY AND ITS AFFILIATES.  Whenever the 
consent or approval of Holders of a specified percentage of Registrable 
Securities is required hereunder, Registrable Securities held by the Company 
or its Affiliates (other than any Holder or transferees or successors or 
assigns thereof if such Holder is deemed to be an Affiliate solely by reason 
of its holdings of such Registrable Securities) shall not be counted in 
determining whether such consent or approval was given by the Holders of such 
required percentage.

                                      20
<PAGE>

                     [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                              SIGNATURE PAGE TO FOLLOW]


                                      21
<PAGE>

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


                                       COMPANY:

                                       THRUSTMASTER, INC.


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


                                       PURCHASERS:

                                       STRONG RIVER INVESTMENTS, INC.


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


                                       WESTOVER INVESTMENTS L.P.


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


                                       MONTROSE INVESTMENTS L.P.


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

                                      22
<PAGE>

                                                                     ANNEX A

                                PLAN OF DISTRIBUTION


     The Selling Stockholders and any of their pledgees, assignees and 
successors-in-interest may, from time to time sell any or all of their shares 
of Common Stock on any stock exchange on which the shares are traded or in 
private transactions.  These sales may be at fixed or negotiated prices.  The 
Selling Stockholders may use any one or more of the following methods when 
selling shares:

- -    ordinary brokerage transactions and transactions in which the broker-dealer
     solicits purchasers; 

- -    block trades in which the broker-dealer will attempt to sell the shares as
     agent but may position and resell a portion of the block as principal to
     facilitate the transaction; 

- -    purchases by a broker-dealer as principal and resale by the broker-dealer
     for its account;

- -    an exchange distribution in accordance with the rules of the applicable
     exchange; 

- -    privately negotiated transactions;

- -    short sales; 

- -    Broker-dealers may agree with the Selling Stockholders to sell a specified
     number of such shares at a stipulated price per share; 

- -    a combination of any such methods of sale; and 

- -    any other method permitted pursuant to applicable law.  

     The Selling Stockholders may also sell shares under SEC Rule 144, if 
available, rather than under this prospectus.

     The Selling Stockholders may sell shares short, short sales against the 
box, puts and calls and other transactions in securities of the Company or 
derivatives of Company securities, and may sell or deliver shares in 
connection with these trades.  The Selling Stockholders may pledge their 
shares to their brokers under the margin provisions of customer agreements.  
If a Selling Stockholder defaults on a margin loan, the broker may, from time 
to time, offer and sell the pledged shares.

<PAGE>

     Broker-dealers engaged by the Selling Stockholders may arrange for other 
brokers-dealers to participate in sales.  Broker-dealers may receive 
commissions or discounts from the Selling Stockholders (or, if any 
broker-dealer acts as agent for the Purchaser of shares, from the Purchaser) 
in amounts to be negotiated.  The Selling Stockholders do not expect these 
commissions and discounts to exceed what is customary in the types of 
transactions involved. 

     The Selling Stockholders and any broker-dealers or agents that are 
involved in selling the shares may be deemed to be "underwriters" within the 
meaning of the Securities Act in connection with such sales.  In such event, 
any commissions received by such broker-dealers or agents and any profit on 
the resale of the shares purchased by them may be deemed to be underwriting 
commissions or discounts under the Securities Act.

     The Company is required to pay all fees and expenses incident to the 
registration of the shares, including reasonable fees and disbursements of 
counsel to the Selling Stockholders.  The Company has agreed to indemnify the 
Selling Stockholders against certain losses, claims, damages and liabilities, 
including liabilities under the Securities Act.




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