TELENETICS CORPORATION
                               25111 Arctic Ocean
                          Lake Forest, California 92630

                                December 28, 2000

Taglich Brothers, Inc.
1370 Avenue of the Americas
New York, New York 10019

                  Re:      ENGAGEMENT LETTER
                  ---      -----------------

Ladies and Gentlemen:

                  This letter serves to confirm that Telenetics Corporation (the
"Company") has engaged Taglich Brothers, Inc. ("Taglich Brothers") to act as the
Company's investment banker from January 2, 2001 through June 30, 2001 (the
"Exclusive Period") to provide financial advisory services. The financial
advisory services shall be provided on such terms and at such times as shall be
mutually agreeable to the parties. The Company also agrees that Taglich Brothers
shall have the exclusive right to act as the Company's placement agent for any
private placements that the Company may initiate during the Exclusive Period.
Any private placement shall be made pursuant to Taglich Brothers' standard form
of retainer letter.

                  As compensation for providing the financial advisory services,
Taglich Brothers shall receive (or may designate the recipients) concurrently
herewith five (5) year warrants to purchase 350,000 shares of the Company's
common stock, no par value per share (the "Common Stock") at $0.80 per share.
With respect to the shares of Common Stock, the holder(s) of such warrants shall
have the registration rights and "piggy-back" registration rights as set forth
on EXHIBIT A annexed hereto. Such registration rights and "piggy-back"
registration rights are incorporated herein by this reference as if fully set
forth herein. The Company will also reimburse Taglich Brothers for all of its
reasonable expenses incurred on the Company's behalf, including reasonable fees
and expenses of its counsel, directly in regard to the services provided by
Taglich Brothers under this letter.

                  In connection with any private placement of the Company's
securities that is initiated during the Exclusive Period, Taglich Brothers shall
be compensated for acting as the Company's placement agent in the following
manner: (i) a cash fee equal to ten (10.0%) percent of the gross proceeds
raised; and (ii) five (5) year warrants to purchase shares of Common Stock equal
to ten (10.0%) percent of the aggregate number of shares of Common Stock issued
or issuable upon conversion of the securities sold in the Private Placement, at
an exercise price equal to 120% of the price per share of the Common Stock or
the conversion price applicable to convertible securities, as applicable.

                  The terms of the Indemnification Rider annexed hereto as
EXHIBIT B are hereby incorporated by reference as if fully set forth herein. The
effectiveness of the Indemnification Rider shall survive the expiration or
termination of this letter and/or the consummation of any transactions under the
terms of this letter.



<PAGE>

                  Notwithstanding the place where this Agreement may be executed
by any of the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and governed by the laws
of the State of New York. The parties hereby agree that any dispute which may
arise between them arising out of or in connection with this Agreement shall be
adjudicated before a court located in New York and they hereby submit to the
exclusive jurisdiction of the courts of the State of New York and of the federal
courts in New York with respect to any action or legal proceeding commenced by
any party, and irrevocably waive any objection they now or hereafter may have
respecting the venue of any such action or proceeding brought in such a court or
respecting the fact that such court is an inconvenient forum, relating to or
arising out of this Agreement or any acts or omissions relating to the sale of
the securities hereunder, and consent to the service of process in any such
action or legal proceeding by means of registered or certified mail, return
receipt requested, in case of the address set forth below or such other address
as the undersigned shall furnish in writing to the other.

                  This Agreement may not be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. It is agreed that a waiver by either party of a breach of any provision
of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by that same party. The holding of any provision of this
Agreement to be invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provision of this Agreement, which shall remain in
full force and effect. The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Agreement.

                  This letter may be executed in any number of counterparts,
each of which shall be deemed an original and together shall constitute one and
the same instrument.

                                              Very truly yours,

                                              TELENETICS CORPORATION

Agreed and Accepted by:
                                              By:/S/ Terry S. Parker
                                                 -------------------------------
TAGLICH BROTHERS, INC.                           Name: Terry S. Parker
                                                 Title: President and
                                                        Chief Executive Officer
By: /s/ Michael Taglich
   ---------------------------------
    Name: Michael Taglich
    Title: President

                                      -2-


<PAGE>

                                    EXHIBIT A
                                    ---------

            REGISTRATION RIGHTS AND "PIGGY-BACK" REGISTRATION RIGHTS
            --------------------------------------------------------

                  (a) As soon as possible, but in no event later than March 31,
2001, the Company shall, at its sole cost and expense, file a registration
statement on the appropriate form under the Securities Act of 1933, as amended
(the "1933 Act") with the Securities and Exchange Commission ("SEC") covering
all of the shares of Common Stock issuable to Taglich Brothers or their
designees and as set forth in this subsection (a) (collectively, the
"Registrable Securities"), time being of the essence. The Company will use its
best efforts to have such registration statement declared effective as soon as
possible thereafter, and shall keep such registration statement current and
effective for at least three (3) years from the effective date thereof or until
such earlier date as all of the Registrable Securities registered pursuant to
such registration statement shall have been sold or otherwise transferred. If
the Registration Statement is not filed by March 31, 2001, the Exercise Price
(as hereinafter defined) shall be reduced (and concomitantly, the number of
shares of Common Stock issuable to Taglich Brothers (or their designees) shall
increase) by the percentage resulting from multiplying three (3%) percent by the
number of thirty (30) day periods, or any part thereof, beyond March 31, 2001
until the registration statement covering the Registrable Securities is filed
with the SEC. Notwithstanding anything to the contrary contained herein, and in
addition to the adjustments set forth in the preceding sentence, if the
Registration Statement shall not be declared effective by May 31, 2001, then the
Exercise Price shall be reduced (and concomitantly the number of shares of
Common Stock issuable to Taglich Brothers (or their designees) shall increase)
by the percentage resulting from multiplying two (2%) percent by the number of
thirty (30) day periods, or any part thereof, beyond May 31, 2001 until the
Registration Statement described herein covering the Registrable Securities is
declared effective. Notwithstanding the foregoing, the Exercise Price shall not
be reduced pursuant to this subsection(a) by more than thirty-six (36%) percent
in the aggregate.

                  (b) In the event the Company effects any registration under
the 1933 Act of any Registrable Securities pursuant to subsections (a) above or
(g) below, the Company shall indemnify, to the extent permitted by law, and hold
harmless Taglich Brothers and/or all of its designees (each, a "Seller"), any
underwriter, any officer, director, employee or agent of any Seller or
underwriter, and each other person, if any, who controls any Seller or
underwriter within the meaning of Section 15 of the 1933 Act, against any
losses, claims, damages or liabilities, judgment, fines, penalties, costs and
expenses, joint or several, or actions in respect thereof (collectively, the
"Claims"), to which each such indemnified party becomes subject, under the 1933
Act or otherwise, insofar as such Claims arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the registration statement or prospectus or any amendment or supplement thereto
or any document filed under a state securities or blue sky law (collectively,
the "Registration Documents") or insofar as such Claims arise out of or are
based upon the omission or alleged omission to state in any Registration
Document a material fact required to be stated therein or necessary to make the
statements made therein not misleading, and will reimburse any such indemnified
party for any legal or other expenses reasonably incurred by such indemnified
party in investigating or defending any such Claim; provided that the Company
shall not be liable in any such case to the extent such Claim is based upon an

                                      A-i


<PAGE>

untrue statement or alleged untrue statement of a material fact or omission or
alleged omission of a material fact made in any Registration Document in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any indemnified party specifically for use in the
preparation of such Registration Document.

                  (c) In connection with any registration statement in which any
Seller is participating, each Seller, severally and not jointly, shall
indemnify, to the extent permitted by law, and hold harmless the Company, each
of its directors, each of its officers who have signed the registration
statement, each other person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act, each other Seller and each underwriter,
any officer, director, employee or agent of any such other Seller or underwriter
and each other person, if any, who controls such other Seller or underwriter
within the meaning of Section 15 of the 1933 Act against any Claims to which
each such indemnified party may become subject under the 1933 Act or otherwise,
insofar as such Claims (or actions in respect thereof) are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
Registration Document, or insofar as any Claims are based upon the omission or
alleged omission to state in any Registration Document a material fact required
to be stated therein or necessary to make the statements made therein not
misleading, and will reimburse any such indemnified party for any legal or other
expenses reasonably incurred by such indemnified party in investigating or
defending any such claim; provided, however, that such indemnification or
reimbursement shall be payable only if, and to the extent that, any such Claim
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Registration Document in reliance
upon and in conformity with written information furnished to the Company by the
Seller specifically for use in the preparation thereof.

                  (d) Any person entitled to indemnification under subsections
(b) or (c) above shall notify promptly the indemnifying party in writing of the
commencement of any Claim if a claim for indemnification in respect thereof is
to be made against an indemnifying party under this subsection (d), but the
omission of such notice shall not relieve the indemnifying party from any
liability which it may have to any indemnified party otherwise than under
subsection (b) or (c) above, except to the extent that such failure shall
materially adversely affect any indemnifying party or its rights hereunder. In
case any action is brought against the indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it chooses, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party;
and, after notice from the indemnifying party to the indemnified party that it
so chooses, the indemnifying party shall not be liable for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation; provided, however,
that (i) if the indemnifying party fails to take reasonable steps necessary to
defend diligently the Claim within twenty (20) days after receiving notice from
the indemnified party that the indemnified party believes it has failed to do
so; (ii) if the indemnified party who is a defendant in any action or proceeding
which is also brought against the indemnifying party reasonably shall have
concluded that there are legal defenses available to the indemnified party which
are not available to the indemnifying party; or (iii) if representation of both
parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct, the indemnified party shall have the right to
assume or continue its own defense as set forth above (but with no more than one

                                      A-ii


<PAGE>

firm of counsel for all indemnified parties in each jurisdiction, except to the
extent any indemnified party or parties reasonably shall have concluded that
there are legal defenses available to such party or parties which are not
available to the other indemnified parties or to the extent representation of
all indemnified parties by the same counsel is otherwise inappropriate under
applicable standards of professional conduct) and the indemnifying party shall
be liable for any reasonable expenses therefor; provided, that no indemnifying
party shall be subject to any liability for any settlement of a Claim made
without its consent (which may not be unreasonably withheld, delayed or
conditioned). If the indemnifying party assumes the defense of any Claim
hereunder, such indemnifying party shall not enter into any settlement without
the consent of the indemnified party if such settlement attributes liability to
the indemnified party (which consent may not be unreasonably withheld, delayed
or conditioned).

                  (e) If for any reason the indemnity provided in subsection (b)
or (c) above is unavailable, or is insufficient to hold harmless, an indemnified
party, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of any Claim in such proportion as
is appropriate to reflect the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other from the
transactions contemplated by this Agreement. If, however, the allocation
provided in the immediately preceding sentence is not permitted by applicable
law, or if the indemnified party failed to give the notice required by
subsection (d) above, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the indemnifying party and the indemnified party as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party or their respective representatives and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable in respect of any Claim shall
be deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such Claim.
Notwithstanding the foregoing, no underwriter or controlling person thereof, if
any, shall be required to contribute, in respect of such underwriter's
participation as an underwriter in the offering, any amount in excess of the
amount by which the total price at which the Registrable Securities underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such underwriter 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 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The obligation
of any underwriters to contribute pursuant to this subsection (e) shall be
several in proportion to their respective underwriting commitments and not
joint.

                                      A-iii


<PAGE>

                  (f) The provisions of subsections (b) through (e) hereof shall
be in addition to any other rights to indemnification or contribution which any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of the Registrable Securities by any such party.

                  (g) If the registration statement as filed pursuant to
subsection (a) above is not then effective, then Registered Holders shall have
certain "piggy-back" registration rights.

                           A. If at any time after the issuance of the warrants
or a predecessor instrument, the Company shall file with the SEC a registration
statement under the 1933 Act registering any shares of Common Stock owned by any
person or entity, the Company shall give written notice to each Registered
Holder thereof prior to such filing.

                           B. Within fifteen (15) days after such notice from
the Company, each Registered Holder shall give written notice to the Company
whether or not the Registered Holder desires to have all of the Registered
Holder's Registrable Securities included in the registration statement. If a
Registered Holder fails to give such notice within such period, such Registered
Holder shall not have the right to have such Registered Holder's Registrable
Securities registered pursuant to such registration statement. If a Registered
Holder gives such notice, then the Company shall include such Registered
Holder's Registrable Securities in the registration statement, at the Company's
sole cost and expense, subject to the remaining terms of this subsection (g).

                           C. If the registration statement relates to an
underwritten offering, and the underwriter shall determine in writing that the
total number of shares of Common Stock to be included in the offering, including
the Registrable Securities, shall exceed the amount which the underwriter deems
to be appropriate for the offering, the number of shares of the Registrable
Securities shall be reduced in the same proportion as the remainder of the
shares in the offering and each Registered Holder's Registrable Securities
included in such registration statement will be reduced proportionately. For
this purpose, if other securities in the registration statement are derivative
securities, their underlying shares shall be included in the computation. The
Registered Holders shall enter into such agreements as may be reasonably
required by the underwriters and the Registered Holders shall pay to the
underwriters commissions relating to the sale of their respective Registrable
Securities.

                           D. The Registered Holders shall have two (2)
opportunities to have the Registrable Securities registered under this
subsection (g).

                           E. The Registered Holder shall furnish in writing to
the Company such information as the Company shall reasonably require in
connection with a registration statement.

                  (h) If and whenever the Company is required by the provisions
of this subsection to use its best efforts to register any Registrable
Securities under the 1933 Act, the Company shall, as expeditiously as possible
under the circumstances:

                                      A-iv


<PAGE>

                           A. Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective as soon as possible and
remain effective.

                           B. Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement current and to
comply with the provisions of the 1933 Act, and any regulations promulgated
thereunder, with respect to the sale or disposition of all Registrable
Securities covered by the registration statement required to effect the
distribution of the securities, but in no event shall the Company be required to
do so for a period of more than three (3) years following the effective date of
the registration statement.

                           C. Furnish to the Sellers participating in the
offering, copies (in reasonable quantities) of summary, preliminary, final,
amended or supplemented prospectuses, in conformity with the requirements of the
1933 Act and any regulations promulgated thereunder, and other documents as
reasonably may be required in order to facilitate the disposition of the
securities, but only while the Company is required under the provisions hereof
to keep the registration statement current.

                           D. Use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions of the United States as the
Sellers participating in the offering shall reasonably request, and do any and
all other acts and things which may be reasonably necessary to enable each
participating Seller to consummate the disposition of the Registrable Securities
in such jurisdictions.

                           E. Notify each Seller selling Registrable Securities,
at any time when a prospectus relating to any such Registrable Securities
covered by such registration statement is required to be delivered under the
1933 Act, of the Company's becoming aware that the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, and promptly prepare and furnish to each such
Seller selling Registrable Securities a reasonable number of copies of a
prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.

                           F. As soon as practicable after the effective date of
the registration statement, and in any event within eighteen (18) months
thereafter, make generally available to Sellers participating in the offering an
earnings statement (which need not be audited) covering a period of at least
twelve (12) consecutive months beginning after the effective date of the
registration statement which earnings statement shall satisfy the provisions of
Section 11(a) of the 1933 Act, including, at the Company's option, Rule 158
thereunder. To the extent that the Company files such information with the SEC

                                       A-v


<PAGE>

in satisfaction of the foregoing, the Company need not deliver the above
referenced earnings statement to Seller.

                           G. Upon request, deliver promptly to counsel of each
Seller participating in the offering copies of all correspondence between the
SEC and the Company, its counsel or auditors and all memoranda relating to
discussions with the SEC or its staff with respect to the registration statement
and permit each such Seller to do such investigation at such Seller's sole cost
and expense, upon reasonable advance notice, with respect to information
contained in or omitted from the registration statement as it deems reasonably
necessary. Each Seller agrees that it will use its best efforts not to interfere
unreasonably with the Company's business when conducting any such investigation
and each Seller shall keep any such information received pursuant to this
subsection G confidential.

                           H. Provide a transfer agent and registrar located in
the United States for all such Registrable Securities covered by such
registration statement not later than the effective date of such registration
statement.

                           I. List the Registrable Securities covered by such
registration statement on such exchanges and/or the NASDAQ as the Common Stock
is then currently listed.

                           J. Pay all Registration Expenses (as hereinafter
defined) incurred in connection with a registration of Registrable Securities,
whether or not such registration statement shall become effective; provided that
each Seller shall pay all underwriting discounts, commissions and transfer
taxes, and their own counsel fees, if any, relating to the sale or disposition
of such Seller's Registrable Securities pursuant to a registration statement. As
used herein, "Registration Expenses" means any and all reasonable and customary
expenses incident to performance of or compliance with the registration rights
set forth herein, including, without limitation, (i) all SEC, stock exchange and
National Association of Securities Dealers, Inc. registration and filing fees,
(ii) all fees and expenses of complying with state securities or blue sky laws
(including reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities but no
other expenses of the underwriters or their counsel), (iii) all printing,
messenger and delivery expenses, and (iv) the reasonable fees and disbursements
of counsel for the Company and the Company's independent public accountants.

                  (i) The Company acknowledges that there is no adequate remedy
at law for failure by it to comply with the provisions of this EXHIBIT A and
that such failure would not be adequately compensable in damages, and therefore
agrees that its agreements contained in this Section may be specifically
enforced. In the event that the Company shall fail to file such registration
statement when required pursuant to subsection (a) above or to keep any
registration statement effective as provided in this Section or otherwise fails
to comply with its obligations and agreements in this Section, then, in addition
to any other rights or remedies the Registered Holders may have at law or in
equity, including without limitation, the right of rescission, the Company shall
indemnify and hold harmless the Registered Holders from and against any and all
manner or loss which they may incur as a result of such failure. In addition,
the Company shall also reimburse the Registered Holders for any and all
reasonable legal fees and expenses incurred by them in enforcing their rights
pursuant to this Section, regardless of whether any litigation was commenced.

                                      A-vi



<PAGE>

                                    EXHIBIT B
                                    ---------

                              INDEMNIFICATION RIDER
                              ---------------------

                  (a) The Company shall indemnify and hold harmless: (i) Taglich
Brothers, (ii) each person and entity that directly, or indirectly though one or
more intermediaries, controls or is controlled by, or is under common control
with, Taglich Brothers (each, an "Affiliate"), and (iii) Taglich Brothers' and
each Affiliate's respective officers, directors, affiliates, shareholders,
agents and employees (collectively, the "Other Parties" and individually "Other
Party") from and against any loss, claim, penalty, fine, judgment, damage or
liability, joint or several of any sort of kind, and any action in respect
thereof, to which Taglich Brothers, any Affiliate or any Other Party may become
subject, under the Securities Act of 1933, as amended ("1933 Act"), the
Securities Exchange Act of 1934, as amended ("1934 Act"), any state law or
otherwise, insofar as such loss, claim, penalty, fine, judgment, damage,
liability or action relates to or arises out of (x) any alleged untrue statement
of a material fact contained in any information or documents issued or supplied
by the Company to Taglich Brothers, or the alleged omission to state a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, (y) any transaction contemplated by
the engagement of Taglich Brothers pursuant to, and the performance by Taglich
Brothers of the services contemplated by, the letter agreement to which this
Indemnification Rider is attached (the "Letter"), (iii) any breach by the
Company of the covenants contained in the Letter; and shall reimburse Taglich
Brothers, any Affiliate and each Other Party for any legal or other expenses
reasonably incurred by Taglich Brothers, any Affiliate and/or such Other Party
in connection with investigating or defending any such loss, claim, penalty,
fine, judgment, damage, liability or action; PROVIDED, HOWEVER, that the Company
will not be liable in any such case to the extent that any such loss, claim,
penalty, fine, judgment, damage, liability or action relates to or arises out of
any alleged untrue statement or alleged omission contained therein relating to
Taglich Brothers, any Affiliate or such Other Party or that was made in reliance
upon and in conformity with information furnished to the Company in writing by
Taglich Brothers, any Affiliate or such Other Party, provided, further, that the
Company will not be liable under clause (ii) above for any loss, claim, penalty,
fine, judgment, damage, liability or action (or expenses relating thereto) that
are finally judicially determined by a court of competent jurisdiction to have
resulted from the bad faith, gross negligence, or willful misconduct of Taglich
Brothers. The foregoing indemnity is in addition to any liability, which the
Company may otherwise have to Taglich Brothers, any Affiliate and/or any Other
Party. In the event Taglich Brothers, any Affiliate or any Other Party is
requested or required to appear as a witness in any action brought by or on
behalf of or against the Company or any participant in a transaction covered
hereby in which Taglich Brothers, any Affiliate or such Other Party is not named
as a defendant, the Company agrees to reimburse Taglich Brothers, Affiliate
and/or such Other Party for all out of pocket expenses reasonably incurred by it
in connection with such party's appearing and preparing to appear as a witness,
including, without limitation the reasonable fees and disbursements of its legal
counsel.

                                       B-i


<PAGE>

                  (b) Taglich Brothers shall indemnify and hold harmless the
Company and its officers, directors, affiliates, agents and employees and any
person who controls the Company within the meaning of the 1933 Act or the 1934
Act from and against any loss, claim, penalty, fine, judgment, damage or
liability, joint or several, or any action in respect thereof, to which the
Company or any officer, director, affiliates, agents, employee or person who
controls the Company or any of them may become subject under the 1933 Act, the
1934 Act, any state law or otherwise, insofar as such loss, claim, penalty,
fine, judgment, damage, liability or action relates to or arises out of the bad
faith, gross negligence or willful misconduct of Taglich Brothers, any Affiliate
or Other Party or any alleged untrue statement of a material fact that was made
in reliance upon and in conformity with the information furnished to the Company
in writing by Taglich Brothers, any Affiliate or Other Party, or the omission or
alleged omission to state therein a material fact that relates to Taglich
Brothers, any Affiliates or Other Party or that was made in reliance upon and in
conformity with information furnished to the Company in writing by Taglich
Brothers, any Affiliate or Other Party, and Taglich Brothers shall reimburse the
Company and each such party for any legal or other expenses reasonably incurred
by the Company, or such indemnified party in connection with investigating or
defending any such loss, claim, penalty, fine, judgment, damage, liability or
action. The only information provided to the Company by Taglich Brothers, any
Affiliate or Other Party is Taglich Brothers' name. The foregoing indemnity is
in addition to any liability, which Taglich Brothers may otherwise have to the
Company, or such indemnified party.

                  (c) Promptly after receipt by an indemnified party under this
Section of notice of any claim or the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section, notify such indemnifying party in writing
of the claim or the commencement of that action provided that the failure to
notify the indemnifying party will not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section. If any such
claim or action is brought against any indemnified party, and it shall notify an
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein, and, to the extent that it wishes, jointly with any other
similarly notified party, to assume the defense thereof, with counsel reasonably
satisfactory to the indemnified party (which shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party, which consent
may not be unreasonably withheld). After notice from the indemnifying party to
the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
out-of-pocket costs of investigation incurred prior to the indemnifying party
assuming the defense thereof. With respect to any such claim or action for which
the indemnifying party does not assume the defense thereof, the indemnifying
party shall not be obligated to pay the reasonable fees and expenses of more
than one counsel for the indemnified party or parties.

                  (d) If the indemnification provided for in this Section shall
for any reason be unavailable to an indemnified party under subsections (a) or
(b) herein in respect of any loss, claim, penalty, fine, judgment, damage or
liability, or any action in respect thereof, referred to therein, then the
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, penalty, fine, judgment, damage or liability, or action in
respect thereof, (i) in such proportion as shall be appropriate to reflect the
relative benefits received by the Company on the one hand and Taglich Brothers
on the other from the financial advisory services provided on the Company's
behalf for Taglich Brothers, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company on the one hand and Taglich Brothers on
the other with respect to the statements or omissions which resulted in such

                                      B-ii



<PAGE>

loss, claim, penalty, fine, judgment, damage, or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and Taglich Brothers on the
other with respect to the financial advisory services provided by Taglich
Brothers shall be deemed to be in the same proportion as the total net proceeds
received by the Company bears to the total compensation received by Taglich
Brothers with respect such services, provided, that in no event shall liability
of Taglich Brothers or any Affiliate exceed the aggregate fees paid to Taglich
Brothers. The relative fault shall be determined be reference to: (i) whether
the untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact relates to information supplied by the
Company, on the one hand, or Taglich Brothers, on the other, (ii) whether there
was a breach of a representation, warranty or covenant by the Company, or (iii)
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement, omission or breach. The
parties agree that it would not be just and equitable if contributions pursuant
to this subsection (d) were to be determined by pro rata allocation or by any
other method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, penalty, fine, judgment, damage, or
liability, or action in respect thereof, referred to above in this subsection
(d) shall be deemed to include, for purposes of this subsection (d), any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.

                                      B-iii