Document:

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EXHIBIT 10.8

                     AMENDED AND RESTATED SECURITY AGREEMENT
                     ---------------------------------------

         THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "AGREEMENT"), dated
as of March 1, 2003 (the "EFFECTIVE DATE"), is made by TELENETICS CORPORATION, a
California corporation having its principal place of business at 25111 Arctic
Ocean, Lake Forest, California 92630 (the "GRANTOR"), for the benefit of DOLPHIN
OFFSHORE PARTNERS, L.P. (the "SECURED PARTY").

                              W I T N E S S E T H:

         WHEREAS, as of the Effective Date, the Grantor has executed a secured
promissory note in favor of the Secured Party in an aggregate principal amount
of $2,232,714.65 (the "NOTE"), pursuant to the Amended and Restated Note and
Warrant Purchase Agreement, dated as of the Effective Date among the Grantor,
the Secured Party and other parties thereto (the "PURCHASE AGREEMENT"). In order
to provide security for the payment of all of the obligations of the Grantor to
the Secured Party under the Note, the Grantor has agreed to grant to the Secured
Party a continuing lien and security interest in all of the Grantor's Inventory
(as defined below) and to execute this and such other security agreements and
instruments as are necessary to grant such lien and security interest and enable
the Secured Party to perfect such security interest; and

         WHEREAS, this Agreement is intended to and shall replace the Security
Agreements (the "ORIGINAL SECURITY AGREEMENTS") executed by the parties as part
of the Original Documents (as defined in the Purchase Agreement).

         NOW, THEREFORE, in consideration of the premises contained herein and
in the Note and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Grantor agrees with the Secured
Party as follows:

Section 1. DEFINITIONS.

         Capitalized terms used in this Agreement which are not otherwise
defined herein shall have the following meanings:

         "CODE" shall mean the Uniform Commercial Code as in effect in the State
of New York from time to time.

         "COLLATERAL" shall have the meaning assigned thereto in SECTION 2 of
this Agreement.

         "INVENTORY" shall have the meaning assigned to that term in the Code.

Section 2. GRANT OF SECURITY INTEREST.

         The Grantor hereby pledges, assigns and grants to the Secured Party a
continuing security interest in and lien on all Inventory of the Grantor,
wherever located and whether now or hereafter existing and whether now owned or
hereafter acquired and, to the extent not otherwise included all payments under
insurance (whether or not the Secured Party is the loss payee) or under any
indemnity, warranty, guaranty or government award which is payable by reason of
any damage to, or any loss, taking or condemnation of, the Inventory
(collectively, the "COLLATERAL").

                                      -1-
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Section 3. OBLIGATIONS SECURED.

         The Collateral hereunder constitutes and will constitute continuing
security for the strict performance and observance by the Grantor of the prompt
payment, when due, of all present and future obligations and indebtedness of the
Grantor to the Secured Party under the Note (after giving effect to any offset
rights of the Grantor thereunder with respect thereto) and of the Grantor under
this Agreement (collectively, the "OBLIGATIONS").

Section 4. GRANTOR REMAINS LIABLE.

         Anything herein to the contrary notwithstanding, in the absence of the
Secured Party's express prior written consent thereto, (a) the Grantor shall
remain liable under any and all contracts and agreements included in the
Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (b) the exercise by the Secured Party of any of the rights hereunder
shall not release the Grantor from any of its duties or obligations under any
contracts and agreements included in the Collateral, and (c) the Secured Party
shall not have any obligation or liability under any contracts and agreements
included in the Collateral by reason of this Agreement, nor shall the Secured
Party be obligated to perform any of the obligations or duties of the Grantor
under any such contract or agreement or to take any action to collect or enforce
any claim for payment assigned hereunder.

Section 5. REPRESENTATIONS AND WARRANTIES.

         The Grantor represents and warrants to the Secured Party that:

         5.1 The Grantor is a corporation duly incorporated, validly existing
and in good standing under the laws of its state of incorporation, is duly
qualified and in good standing under the laws of each jurisdiction where the
character of its properties or the transaction of its business makes such
qualification necessary, except for any jurisdictions(s) (alone or in the
aggregate) in which the failure to be so qualified will not have a Material
Adverse Effect (as defined in the Purchase Agreement), and has the requisite
corporate power to own or hold under lease its properties and assets and to
conduct its business as it is now being conducted.

         5.2 The Grantor has the requisite corporate power and authority to
enter into and perform this Agreement, which has been duly authorized by all
necessary corporate action, and no further consent or authorization of the
Grantor or its board of directors or shareholders or any public authority is
required in connection therewith. The execution, delivery and performance by the
Grantor of this Agreement will not violate any provision of law applicable to
the Grantor and will not conflict with or result in the breach of any order,
writ, injunction or decree of any court or government instrumentality, or its
charter or by-laws or create a default under any agreement, note or indenture to
which it is a party or by which it is bound or to which any of its property is
subject, or result in the imposition of any lien, charge, security interest or
encumbrance of any nature whatsoever upon any of its properties or assets under
any agreement or any commitment to which the Grantor is bound or by which any of
its properties or assets are bound, except for the liens created under this
Agreement and except for such conflicts, defaults, violations, breaches and the
like that would not, individually or in the aggregate, have a Material Adverse
Effect.

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         5.3 This Agreement has been duly executed and delivered, and
constitutes the legal, valid and binding obligation of the Grantor, enforceable
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.

         5.4 Except as disclosed on SCHEDULE 1 to this Agreement, the Grantor
has good title to and is the lawful owner of the Collateral free from all
claims, liens, encumbrances, charges or security interests whatsoever. Except as
provided in SECTION 6.9 of this Agreement, the Collateral will at all times be
kept at the locations set forth on EXHIBIT A hereto.

         5.5 The provisions of this Agreement create a valid, and upon filing a
UCC-1 financing statement with the Secretary of State of the State of
California, a perfected, security interest in the Collateral, enforceable in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation,
conservatorship, receivership or similar laws relating to, or affecting
generally the enforcement of, creditor's rights and remedies or by other
equitable principles of general application.

         5.6 Except as disclosed on SCHEDULE 1 to this Agreement, there are no
judgments outstanding against the Grantor and there are no actions or
proceedings before any court or administrative agency pending or, to the
knowledge of the Grantor, threatened against the Grantor which, if determined
adversely to the Grantor, would affect the Collateral.

         5.7 The Grantor's principal office and place of business where it
maintains its records concerning the Collateral is at its address stated above.
The Grantor has no other office or place of business except as indicated on
EXHIBIT A hereto.

Section 6. COVENANTS.

         The Grantor covenants and agrees that from the date of this Agreement
until payment in full of all of the Obligations:

         6.1 The Grantor shall keep and maintain the Collateral insured against
loss or damage by fire and all other risks as is customarily maintained by
similar businesses for the full insurable value thereof. Certificates of all
such policies shall be delivered to the Secured Party. Such policies shall by
their terms provide that the Secured Party be given at least 30 days prior
written notice of any amendment, modification or cancellation thereof and that
the Secured Party shall have the option, but not the obligation, to pay the
premiums to continue such insurance in effect or obtain like coverage. The
Grantor agrees that any payment made by the Secured Party pursuant to the
foregoing authorization shall bear interest thereon at the rate of 10% per annum
from the date of such payment and shall become part of the Obligations and be
shall secured by the Collateral pursuant to the terms of this Agreement. The
Grantor hereby appoints the Secured Party as its attorney-in-fact to make,
adjust or settle any claim under any insurance policy insuring the Collateral
while an Event of Default (as defined below) shall have occurred and be
continuing.

                                      -3-
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         6.2 The Grantor shall maintain the Collateral in good repair, working
order and condition, subject to normal wear and tear, and make all reasonable
repairs, replacements, additions and improvements thereto.

         6.3 The Grantor shall give the Secured Party full and free access to
the Collateral and to all books, correspondence and records of the Grantor with
respect thereto upon reasonable notice and at all reasonable times, and shall
permit upon the occurrence and continuance of an Event of Default the Secured
Party and its representatives to examine the same and to make extracts therefrom
all at the Grantor's expense.

         6.4 The Grantor shall promptly pay and discharge or cause to be paid
and discharged all its obligations and liabilities including, without
limitation, all taxes, assessments and governmental charges upon it or its
income or properties, when due unless and to the extent only that the same shall
be contested in good faith and by appropriate proceedings and then only to the
extent that a bond is filed in cases where the filing of a bond is necessary to
avoid the creation of a lien against any of its property.

         6.5 The Grantor shall do, or cause to be done, all things necessary to
preserve and keep in full force and effect its corporate existence and all
franchises, rights and privileges necessary for the proper conduct of its
business, and continue to engage in the business of the same type as now
conducted by it.

         6.6 The Grantor shall not grant, permit or suffer to exist any lien,
claim, security interest or encumbrance upon the Collateral, that is senior or
on parity with that in favor of the Secured Party other than the security
interest granted by the Grantor pursuant to the Amended and Restated Security
Agreement dated as of the Effective Date by and between the Grantor and the
holders of the other notes pursuant to the Purchase Agreement and other than
such liens, claims, security interests and encumbrances as exist as of the
Effective Date.

         6.7 The Grantor shall notify the Secured Party in writing within five
(5) business days after the occurrence thereof, of the occurrence of any event
which constitutes, or which with notice or lapse of time, or both, would
constitute an Event of Default.

         6.8 The Grantor shall execute and deliver such further or additional
instruments and assurances, and take all such additional action as the Secured
Party may require for the purpose of carrying out the provisions of this
Agreement.

         6.9 Except as expressly permitted by or described in this Agreement or
its schedules or exhibits, the Grantor shall not sell, assign, lease or
otherwise dispose of the Collateral except in the ordinary course of business.

                                      -4-
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         6.10 The Grantor shall not change its principal office or the place
where it maintains its records pertaining to the Collateral as specified in
SECTION 5.7 hereof without giving the Secured Party at least 30 days prior
written notice thereof.

         6.11 The Grantor shall not remove or permit the removal of the
Collateral from its present location as set forth on EXHIBIT A hereto except in
the ordinary course of business without the prior written consent of the Secured
Party.

Section 7. OPTION TO PERFORM OBLIGATION OF THE GRANTOR IN RESPECT OF THE
COLLATERAL.

         If the Grantor fails or refuses to make any payment, perform any
covenant or obligation, or take any other action which the Grantor is obligated
hereunder to perform, observe, take or do, then the Secured Party may, at its
option, without notice or demand upon the Grantor and without releasing the
Grantor from any obligation or covenant hereof, perform, observe, take or do the
same in such manner and to such extent as the Secured Party may deem necessary
to protect any of the Collateral and its rights hereunder including, without
limitation, obtaining insurance and the payment of any taxes and the payment of
any sums necessary to discharge liens or security interests at any time levied
or placed on the Collateral.

Section 8. EVENTS OF DEFAULT.

         For purposes of this Agreement, any of the following events shall
constitute an "EVENT OF DEFAULT":

         8.1 The Grantor shall fail to make any payment of principal and
interest on the Note prior to the expiration of all applicable cure periods;

         8.2 The Grantor shall default in the performance or observance of any
covenant or agreement contained in this Agreement and such default shall
continue for a period of seven (7) business days following the Grantor's receipt
of written notice thereof;

         8.3 Any representation or warranty made by the Grantor in this
Agreement or the other Transaction Documents (as defined in the Purchase
Agreement) or in any other certificate, agreement, instrument or statement
delivered to the Secured Party by or on behalf of the Grantor shall at any time
prove to have been incorrect when made in any material respect;

         8.4 There shall be a defect in the Grantor's title to any of the
Collateral and such defect in title shall not have been cured or removed within
20 days after the Grantor's receipt of written notice thereof;

         8.5 The Grantor shall become insolvent, make a general assignment for
the benefit of creditors, file a petition in bankruptcy, be adjudicated
insolvent or bankrupt, admit in writing its inability to pay its debts as they
mature, petition or apply for, consent to, or acquiesce in the appointment of, a
trustee or receiver for all or a substantial part of the Grantor's property; or
any other bankruptcy, reorganization, debt arrangement or other proceeding under

                                      -5-
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any bankruptcy, insolvency law, or any dissolution or liquidation proceeding
shall be instituted by or against the Grantor, and if instituted against it,
shall be consented to or acquiesced in by the Grantor or shall not be dismissed
or, if contested, stayed within a period of 90 days; or any judgment, writ of
attachment or execution or any similar process shall be issued or levied against
a substantial part of the property of the Grantor and shall not be released,
stayed, bonded or vacated within a period of 90 days after its issue or levy;

         8.6 The Grantor shall, at any time without the prior written consent of
the Secured Party, enter into an agreement to change the location of the
Collateral or permit any change in such location of the Collateral from that
specified in SECTION 5.4 hereof except as permitted by SECTION 6.9 of this
Agreement; and/or

         8.7 The lien created hereunder shall, for any reason other than by or
through the conduct of the Secured Party, cease to be valid.

Section 9. REMEDIES.

         In case any Event of Default shall have occurred and be continuing, the
Secured Party shall have, in addition to all other rights and remedies given it
by this Agreement or the Note, those allowed by law and the rights and remedies
of a secured party under the Uniform Commercial Code as enacted in any
jurisdiction in which any of the Collateral may be located and, without limiting
the generality of the foregoing, the Secured Party may immediately, without
demand of performance and without notice of intention to sell or of time or
place of sale or redemption or other notice or demand whatsoever to the Grantor,
all of which are hereby expressly waived, and without advertisement, enter onto
the premises where the Collateral is located and take possession thereof without
liability for any lawsuit or action, and sell, lease or otherwise dispose of all
or any part of the Collateral or any interest which the Grantor may have
therein, either at pubic or private sale or otherwise, and after deducting from
the proceeds of sale or other disposition of the Collateral all expenses
(including all reasonable fees and expenses of counsel) as provided in SECTION
14 hereof, shall apply the residue of such proceeds toward the payment of the
Obligations. If notice of any sale or other disposition is required by law to be
given, the Grantor hereby agrees that a notice sent at least five (5) days
before the time of any intended public sale or before the time after which any
private sale or other disposition of the Collateral is to be made shall be
reasonable notice of such sale or other disposition. The Grantor agrees to
assemble the Collateral, or cause it to be assembled, at such place or places as
the Secured Party may designate by written notice to the Grantor. At any such
sale or other disposition, the Secured Party may purchase the whole or any part
of the Collateral, free from any right of redemption on the part of the Grantor,
which right is hereby waived and released. Without limiting the generality of
the rights and remedies conferred upon the Secured Party under this SECTION 9,
the Secured Party may: (a) enter upon the premises of the Grantor and take
immediate possession of the Collateral, either personally or by means of a
receiver appointed by a court therefor, using reasonable force to do so; (b) at
the Secured Party's option, use, operate, manage and control the Collateral in
any lawful manner; (c) collect and receive all rents, income, revenue, earnings,
issue and profits therefrom; and (d) maintain, repair, renovate, alter or remove
the Collateral as the Secured Party may determine in its discretion and any
monies so collected or received by the Secured Party shall be applied to, or may
be accumulated for application upon, the Obligations and the Grantor shall be
liable for any deficiency.

                                      -6-
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Section 10. POWER OF ATTORNEY.

         The Grantor authorizes the Secured Party and does hereby make,
constitute and appoint the Secured Party and agents of the Secured Party with
full power of substitution, as the Grantor's true and lawful attorney-in-fact
with power, in its own name or in the name of the Grantor, upon the occurrence
and continuance of any Event of Default, to endorse any notes checks, drafts,
money orders, or other instruments of payment (including, payments under or in
respect of any policy of insurance) in respect of the Collateral that may come
into possession of the Secured Party; to sign and endorse any documents relating
to the Collateral; to pay or discharge taxes, liens, security interests or other
encumbrances at any time levied or placed on or threatened against the
Collateral; to grant, collect, receive, compromise, settle and sue for monies
due in respect of the Collateral; and generally, to do at the Secured Party's
option and at the Grantor's expense, at any time, or from time to time, all acts
and things which the Secured Party deems necessary to protect, preserve and
realize upon the Collateral and the Secured Party's security interests therein
in order to effect the intent of this Agreement, as fully and effectually as the
Grantor might or could do; and the Grantor hereby ratifies all that said
attorney shall do or cause to be done by virtue hereof. THIS POWER OF ATTORNEY
IS COUPLED WITH AN INTEREST AND SHALL BE IRREVOCABLE FOR AS LONG AS ANY OF THE
OBLIGATIONS SHALL BE OUTSTANDING. The Grantor agrees that any reasonable fees,
costs and expenses incurred by the Secured Party pursuant to the foregoing
authorization, and interest thereon at the rate of 10% per annum from the date
of incurring any such reasonable fees, costs and expense, shall become part of
the Obligations and be secured by the Collateral.

Section 11. NOTICES.

         All notices, requests, demands and other communications to or upon the
respective parties hereto shall be made in accordance with SECTION 4.1 of the
Note.

Section 12. NO WAIVER; REMEDIES CUMULATIVE.

         No failure on the part of the Secured Party to exercise, and no delay
in exercising any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise by the Secured Party of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

Section 13. FINANCING STATEMENTS; FURTHER ASSURANCES; FILING.

         On the date hereof, the Grantor shall deliver UCC-1 financing
statements in form and substance satisfactory to the Secured Party and with the
Secured Party's security interest duly noted thereon with respect to the
Collateral for filing at the appropriate offices. Thereafter, within ten (10)
business days after the Secured Party's written request therefor, the Grantor
shall cause such additional Uniform Commercial Code financing statements with
respect to the Collateral or any modifications or amendments to any such
financing statements (all in form and substance reasonable satisfactory to the
Secured Party) to be delivered to the Secured Party for filing at the

                                      -7-
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appropriate offices. The Grantor from time to time, at its sole expense, will
promptly execute and deliver all further instruments and documents, and take all
further action that the Secured Party may reasonably request, and hereby
authorizes the Secured Party to take all action (including the filing of any
financing statements, continuation statements or amendments thereto with respect
to the Collateral without the signature of the Grantor where permitted by law)
as the Secured Party in each case may deem reasonably necessary, proper or
desirable in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any Collateral. A
carbon, photographic or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law. The Secured Party shall execute
terminations to any such financing statements within three (3) business days of
the Grantor's request therefore upon payment of the Obligations. The Secured
Party hereby consents to the Grantor's filing of amendments to and/or
terminations of Uniform Commercial Code financing statements as may be required
in connection with the replacement of the Original Security Agreements by this
Agreement.

Section 14. COSTS AND EXPENSES.

         The Grantor shall reimburse the Secured Party for all reasonable costs
and expenses incurred by it and shall pay the reasonable fees and disbursements
to one attorney for the Secured Party in connection with enforcement of the
Secured Party's rights hereunder.

Section 15. AMENDMENTS.

         No amendment, modification or waiver of any provision of this Agreement
nor consent to any departure by the Grantor therefrom shall be effective unless
the same shall be in writing and signed by the Secured Party and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

Section 16. TERMINATION.

         Upon the payment in full of all Obligations, the Secured Party shall
execute and deliver to the Grantor all such documents and instruments as shall
be necessary to evidence termination of this Agreement and the security
interests created hereunder; PROVIDED, HOWEVER, the obligations of the Grantor
under SECTION 13 hereof shall survive any termination under this SECTION 16.

Section 17. GOVERNING LAW.

         THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OR
CHOICE OF LAW.

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Section 18. ASSIGNMENT, ETC.

         The Grantor shall not assign, pledge, mortgage, sublet or otherwise
transfer or encumber any of its rights or obligations, as the case may be, under
this Agreement without the Secured Party's prior written consent. Any such
purported assignment, pledge, mortgage, sublet, transfer or other action without
such written consent shall be void. This Agreement shall be binding upon each of
the Grantor and its successors and shall inure to the benefit of the Secured
Party and its successors and assigns.

Section 19. SEVERABILITY.

         The provisions of this Agreement are severable, and if any provision
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
then such invalidity or unenforceability shall not in any manner affect such
provision in any other jurisdiction or any other provision of this Agreement in
any jurisdiction.

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              IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their authorized representatives on the date first above
written.

GRANTOR:                               TELENETICS CORPORATION

                                       By: /s/ David L. Stone
                                           -------------------------------------
                                           Name: David L. Stone
                                           Title:   President

SECURED PARTIES:                       DOLPHIN OFFSHORE PARTNERS, L.P.

                                       By: /s/ Peter E. Salas
                                           -------------------------------------
                                           Name:  Peter E. Salas
                                           Title:   General Partner

                                      -10-
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                                                                       Exhibit A
                                                                              to
                                                              Security Agreement

                          GRANTOR'S PLACES OF BUSINESS
                          ----------------------------

         The following address is the Grantor's principal place of business and
is a location where Collateral is kept:

                              25111 Arctic Ocean
                              Lake Forest, California 92630

         The Company maintains the following additional place of business where
a portion of the Collateral is kept:

                              SDC
                              4111 Citrus Ave. #5
                              Rocklin, California 95677

         Collateral also is kept at the following third party locations:

                              Corlund Electronics
                              14101 Myford Road
                              Tustin, California 92780

                              American Optisurgical
                              25501 Arctic Ocean
                              Lake Forest, California 92630

                              DisCopy Labs
                              3550-B Jurupa St.
                              Ontario, California 91761

                                      -11-
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                                                                      Schedule 1
                                                                              to
                                                              Security Agreement

                                   EXCEPTIONS
                                   ----------

Title to the Collateral:

         See Schedule 2.1(l) to the Purchase Agreement (except with regard to
the promissory note in favor of Knobbe, Martens Olsen & Bear LLP and the various
capital leases).

Legal Proceedings:

         See Schedule 2.1(m) to the Purchase Agreement.

                                      -12-<PAGE>
EXHIBIT 10.9

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
RECEIPT BY THE MAKER OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE REASONABLY
ACCEPTABLE TO THE MAKER) IN THE FORM, SUBSTANCE AND SCOPE REASONABLY
SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD, TRANSFERRED, OR OTHERWISE
DISPOSED OF, UNDER AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE
SECURITIES LAWS.

                             TELENETICS CORPORATION

                  Amended and Restated Secured Promissory Note
                                due March 1, 2006

No. N-________                                                     $2,232,714.65
Dated: March 1, 2003

         For value received, TELENETICS CORPORATION, a California corporation
(the "MAKER"), hereby promises to pay to the order of Dolphin Offshore Partners,
L.P. (together with its successors, representatives, and permitted assigns, the
"Holder"), in accordance with the terms hereinafter provided, the principal
amount of Two Million Two Hundred Thirty-Two Thousand Seven Hundred Fourteen and
65/100 Dollars ($2,232,714.65), together with interest thereon. Concurrently
with the issuance of this Note, the Maker is issuing separate notes (the "OTHER
NOTES") to separate holders (the "OTHER HOLDERS") pursuant to the Purchase
Agreement (as defined in SECTION 1.1 hereof).

         All payments under or pursuant to this Note shall be made in United
States Dollars in immediately available funds to the Holder at the address of
the Holder first set forth above or at such other place as the Holder may
designate from time to time in writing to the Maker or by wire transfer of funds
to the Holder's account, instructions for which are attached hereto as EXHIBIT
A.

                                   ARTICLE I
                                PAYMENT; SECURITY
                                -----------------

         Section 1.1 PURCHASE AGREEMENT. This Note has been executed and
delivered pursuant to the Amended and Restated Note and Warrant Purchase
Agreement, dated as of March 1, 2003 (the "PURCHASE AGREEMENT"), by and between
the Maker, the Holder and the Other Holders. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth for such terms in the
Purchase Agreement.

         Section 1.2 PAYMENTS OF PRINCIPAL AND INTEREST. Beginning on July 1,
2003, the outstanding principal balance of this Note shall bear interest at a
rate per annum equal to nine percent (9%), payable quarterly in arrears unless
prepaid as provided herein. Interest shall be computed on the basis of a 360-day
year of twelve (12) 30-day months. Payments of principal and interest shall be
payable in cash as follows:

<PAGE>

                  (a) Principal payments which, in each case, shall be equal to
         five percent (5%) of the then outstanding principal balance of this
         Note, shall be paid by the Maker to the Holder on a quarterly basis on
         February 15, May 15, August 15 and November 15 of each year so long as
         any balance of principal and interest of this Note remains outstanding.
         The first principal payment shall be due on August 15, 2003; and

                  (b) Interest payments hereunder shall be paid quarterly, in
         arrears, by the Maker to the Holder on March 31, June 30, September 30
         and December 31 of each year so long as any balance of principal and
         interest of this Note remains outstanding. The first interest payment
         shall be due on September 30, 2003 (which payment shall represent all
         accrued interest from July 1, 2003 through September 30, 2003); and

                  (c) Any remaining outstanding balance of principal and
         interest of this Note shall be due and payable on March 1, 2006 (the
         "MATURITY DATE") or at such earlier time as provided herein.

         Upon the occurrence of an Event of Default (as defined in SECTION 2.1
hereof), then, to the extent permitted by law, the Maker will pay interest to
the Holder, payable on demand, on the outstanding principal balance of the Note
from the date of the Event of Default until such Event of Default is cured at
the rate of the lesser of nine percent (9%) above the interest rate then in
effect and the maximum applicable legal rate per annum.

         Section 1.3 SECURITY AGREEMENT. The obligations of the Maker hereunder
shall be secured by, and the Holder shall be entitled to the rights and security
granted by the Maker pursuant to, the Amended and Restated Security Agreement
dated as of the date hereof by the Maker for the benefit of the Holder (the
"SECURITY AGREEMENT").

         Section 1.4 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made shall be due on a Saturday, Sunday or a public holiday under the laws of
the State of New York, such payment may be due on the next succeeding business
day and such next succeeding day shall be included in the calculation of the
amount of accrued interest payable on such date.

         Section 1.5 TRANSFER. This Note may be transferred or sold, subject to
the provisions of SECTION 4.8 of this Note and the provisions of the other
Transaction Documents (as defined in the Purchase Agreement), or pledged,
hypothecated or otherwise granted as security by the Holder.

         Section 1.6 REPLACEMENT. Upon receipt of a duly executed, notarized and
unsecured written statement from the Holder with respect to the loss, theft or
destruction of this Note (or any replacement hereof), and without requiring an
indemnity bond or other security, or, in the case of a mutilation of this Note,
upon surrender and cancellation of such Note, the Maker shall issue a new Note,
of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated
Note.

                                      -2-
<PAGE>

                                   ARTICLE II
                           EVENTS OF DEFAULT; REMEDIES
                           ---------------------------

         Section 2.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall be an "EVENT OF DEFAULT" under this Note:

                  (a) the Maker shall fail to make any payment of principal in
         cash for a period of three (3) days after the date such principal
         payment is due hereunder; or

                  (b) the Maker shall fail to make any payment of interest in
         cash for a period of five (5) days after the date such interest payment
         is due hereunder; or

                  (c) the Maker shall fail to make the payment of any fees
         and/or liquidated damages under this Note or the Purchase Agreement,
         which failure is not remedied within seven (7) business days after the
         incurrence thereof; or

                  (d) default shall be made in the performance or observance by
         the Maker of (i) any material covenant, condition or agreement
         contained in this Note (other than as set forth in clause (d) of this
         SECTION 2.1) and such default is not fully cured within five (5)
         business days after the occurrence thereof or (ii) any material
         covenant, condition or agreement contained in the Purchase Agreement,
         the Security Agreement or the Other Notes which is not covered by any
         other provisions of this SECTION 2.1 and such default is not fully
         cured within seven (7) business days after the occurrence thereof; or

                  (e) any material representation or warranty made by the Maker
         herein or in the Purchase Agreement or the Security Agreement shall
         prove to have been false or incorrect or breached in a material respect
         on the date as of which made; or

                  (f) the Maker shall issue any debt securities which are not
         subordinate to this Note and the Other Notes and are not on such terms
         as are acceptable to the Holders of a majority of the outstanding
         principal amount of this Note and the Other Notes purchased under the
         Purchase Agreement; or

                  (g) the consummation of any of the following transactions: (i)
         the consolidation, merger or other business combination of the Maker
         with or into a person or entity (other than (A) pursuant to a migratory
         merger effected solely for the purpose of changing the jurisdiction of
         incorporation of the Maker, or (B) a consolidation, merger or other
         business combination in which holders of the Maker's voting power
         immediately prior to the transaction continue after the transaction to
         hold, directly or indirectly, the voting power of the surviving entity
         or entities necessary to elect a majority of the members of the board
         of directors (or their equivalent if other than a corporation) of such
         entity or entities); (ii) the sale or transfer of all or substantially
         all of the Maker's assets; or (iii) the consummation of a purchase,
         tender or exchange offer made to the holders of more than 30% of the
         outstanding shares of Common Stock; or

                                      -3-
<PAGE>

                  (h) if required by applicable law, rule or regulation, the
         stockholders of the Maker shall fail to approve the proposal presented
         and recommended by the Board of Directors of the Maker to approve the
         Holder acquiring in excess of 19.99% of the issued and outstanding
         shares of Common Stock upon exercise of the Warrants; or

                  (i) the Maker shall (i) default in any payment of any amount
         or amounts of principal of or interest on any payment of a secured debt
         (other than the indebtedness hereunder and other than any debt of the
         Company to Corlund Electronics or any of its affiliates, parents,
         subsidiaries or successors-in-interest) the aggregate principal amount
         of which payment is in excess of $100,000 (collectively, "SECURED
         INDEBTEDNESS"), or (ii) default in the observance or performance of any
         other agreement or condition relating to any Secured Indebtedness or
         contained in any instrument or agreement evidencing, securing or
         relating thereto, or any other event shall occur or condition exist,
         the effect of which default or other event or condition is to cause, or
         to permit the holder or holders or beneficiary or beneficiaries of such
         Secured Indebtedness to cause with the giving of notice if required,
         such Secured Indebtedness to become due prior to its stated maturity;
         or

                  (j) the Maker shall (i) apply for or consent to the
         appointment of, or the taking of possession by, a receiver, custodian,
         trustee or liquidator of itself or of all or a substantial part of its
         property or assets, (ii) make a general assignment for the benefit of
         its creditors, (iii) commence a voluntary case under the United States
         Bankruptcy Code (as now or hereafter in effect) or under the comparable
         laws of any jurisdiction (foreign or domestic), (iv) file a petition
         seeking to take advantage of any bankruptcy, insolvency, moratorium,
         reorganization or other similar law affecting the enforcement of
         creditors' rights generally, (v) acquiesce in writing to any petition
         filed against it in an involuntary case under United States Bankruptcy
         Code (as now or hereafter in effect) or under the comparable laws of
         any jurisdiction (foreign or domestic), or (vi) take any action under
         the laws of any jurisdiction (foreign or domestic) analogous to any of
         the foregoing; or

                  (k) a proceeding or case shall be commenced in respect of the
         Maker, without its application or consent, in any court of competent
         jurisdiction, seeking (i) the liquidation, reorganization, moratorium,
         dissolution, winding up, or composition or readjustment of its debts,
         (ii) the appointment of a trustee, receiver, custodian, liquidator or
         the like of it or of all or any substantial part of its assets in
         connection with the liquidation or dissolution of the Maker or (iii)
         similar relief in respect of it under any law providing for the relief
         of debtors, and such proceeding or case described in clause (i), (ii)
         or (iii) shall continue undismissed, or unstayed and in effect, for a
         period of sixty (60) days or any order for relief shall be entered in
         an involuntary case under United States Bankruptcy Code (as now or
         hereafter in effect) or under the comparable laws of any jurisdiction
         (foreign or domestic) against the Maker or action under the laws of any
         jurisdiction (foreign or domestic) analogous to any of the foregoing
         shall be taken with respect to the Maker and shall continue
         undismissed, or unstayed and in effect for a period of sixty (60) days;
         or

                  (l) the occurrence of an Event of Default under the Other
         Notes.

                                      -4-
<PAGE>

         Section 2.2 REMEDIES UPON AN EVENT OF DEFAULT. If an Event of Default
shall have occurred and shall be continuing, the Holder of this Note may at any
time at its option (a) declare the entire unpaid principal balance of this Note,
together with all interest accrued hereon, due and payable, and thereupon, the
same shall be accelerated and so due and payable, without presentment, demand,
protest, or notice, all of which are hereby expressly unconditionally and
irrevocably waived by the Maker; provided, however, that upon the occurrence of
an Event of Default described in (i) SECTIONS 2.1(i), (j) OR (k), the
outstanding principal balance and accrued interest hereunder shall be
automatically due and payable, and (ii) SECTIONS 2.1 (c)-(h), the Holder may
demand the prepayment of this Note pursuant to SECTION 3.1(a) hereof, or (b)
exercise or otherwise enforce any one or more of the Holder's rights, powers,
privileges, remedies and interests under this Note, the Purchase Agreement, the
Security Agreement or applicable law. No course of delay on the part of the
Holder shall operate as a waiver thereof or otherwise prejudice the right of the
Holder. No remedy conferred hereby shall be exclusive of any other remedy
referred to herein or now or hereafter available at law, in equity, by statute
or otherwise.

                                  ARTICLE III
                                   PREPAYMENT
                                   ----------

         Section 3.1 PREPAYMENT.

                  (a) PREPAYMENT UPON AN EVENT OF DEFAULT. Notwithstanding
         anything to the contrary contained herein, upon the occurrence of an
         Event of Default described in SECTIONS 2.1(c)-(h) hereof, the Holder
         shall have the right, at such Holder's option, to require the Maker to
         prepay all or a portion of this Note at a price equal to the Triggering
         Event Prepayment Price (as defined in SECTION 3.1(c) below) applicable
         at the time of such request. Nothing in this SECTION 3.1(a) shall limit
         the Holder's rights under SECTION 2.2 hereof.

                  (b) PREPAYMENT OPTION UPON MAJOR TRANSACTION. In addition to
         all other rights of the holder of this Note contained herein,
         simultaneous with the occurrence of a Major Transaction (as defined
         below), the holder of this Note shall have the right, at such holder's
         option, to require the Maker to prepay all or a portion of such
         holder's Notes at a price equal to the 130% of the aggregate principal
         amount of the Notes (the "MAJOR TRANSACTION PREPAYMENT Price").

                  (c) PREPAYMENT OPTION UPON TRIGGERING EVENT. In addition to
         all other rights of the holder of this Note contained herein, after a
         Triggering Event (as defined below), the holder of this Note shall have
         the right, at such holder's option, to require the Maker to prepay all
         or a portion of such holder's Notes at a price equal to 130% of the
         aggregate principal amount of such holder's Notes (the "TRIGGERING
         EVENT PREPAYMENT PRICE").

                  (d) "MAJOR TRANSACTION." A "MAJOR TRANSACTION" shall be deemed
         to have occurred at such time as any of the following events occurs:

                                      -5-
<PAGE>

                           (i) the consolidation, merger or other business
                  combination of the Maker with or into another Person (as
                  defined in SECTION 4.13 hereof) (other than (A) pursuant to a
                  migratory merger effected solely for the purpose of changing
                  the jurisdiction of incorporation of the Maker or (B) a
                  consolidation, merger or other business combination in which
                  holders of the Maker's voting power immediately prior to the
                  transaction continue after the transaction to hold, directly
                  or indirectly, the voting power of the surviving entity or
                  entities necessary to elect a majority of the members of the
                  board of directors (or their equivalent if other than a
                  corporation) of such entity or entities);

                           (ii) the sale or transfer of all or substantially all
                  of the Maker's assets; or

                           (iii) consummation of a purchase, tender or exchange
                  offer made to the holders of more than 30% of the outstanding
                  shares of Common Stock.

                  (e) "TRIGGERING EVENT." A "TRIGGERING EVENT" shall be deemed
         to have occurred if any material representation, warranty or covenant
         made by the Maker herein or in the Purchase Agreement or the Security
         Agreement shall prove to have been false or incorrect or breached in a
         material respect on the date as of which made.

                  (f) INTENTIONALLY OMITTED.

                  (g) MECHANICS OF PREPAYMENT AT OPTION OF HOLDER UPON MAJOR
         TRANSACTION. No sooner than fifteen (15) days nor later than ten (10)
         days prior to the consummation of a Major Transaction, but not prior to
         the public announcement of such Major Transaction, the Maker shall
         deliver written notice thereof via facsimile and overnight courier
         ("NOTICE OF MAJOR TRANSACTION") to the holder of this Note and holders
         of the Other Notes. At any time after receipt of a Notice of Major
         Transaction (or, in the event a Notice of Major Transaction is not
         delivered at least ten (10) days prior to a Major Transaction, at any
         time within ten (10) days prior to a Major Transaction), any holder of
         the Notes then outstanding may require the Maker to prepay, effective
         immediately prior to the consummation of such Major Transaction, all of
         the holder's Notes then outstanding by delivering written notice
         thereof via facsimile and overnight courier ("NOTICE OF PREPAYMENT AT
         OPTION OF HOLDER UPON MAJOR TRANSACTION") to the Maker, which Notice of
         Prepayment at Option of Holder Upon Major Transaction shall indicate
         (i) the number of Notes that such holder is electing to prepay, and
         (ii) the applicable Major Transaction Prepayment Price, as calculated
         pursuant to SECTION 3.1(b) above.

                  (h) MECHANICS OF PREPAYMENT AT OPTION OF HOLDER UPON
         TRIGGERING EVENT. Within one (1) day after the occurrence of a
         Triggering Event, the Maker shall deliver written notice thereof via
         facsimile and overnight courier ("NOTICE OF TRIGGERING EVENT") to each
         holder of the Notes. At any time after the earlier of a holder's
         receipt of a Notice of Triggering Event and such holder becoming aware
         of a Triggering Event, any holder of this Note and the Other Notes then
         outstanding may require the Maker to prepay all of such holder's Notes
         on a pro rata basis by delivering written notice thereof via facsimile
         and overnight courier ("NOTICE OF PREPAYMENT AT OPTION OF HOLDER UPON
         TRIGGERING EVENT") to the Maker, which Notice of Prepayment at Option
         of Holder Upon Triggering Event shall indicate (i) the number of Notes
         that such holder is electing to prepay, and (ii) the applicable
         Triggering Event Prepayment Price, as calculated pursuant to SECTION
         3.1(c) above.

                                      -6-
<PAGE>

                  (i) INTENTIONALLY OMITTED.

                  (j) PAYMENT OF PREPAYMENT PRICE. Upon the Maker's receipt of a
         Notice(s) of Prepayment at Option of Holder Upon Triggering Event or a
         Notice(s) of Prepayment at Option of Holder Upon Major Transaction from
         any holder of the Notes, the Maker shall immediately notify each holder
         of the Notes by facsimile of the Maker's receipt of such Notice(s) of
         Prepayment at Option of Holder Upon Triggering Event or Notice(s) of
         Prepayment at Option of Holder Upon Major Transaction and each holder
         which has sent such a notice shall promptly submit to the Maker such
         holder's certificates representing the Notes which such holder has
         elected to have prepaid. The Maker shall deliver the applicable
         Triggering Event Prepayment Price, in the case of a prepayment pursuant
         to SECTION 3.1(h), to such holder within five (5) business days after
         the Maker's receipt of a Notice of Prepayment at Option of Holder Upon
         Triggering Event and, in the case of a prepayment pursuant to SECTION
         3.1(G), the Maker shall deliver the applicable Major Transaction
         Prepayment Price immediately prior to the consummation of the Major
         Transaction; provided that a holder's original Note shall have been so
         delivered to the Maker; provided further that if the Maker is unable to
         prepay all of the Notes to be prepaid, the Maker shall prepay an amount
         from each holder of the Notes being prepaid equal to such holder's
         pro-rata amount (based on the number of Notes held by such holder
         relative to the number of Notes outstanding) of all Notes being
         prepaid. If the Maker shall fail to prepay all of the Notes submitted
         for prepayment (other than pursuant to a dispute as to the arithmetic
         calculation of the prepayment price), in addition to any remedy such
         holder of the Notes may have under this Note, the Security Agreement
         and the Purchase Agreement, then until the Maker pays such unpaid
         applicable prepayment price in full to a holder of the Notes submitted
         for prepayment, such holder shall have the option (the "VOID OPTIONAL
         PREPAYMENT OPTION") to, in lieu of prepayment, require the Maker to
         promptly return to such holder(s) all of the Notes that were submitted
         for prepayment by such holder(s) under this SECTION 3.1 and for which
         the applicable prepayment price has not been paid, by sending written
         notice thereof to the Maker via facsimile (the "VOID OPTIONAL
         PREPAYMENT NOTICE"). Upon the Maker's receipt of such Void Optional
         Prepayment Notice(s) and prior to payment of the full applicable
         prepayment price to such holder, (i) the Notice(s) of Prepayment at
         Option of Holder Upon Triggering Event or the Notice(s) of Prepayment
         at Option of Holder Upon Major Transaction, as the case may be, shall
         be null and void with respect to those Notes submitted for prepayment
         and for which the applicable prepayment price has not been paid, and
         (ii) the Maker shall immediately return any Notes submitted to the
         Maker by each holder for prepayment under this SECTION 3.1(i) and for
         which the applicable prepayment price has not been paid.

                  (k) HOLDER PREPAYMENT OPTION. At the sole option of the
         Holder, the Holder may grant the Maker the option to prepay all or any
         portion of the outstanding principal amount of this Note together with
         all accrued and unpaid interest thereon within ten (10) days of the
         Holder granting the option to the Maker. If the Maker elects to
         exercise the prepayment option, the Maker shall upon five (5) days
         prior written notice to the Holder (the "MAKER'S PREPAYMENT NOTICE")

                                      -7-
<PAGE>

         prepay all or a portion of the outstanding Notes at a price equal to
         130% of the aggregate principal amount of this Note plus any accrued
         but unpaid interest (the "MAKER'S PREPAYMENT PRICE"); PROVIDED,
         HOWEVER, that if during the period between delivery of the Maker's
         Prepayment Notice and the Maker's Prepayment Date (as defined below), a
         holder shall become entitled to deliver a Notice of Prepayment at
         Option of Holder Upon Major Transaction or Notice of Prepayment at
         Option of Holder upon Triggering Event, then such rights of the holders
         shall take precedence over the previously delivered Maker Prepayment
         Notice. The Maker's Prepayment Notice shall state the date of
         prepayment (the "MAKER'S PREPAYMENT DATE"), the Maker's Prepayment
         Price and the amount of Notes to be prepaid by the Maker. The Maker
         shall deliver the Maker's Prepayment Price to the Holder within five
         (5) business days after the Maker has delivered the Maker's Prepayment
         Notice. On the Maker's Prepayment Date, the Maker shall pay the Maker's
         Prepayment Price to the holder(s) on a pro rata basis, provided,
         however, that upon receipt by Maker of the certificates representing
         the Notes to be prepaid pursuant to this SECTION 3.1(K), the Maker
         shall, on the next business day following the date of receipt by the
         Maker of the original Note, pay the Maker's Prepayment Price to the
         holder(s) on a pro rata basis. If the Maker fails to pay the Maker's
         Prepayment Price by the Maker's Prepayment Date, the prepayment will be
         declared null and void and the Maker shall lose its right to serve a
         Maker's Prepayment Notice to the Holder pursuant to this SECTION 3.1(K)
         in the future.

                  (l) MAKER PREPAYMENT OPTION. The Maker may prepay all or a
         portion of this Note at a price equal to 110% of the aggregate
         principal amount of this Note plus all accrued and unpaid interest by
         providing twenty (20) days written notice to the Holder. The Holder
         shall surrender immediately the Notes called for prepayment to the
         Maker at the place designated by the Maker and shall thereupon be
         entitled to receive payment of the prepayment price. If the Maker fails
         to pay the prepayment price by the sixth (6th) business day after the
         prepayment date specified in the notice, then the prepayment will be
         declared null and void and the Maker shall lose its right to serve a
         prepayment notice to the Holder pursuant to this SECTION 3.1(l) in the
         future.

                                   ARTICLE IV
                                  MISCELLANEOUS
                                  -------------

         Section 4.1 NOTICES. Any notice, demand, request, waiver or other
communication required or permitted to be given hereunder shall be in writing
and shall be effective (a) upon hand delivery by telex (with correct answer back
received), telecopy or facsimile at the address or number designated in the
Purchase Agreement (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day following such
delivery (if delivered other than on a business day during normal business hours
where such notice is to be received), or (b) on the second business day
following the date of mailing by express courier service, fully prepaid,
addressed to such address, or upon actual receipt of such mailing, whichever
shall first occur.

         Section 4.2 GOVERNING LAW. This Note shall be governed by and construed
in accordance with the internal laws of the State of New York, without giving
effect to the choice of law provisions. This Note shall not be interpreted or
construed with any presumption against the party causing this Note to be
drafted.

                                      -8-
<PAGE>

         Section 4.3 HEADINGS. Article and Section headings in this Note are
included herein for purposes of convenience of reference only and shall not
constitute a part of this Note for any other purpose.

         Section 4.4 REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES
AND INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative
and in addition to all other remedies available under this Note, at law or in
equity (including, without limitation, a decree of specific performance and/or
other injunctive relief), no remedy contained herein shall be deemed a waiver of
compliance with the provisions giving rise to such remedy and nothing herein
shall limit a holder's right to pursue actual damages for any failure by the
Maker to comply with the terms of this Note. Amounts set forth or provided for
herein with respect to payments shall be the amounts to be received by the
holder thereof and shall not, except as expressly provided herein, be subject to
any other obligation of the Maker (or the performance thereof). The Maker
acknowledges that a breach by it of its obligations hereunder will cause
irreparable and material harm to the Holder and that the remedy at law for any
such breach may be inadequate. Therefore, the Maker agrees that, in the event of
any such breach or threatened breach, the Holder shall be entitled, in addition
to all other available rights and remedies, at law or in equity, to seek and
obtain such equitable relief, including but not limited to an injunction
restraining any such breach or threatened breach, without the necessity of
showing economic loss and without any bond or other security being required.

         Section 4.5 ENFORCEMENT EXPENSES. The Maker agrees to pay all costs and
expenses of enforcement of this Note, including, without limitation, reasonable
attorneys' fees and expenses to one attorney for the holder and the Other
Holders in connection with enforcement of the Holder's and the Other Holders'
rights under this Note and the Other Notes.

         Section 4.6 BINDING EFFECT. The obligations of the Maker and the Holder
set forth herein shall be binding upon the successors and assigns of each such
party, whether or not such successors or assigns are permitted by the terms
hereof.

         Section 4.7 AMENDMENTS. This Note may not be modified or amended in any
manner except in writing executed by the Maker and the Holder.

         Section 4.8 COMPLIANCE WITH SECURITIES LAWS. The Holder of this Note
acknowledges that this Note is being acquired solely for the Holder's own
account and not as a nominee for any other party, and for investment, and that
the Holder shall not offer, sell or otherwise dispose of this Note. This Note
and any Note issued in substitution or replacement therefore shall be stamped or
imprinted with a legend in substantially the following form:

         "THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
         AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
         BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR RECEIPT
         BY THE MAKER OF AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE
         REASONABLY ACCEPTABLE TO THE MAKER) IN THE FORM, SUBSTANCE AND SCOPE
         REASONABLY SATISFACTORY TO THE MAKER THAT THIS NOTE MAY BE SOLD,
         TRANSFERRED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNDER AN EXEMPTION
         FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS."

                                      -9-
<PAGE>

         Section 4.9 CONSENT TO JURISDICTION. Each of the Maker and the Holder
(i) hereby irrevocably submits to the exclusive jurisdiction of the United
States District Court sitting in the Southern District of New York and the
courts of the State of New York located in New York County for the purposes of
any suit, action or proceeding arising out of or relating to this Note and (ii)
hereby waives, and agrees not to assert in any such suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of such court,
that the suit, action or proceeding is brought in an inconvenient forum or that
the venue of the suit, action or proceeding is improper. Each of the Maker and
the Holder consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via certified mail, return receipt
requested, to such party at the address in effect for notices to it under the
Purchase Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing in this SECTION 4.9
shall affect or limit any right to serve process in any other manner permitted
by law.

         Section 4.10 PARTIES IN INTEREST. This Note shall be binding upon,
inure to the benefit of and be enforceable by the Maker, the Holder and their
respective successors and permitted assigns.

         Section 4.11 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on
the part of the Holder in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

         Section 4.12 MAKER WAIVERS. Except as otherwise specifically provided
herein, the Maker and all others that may become liable for all or any part of
the obligations evidenced by this Note, hereby waive presentment, demand, notice
of nonpayment, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, and do hereby
consent to any number of renewals or extensions of the time or payment hereof
and agree that any such renewals or extensions may be made without notice to any
such persons and without affecting their liability herein and do further consent
to the release of any person liable hereon, all without affecting the liability
of the other persons, firms or Maker liable for the payment of this Note, AND DO
HEREBY WAIVE TRIAL BY JURY.

                  (a) No delay or omission on the part of the Holder in
         exercising its rights under this Note, or course of conduct relating
         hereto, shall operate as a waiver of such rights or any other right of
         the Holder, nor shall any waiver by the Holder of any such right or
         rights on any one occasion be deemed a waiver of the same right or
         rights on any future occasion.

                                      -10-
<PAGE>

                  (b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS
         NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED
         BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH
         RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR
         ASSIGNS MAY DESIRE TO USE.

         Section 4.13 DEFINITIONS. For the purposes hereof, the following terms
shall have the following meanings:

         "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.

         "TRADING DAY" means (a) a day on which the Common Stock is traded on
the OTC Bulletin Board, Nasdaq SmallCap Market, The Nasdaq National Market,
American Stock Exchange or other registered national stock exchange on which the
Common Stock has been listed, or (b) if the Common Stock is not listed on the
OTC Bulletin Board, Nasdaq SmallCap Market, The Nasdaq National Market, American
Stock Exchange or any registered national stock exchange, a day on which the
Common Stock is quoted in the over-the-counter market as reported by the
National Quotation Bureau Incorporated (or any similar organization or agency
succeeding its functions of reporting prices); PROVIDED, HOWEVER, that in the
event that the Common Stock is not listed or quoted as set forth in (a) and (b)
hereof, then Trading Day shall mean 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 are authorized or required by law or other government action
to close.

         IN WITNESS WHEREOF, the Maker has executed this Note as of the day and
year first above written.

                                        TELENETICS CORPORATION

                                        By: /s/ David L. Stone
                                            ------------------------------------
                                            Name: David L. Stone
                                            Title:  President

                                      -11-
<PAGE>

                                    EXHIBIT A

                               WIRE INSTRUCTIONS.
                               ------------------

Payee: _________________________________________________________________________

Bank: __________________________________________________________________________

Address: _______________________________________________________________________

         _______________________________________________________________________

Bank No.: ______________________________________________________________________

Account No.: ___________________________________________________________________

Account Name: __________________________________________________________________

                                      -12-

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