Document:

MANUFACTURING AGREEMENT

         This Manufacturing Agreement ("AGREEMENT") is made and entered into as
of December 29, 2000 (the "EFFECTIVE Date") by and between, Telenetics
Corporation (the "BUYER"), a California corporation, having its place of
business at 25111 Arctic Ocean, Lake Forest, CA 92630, and Comtel Electronics,
Inc. ("SELLER"), a Delaware corporation and a division of Comtel Holdings, Inc.,
having its place of business at 14101 Myford Road, Tustin CA 92780 ("SELLER'S
FACILITY"). Buyer and Seller are sometimes referred to herein individually as a
"PARTY" and collectively as the "PARTIES." References to "Buyer" and "Seller"
shall include their respective Affiliates (as that term is defined in SECTION
11.2 herein).

1.       PREAMBLE.
         ---------

         WHEREAS, the Buyer has entered into an agreement with Motorola, Inc.
known as the Manufacturing License and Distribution Agreement (the "MOTOROLA
AGREEMENT") to produce certain transmission products and desires to outsource
certain aspects of the manufacturing, assembly and testing (the "MANUFACTURING"
or "MANUFACTURE") of such transmission products and other products (the
"PRODUCTS") as set forth on EXHIBIT A;

         WHEREAS, the Seller is a local contract manufacturer capable of meeting
Buyer's requirements for the outsourcing of those aspects of the Manufacturing
of the Products necessary for Buyer to meet its requirements as set forth in the
Motorola Agreement; and

         WHEREAS, in order to facilitate the coordinated Manufacturing of the
Products, the Parties desire to establish manufacturing processes and
procedures, good engineering and workmanship practices and industry standards to
assure the consistent, high quality Manufacturing of Products.

         NOW, THEREFORE, in consideration of the foregoing and the covenants and
premises contained in this Agreement, the Parties agree as follows:

2.       AGREEMENT TO MANUFACTURE.
         -------------------------

         2.1 SCOPE OF WORK. Buyer hereby contracts with Seller to Manufacture
the Products in accordance with the terms and conditions of this Agreement.
Seller agrees to Manufacture the Products in accordance with the configurations,
descriptions and specifications provided to Seller by Buyer for the Products
(the "BUYER'S SPECIFICATIONS") which are set forth in and attached hereto as
EXHIBIT B. Buyer agrees to purchase from Seller all of the Products manufactured
by Seller pursuant to and in accordance with the Buyer's Specifications and the
terms and conditions of this Agreement at the prices set forth in and attached
hereto as EXHIBIT C.

3.       MANUFACTURING EQUIPMENT AND START-UP INVENTORY.
         -----------------------------------------------

3.1      MANUFACTURING EQUIPMENT.

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                  (a) PURCHASED EQUIPMENT. The Parties acknowledge that, in
         order to Manufacture the Products pursuant to this Agreement, Seller
         will need to acquire ownership and/or use of production equipment and
         peripheral support equipment. The Seller agrees to purchase from Buyer
         and Buyer agrees to sell to Seller the production equipment and
         peripheral support equipment (the "PURCHASED EQUIPMENT") (a list of
         which is set forth in and attached hereto as EXHIBIT D) for the total
         purchase price of $400,000.00 due and payable upon delivery of the
         Purchased Equipment to Seller's Facility and transfer of title to the
         Purchased Equipment.

                  (b) TEST EQUIPMENT. The Parties further agree that the Buyer
         shall deliver to Seller certain test equipment to be used exclusively
         for the Manufacture of Products (the "TEST EQUIPMENT") (a list of which
         is set forth in and attached hereto as EXHIBIT E). The Parties agree
         and acknowledge that the Test Equipment shall at all times remain the
         sole and separate property of Buyer. The Parties hereby agree and
         acknowledge that Buyer shall be solely responsible for the normal
         maintenance, repair and upkeep of the Test Equipment. Seller shall be
         solely responsible for any damages to the Test Equipment or any costs
         associated therewith caused or contributed by the negligent misuse of
         the Test Equipment by any of Seller's employees, agents or contractors.

         3.2 DELIVERY OF MANUFACTURING EQUIPMENT. The Parties hereby agree and
acknowledge that it shall be Buyer's sole responsibility to deliver the
Purchased Equipment and the Test Equipment to Seller's Facility in a timely
manner and that the Manufacturing Equipment shall be delivered by Buyer in good
working order and free and clear of all liens and attachments.

         3.3 START-UP INVENTORY. The Parties acknowledge that, in order for
Seller to Manufacture the Products, Seller will need to acquire certain raw
materials and component parts (the "COMPONENT PARTS"). Buyer will be acquiring a
substantial inventory of Component Parts ("BUYER'S INVENTORY"). Seller hereby
agrees to purchase all usable Component Parts (as needed to support Buyer's
master requirement schedule in a timely fashion) which exist in Buyer's
Inventory from Buyer until Buyer's Inventory is exhausted. Seller agrees that
Buyer may deliver to Seller's Facility any or all Buyer's Inventory for storage
prior to use in the Manufacturing of Products. However, the Parties agree that
title to and ownership of any portion of Buyer's Inventory shall pass from Buyer
to Seller only as Buyer's Inventory is sold to Seller for the Manufacture of
Products. Seller agrees that that portion of Buyer's Inventory delivered to
Seller's Facility shall be stored in a secure area of Seller's Facility and
shall not be commingled with any other Component Parts or other materials and
shall be kept in good working order and condition at Seller's sole expense.
Seller agrees that Buyer's Inventory shall only be used for the Manufacture of
Products.

         3.4 INITIAL INVENTORY. Seller agrees to purchase an initial inventory
(the "INITIAL INVENTORY") of Component Parts from Buyer's Inventory necessary to
commence the Manufacture of Products pursuant to this Agreement. The purchase
price paid by Seller to Buyer for the Initial Inventory shall be $1,450,000.00.
The amount and description of Component Parts contained in the Initial Inventory
is set forth in and attached hereto as EXHIBIT F. Buyer hereby agrees to deliver
a sufficient portion of the Initial Inventory to Seller's Facility in a timely
fashion prior to the commencement of the Manufacture of the Products by Seller
and the Initial Inventory shall be delivered by Buyer in good working order and
free and clear of all liens and attachments. Buyer agrees to continue to deliver
the Initial Inventory to Seller as requested by Seller until the Initial
Inventory is exhausted.

                                      -2-

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         3.5 ADDITIONAL INVENTORY. After Buyer's Inventory is exhausted, it
shall be Seller's sole responsibility to locate and purchase Component Parts
from third parties in sufficient quantities and lead-time to enable Seller to
meet Buyer's ongoing demand for Products (as ordered pursuant to this
Agreement).

         3.6 MINIMUM VOLUME REQUIREMENTS. Buyer acknowledges that Seller will
procure Manufacturing Equipment, Initial Inventory, and other Component Parts,
equipment, inventory, materials and resources in anticipation of the initial and
ongoing Manufacture of Products under the terms of this Agreement. As
consideration for Seller's capital investments in preparation for its
performance of Seller's duties and obligations under this Agreement, Buyer
agrees that it will schedule monthly shipments and purchase a minimum of One
Million Dollars ($1,000,000.00) of Products per month (based upon the prices set
forth in EXHIBIT C) from Seller (the "MINIMUM VOLUME REQUIREMENTS") beginning
the third (3rd) calendar month after the commencement of the Manufacture of
Products by Seller, and continue on a month to month basis for the life of this
agreement. If, in any month following the third (3rd) calendar month after the
commencement of the Manufacture of Products by Seller, Buyer fails to meet the
Minimum Volume Requirements, Buyer shall pay Seller a "SHORTFALL CHARGE." The
"SHORTFALL Charge" will be calculated by subtracting the sum of all invoices
billed to Buyer by Seller for Products shipped during any applicable month from
One Million Dollars ($1,000,000.00), then multiplying that figure by 25%. For
example, if in one month, the sum of the total invoices for Products shipped is
$900,000.00, then Buyer shall pay to Seller a Shortfall Charge of $25,000.00.
The Seller shall invoice Buyer and provide sufficient detail on how the
Shortfall Charge is calculated. Payment is due net thirty (30) days after the
invoice date. Should buyer fail to make payment within thirty (30) days after
the invoice date, Seller may, at its sole option, (i) cease shipments to the
Buyer or other destinations designated by Buyer, and/or (ii) make partial or all
future shipments on a C.O.D. basis until such delinquency has been paid.
Interest at the rate of one percent (1.0%) per month shall accrue and be charged
on all late payments. Non-payment of a monthly Shortfall Charge constitutes a
material breach under Paragraph 8.2(a) and Paragraph 8.2(b) and all rights and
remedies of the Seller to enforce the continued Minimum Volume Requirement
remain in effect for the life of the Agreement.

4.       PURCHASING AND CANCELLATIONS.
         -----------------------------

         4.1 BASE PRODUCTS AND FINAL PRODUCTS. The Parties hereto specifically
agree and acknowledge that the basic Products Manufactured under the terms of
this Agreement are of a generic type and are identical (the "BASE Product") and,
when completed, will be delivered to Seller's in-house storage facility to await
the Final Configuration. Base Products may be specially configured or modified,
as required, to conform with Buyer's customers' other products or special
requirements prior to shipment to Buyer or Buyer's customers (the "FINAL
PRODUCT").

         4.2 PURCHASE ORDERS. Buyer shall order Products by issuing purchase
orders to Seller (the "PURCHASE Orders"). Purchase Orders shall be either a
"BASE CONFIGURATION PURCHASE ORDER" or a "FINAL CONFIGURATION PURCHASE ORDER." A
"BASE CONFIGURATION PURCHASE ORDER" shall set forth the amount of Base Products
Buyer requires Seller to Manufacture for eventual configuration to Final
Products. A "FINAL CONFIGURATION PURCHASE ORDER" shall set forth the amount of
Final Products required and the special configurations and/or modifications (the
"FINAL CONFIGURATION") necessary to convert the Base Products to Final Products.

                                      -3-

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         4.3 ACCEPTANCE OF PURCHASE ORDERS. Within two (2) working days of
receipt of a Base Configuration Purchase Order, the Seller shall either accept
or reject the same. If the Seller is unable to meet the delivery schedule set
forth in a Base Configuration Purchase Order or finds the same to be
unacceptable for some other reason, the Buyer and Seller shall negotiate in good
faith to resolve the disputed matter(s). Within one (1) working day of receipt
of a Final Configuration Purchase Order, the Seller shall either accept or
reject the same. If the Seller is unable to meet the delivery schedule set forth
in a Final Configuration Purchase Order or finds the same to be unacceptable for
some other reason, the Buyer and Seller shall negotiate in good faith to resolve
the disputed matter(s).

         4.4 PURCHASE ORDER LEAD-TIME REQUIREMENTS. The Buyer shall issue Base
Configuration Purchase Orders to the Seller a minimum of twelve (12) weeks prior
to the required in-house delivery date. The Buyer shall also issue Final
Configuration Purchase Orders to the Seller a minimum of ten (10) working days
prior to the delivery date to Buyer or Buyer's customer. The Final Configuration
Purchase Order will instruct the Seller to complete the Final Configuration on a
number of Base Products. In addition, the Buyer shall provide the Seller with a
9-12 month rolling forecast of Products (the "ROLLING FORECASTS"), on a monthly
basis, to be used for material procurement planning and potential purchasing
purposes.

         4.5 ADVERSE MATERIAL LEAD-TIMES. The Seller shall make purchase
commitments to suppliers based upon the Rolling Forecasts received from the
Buyer. If, due to current market conditions and component allocations, some
Component Parts are not be available within agreed upon lead-times, the Parties
will mutually negotiate procurement of long-lead material and safety stock as
necessary.

         4.6 PURCHASE ORDER CONTENTS. The Buyer shall specify the Products to be
delivered by the Seller under the terms of this Agreement by issuing written
Purchase Orders as stated in SECTION 4.2 above. The Purchase Orders shall
contain the following information:

         (a)      The quantity and type of Product ordered.

         (b)      The Product unit price.

         (c)      The Product unit revision and configuration level.

         (d)      The delivery schedule.

         (e)      Destination.

         (f)      Required method of shipment.

         (g)      Reference to this Agreement.

                                      -4-

<PAGE>

         4.7 RESCHEDULING OF RELEASED ORDERS. The Buyer may reschedule delivery
of Base Products or Final Products by sending the Seller a written change order
(a "CHANGE ORDER"). Deliveries of Final Products may be rescheduled in
accordance with the following schedule:

 NUMBER OF BUSINESS DAYS ADVANCE NOTICE   % OF SHIPMENT RESCHEDULED - UP OR DOWN
 --------------------------------------   --------------------------------------
                 0 - 14                                    None
                15 - 30                                   0 - 30%
                31 - 90                                 31% - 50%
                91 - 120                                51% - 70%
               121 - Beyond                             71% - 100%

Deliveries of Base Products may be rescheduled in accordance with the following
schedule:

 NUMBER OF BUSINESS DAYS ADVANCE NOTICE   % OF SHIPMENT RESCHEDULED - UP OR DOWN
 --------------------------------------   --------------------------------------
                 0 - 60                                    None
                61 - 90                                   0 - 30%
                91 - 120                                31% - 50%
                91 - 150                                51% - 70%
               151 - Beyond                             71% - 100%

         The Buyer shall reimburse Seller for any increased costs incurred as a
result of any Change Order. Should one or more shipments be rescheduled with a
delay of greater than thirty (30) days, inventory carrying charges of 1.0% per
month will accrue and be invoiced by Seller.

         4.8 ENGINEERING CHANGE ORDERS. If the Buyer requests that Seller change
the configuration of the Base Products, Buyer shall deliver to Seller an
engineering change order (the "ENGINEERING CHANGE ORDER") specifying the
required changes. The Buyer will pay Seller $350.00 to process a standard
Engineering Change Order and $1,000.00 for each expedited Engineering Change
Order requested to be implemented in less than a forty-eight (48) hour notice.
The Seller will use its best efforts to advise the Buyer within two (2) business
days as to how soon, and at what cost, a Engineering Change Order requested by
the Buyer can be implemented by the Seller.

         4.9 CANCELLATIONS OF PURCHASE ORDERS. In the event that the Buyer
wishes to cancel some quantity of the Products ordered pursuant to a Purchase
Order which become obsolete and unusable for any other purpose other than as
originally contemplated by such cancelled Purchase Order ("OBSOLETE PRODUCTS"),
the Buyer will provide Seller with written notice of cancellation (a "NOTICE OF
CANCELLATION") and, upon receipt of the Notice of Cancellation, the Seller shall
stop work to the extent specified therein. Notwithstanding Seller's receipt of a
Notice of Termination and the implementation thereof, Buyer shall remain
responsible for the following:

                                      -5-

<PAGE>

                  (a) Payment for all Obsolete Products delivered to the Buyer
         and in transit, plus finished Base Products (which are obsolete) in
         inventory prior to, and including, the effective date of cancellation
         the unit prices applicable to the order;

                  (b) Payment for all work-in-process ("WORK-IN-PROCESS") based
         upon the percentage of completion, as determined by the Seller,
         multiplied by the unit price of the Obsolete Product set forth in
         EXHIBIT C, including Obsolete Products which were in process prior to
         receipt of the Notice of Cancellation and that could not be completed
         by the cancellation date. The total unit price for Work-In-Process
         units will not exceed the total unit price for a completed assembly.
         The Buyer may request the Seller to complete and deliver all Obsolete
         Products included in Work-In-Process at the unit price referenced in
         EXHIBIT C.

                  (c) Payment of the cost plus burden and benefit (not to exceed
         actual costs plus 16%) in accordance with agreed to Component Parts
         prices of inventory in-house and on orders which cannot be cancelled or
         returned, provided that such inventory is in support of Buyer's
         Purchase Orders and Forecasts.

                  (d) Payment of any restocking charges, bill-backs, and
         cancellation charges received by the Seller from suppliers for
         Component Parts ordered for the manufacture of Obsolete Products plus a
         5% handling fee.

                  (e) If applicable, any Shortfall Charge pursuant to SECTION
         3.6 herein.

         The Seller shall use its best efforts to minimize cancellation charges
by returning inventory and material for credit, canceling material on order,
applying material to other Seller projects as applicable, and minimizing all
Work-In-Process and finished goods to support the final production schedule.
Upon payment of the cancellation charges, all Obsolete Products,
Work-In-Process, and non-returnable/non-cancelable components in house or on
order shall be delivered to (or held by Seller on a consignment basis), and
become the property of, the Buyer. F.O.B. is from the Seller's location.

5.       PAYMENT AND SHIPPING TERMS.
         ---------------------------

         5.1 INVOICES AND PAYMENT. The Seller shall invoice Buyer upon shipment
of Products. Payment is due net thirty (30) days from the date of shipment and
invoice. Should Buyer fail to make payment within thirty (30) days after the
invoice date, the Seller may, at its sole option, (i) cease shipments to the
Buyer or other destination designated by Buyer; and/or (ii) make partial or all
future shipments on a C.O.D. basis until such delinquency has been paid.
Interest at the rate of 1.0% per month shall accrue and be charged on all late
payments. If a completed Base Product has not been converted into a Final
Product within 20 working days of its completion, the Seller will invoice the
Buyer at the rate of 95% of the Final Product price listed in EXHIBIT C (which
shall be credited against any subsequent Final Configuration of those Base
Products into Final Products).

         5.2 BUYER INVOICES AND PAYMENT. The Buyer shall invoice Seller upon
shipment of Component Parts. Payment is due net thirty (30) days from the date
of shipment and invoice. Should Seller fail to make payment within thirty (30)
days after the invoice date, the Buyer may, at its sole option, (i) cease
shipments to the Seller, and/or (ii) make partial or all future shipments on a
C.O.D. basis until such delinquency has been paid. Interest at the rate of 1.0%
per month shall accrue and be charged on all late payments.

                                      -6-

<PAGE>

         5.3 PACKAGING AND SHIPPING. The Seller shall package each Product to
the Buyer's Specifications or, if not specified by the Buyer, to good commercial
standards. All shipments made by Seller to the Buyer or other destination
designated by Buyer shall be F.O.B. Comtel Electronics, Tustin, CA. Title, risk
of loss and damage shall pass from the Seller to the Buyer upon shipment or
physical possession of the shipment passing to a common carrier. Shipments will
be made in accordance with the Buyer's specific routing instructions, including
method of carrier to be used, and all special and incidental charges resulting
from the choice of freight carrier shall be borne by the Buyer. Within one (1)
business day of shipment, Seller will communicate all shipping data (e.g.,
product serial numbers, ship date, etc.) to Buyer.

         5.4 SECURITY INTEREST. The Seller reserves a purchase money security
interest in each of the Products produced pursuant to this Agreement as the sole
security for the payment of the applicable purchase price thereof. This security
interest will be satisfied and discharged by payment in full of the applicable
purchase price for the Products. A UCC-1 Financing Statement may be filed on the
Seller's behalf with appropriate state authorities at any time after signature
by the Buyer in order to perfect the Seller's security interest. The Buyer
agrees to execute any and all such documents necessary to perfect said purchase
money security interest.

6.       WARRANTY AND TESTING.
         ---------------------

         6.1 WARRANTY. The Seller warrants to the Buyer that the Products
Manufactured by Seller will conform to Buyer's Specifications and be free from
defects in process and workmanship. The Seller is responsible for repairing or
replacing any failed Products under normal use and service for a period of one
(1) year after shipment by the Seller. The Seller's responsibility with respect
to Component Parts shall be limited to procurement of materials, incoming
inspection, and safe handling of the Component Parts while in-house at the
Seller. The Buyer is responsible for the selection of all materials as well as
ensuring the quality of the vendors and the compatibility of the components. The
Buyer is also responsible for designing Products so that the Component Parts are
not unduly stressed. The Seller's obligation under this warranty is limited to
replacing, repairing, or issuing credit for any Products or Component Parts that
are defective. All defective Products shall be returned to the Seller's
manufacturing facility, F.O.B. Seller, with reference to a Seller supplied
Returned Materials Authorization number ("RMA"), which the Seller shall issue to
the Buyer or any third party assigned by the Buyer. Seller shall inspect all
returned Products within two (2) days of receipt to confirm that the returned
Products are defective. If the returned defective Products are repairable with
Component Parts on hand, Seller shall ship replacement Products to Buyer or
another destination designated by Buyer within ten (10) days of receipt thereof.
If, however, the returned defective Products are not repairable with Component
Parts on hand, Seller shall ship replacement Products to Buyer or another
destination designated by Buyer within thirty (30) days of receipt thereof. If
the needed Component Parts are not available within 30 days, the Buyer and
Seller will mutually agree to a return date. All shipping and handling charges
associated with replacement Products shall be borne exclusively by Seller. No
products inspected by the Seller shall be returned without prior written consent
of the Seller. A shipping and handling charge will be assessed for invalid
returns or those where no defect is found.

                                      -7-

<PAGE>

         THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES WHETHER STATUTORY,
EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR PARTICULAR PURPOSE.

         The Seller neither assumes nor authorizes any other person to assume
for the Seller any other liability in connection with the sale of the Products.
This warranty shall not apply to any Products which have been repaired or
altered (except by the Seller) or which shall have been subject to misuse,
negligence, or accident (other than by Seller). A RMA must be obtained from the
Seller before any Products can be returned to the Seller pursuant to a warranty
claim. The Seller is not liable for incidental, consequential or special damage
of any kind or for personal injury resulting directly or indirectly from the
design, material, workmanship, operation or installation of the Products
Manufactured under the terms of this Agreement.

7.       RESPONSIBILITY FOR ADDITIONAL COSTS AND EXCESS INVENTORY.
         ---------------------------------------------------------

         7.1 EXCESS INVENTORY. In the event that the Seller purchases or orders
Component Parts in order to meet the Buyer's Forecast, the Buyer shall be
required to purchase the unused portion from the Seller upon request if (i)
Buyer fails to purchase Products in accordance with such Buyer's Forecast(s),
and (ii) Seller cannot reasonably return, cancel the order, or otherwise use
such Component Parts at no additional cost to itself. The cost of such purchase
of excess inventory by Buyer shall equal the total cost of the excess Component
Parts plus a seven and one-half percent (7.5%) handling fee (and will not, in
any case, be less than $100.00).

         7.2 PRICE ADJUSTMENTS. Product unit pricing shall remain firm for
Products on the Purchase Orders which have been accepted by the Seller except as
follows:

                  (a) In the event there is an increase in the cost of Component
         Parts which affects the Product(s) unit price, the Seller shall
         document such increase in material cost to the Buyer so that both
         Parties may mutually pursue alternative pricing in order to retain the
         original cost. If such an alternative cannot be attained within a
         reasonable period of time, the prices in EXHIBIT C shall be adjusted to
         reflect the actual cost of the increase. The summary of costs of
         Component Parts will be prepared and reviewed by Seller on a quarterly
         basis to establish revised cost of material standards and capture
         increases and decreases to the cost of the bill of materials and to
         review market updates and how they will impact the Buyer;

                  (b) Buyer will be responsible for certain other increased
         charges constituting costs and expenses not contained in the prices in
         EXHIBIT C, WHERE THE INCREASE IS DUE TO THE BUYER'S ACTIONS including,
         but not limited to, the following:

                           (i) overtime charges and actual expenses incurred by
                  Seller as a result of delays in the normal Manufacture of
                  Products or interruption in the work flow process where such
                  delays or interruption are caused by (a) a change in Buyer's
                  Specifications or Product test by Buyer which impacts
                  Works-In-Progress, or (b) failure by the Buyer to provide
                  within the agreed time frame sufficient quantities or a
                  reasonable quality level of Component Parts, if applicable
                  (and until Buyer's Inventory is exhausted), to sustain the
                  production schedule;

                                      -8-

<PAGE>

                           (ii) expenses incurred due to additional packaging
                  requirements that the Buyer may specify; and

                           (iii) Engineering Change Orders as defined in SECTION
                  4.8.

8.       TERM AND TERMINATION.
         ---------------------

         8.1 TERM. The term of this Agreement (the "TERM") shall commence on the
Effective Date and, unless terminated earlier pursuant to SECTION 8.2, shall
remain in effect for a fixed term of three (3) years, and shall automatically
renew for additional one (1) year terms, unless either Party provides the other
with written notice of termination not later than one hundred eighty (180) days
prior to the expiration of the then-current Term. Those Sections of this
Agreement that by their terms logically ought to survive termination shall
survive termination of this Agreement.

         8.2 TERMINATION.

                  (a) If either Party (the "DEFAULTING PARTY") is in breach of a
         material term of this Agreement, the other Party may deliver to the
         Defaulting Party a written notice specifying the default and stating
         its intentions to exercise its rights pursuant to this SECTION 8.

                  (b) Either Party may terminate this Agreement if:

                           (i) The default referred to in SECTION 8.2(a) is not
                  capable of remedy;

                           (ii) The Defaulting Party fails to remedy such
                  default in a proper manner within thirty (30) days after the
                  notice referred to in SECTION 8.2(a) is received and the
                  Defaulting Party fails within the period of thirty (30) days
                  to provide adequate assurance that the default will be cured
                  within a specified time; or

                           (iii) The Defaulting Party gives such adequate
                  assurance referred to in SECTION 8.2(b)(ii), but the default
                  is not cured within such specified time.

                  (c) Either Party may terminate this Agreement at any time by
         giving not less than thirty (30) days prior written notice of
         termination to the other Party in the event such other Party takes any
         action or any steps are taken or legal proceedings are started for:

                           (i) Such other Party's winding-up, dissolution,
                  liquidation, or reorganization other than on terms approved in
                  advance in writing by the other Party; or

                                      -9-

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                           (ii) The filing by or against a Party of any
                  proceeding under federal bankruptcy laws now or hereafter
                  existing or any other similar laws now or hereafter in effect
                  or the appointment of a receiver, trustee, custodian or
                  conservator of all or any part of the assets of a Party.

                  (d) Buyer may terminate this Agreement, upon thirty (30) days
         prior written notice to Seller, if for three consecutive months,
         Buyer's Purchase Orders and Products are rejected or returned by Buyer
         in connection with Buyer's Specifications or warranty provisions hereof
         and are not replaced by Seller with Products compliant with Buyer's
         Specifications in accordance with SECTION 6.1 herein.

8.3      EFFECT OF TERMINATION.
         ----------------------

                  (a) Termination, relinquishment or expiration of this
         Agreement for any reason shall be without prejudice to any rights which
         shall have accrued to the benefit of any Party prior to such
         termination, relinquishment or expiration. Such termination,
         relinquishment or expiration shall not relieve any Party from
         obligations that survive termination or expiration of this Agreement
         and shall not terminate any obligations to pay all amounts which shall
         have accrued or are payable hereunder.

                  (b) Upon expiration or termination of this Agreement for any
         reason, each Party agrees to return to the other, the other Party's
         Confidential Information (as that term is defined in SECTION 11.8). It
         is understood that confidentiality obligations shall survive expiration
         or termination of this Agreement without regard to the basis of
         expiration or termination.

                  (c) Upon termination, relinquishment or expiration of this
         Agreement for any reason, Seller shall return all of the Test Equipment
         to Buyer in good working order (normal wear and tear excepted) and free
         and clear of all liens and attachments OR permit Buyer and any of its
         employees or agents to enter Seller's Facility to take physical
         possession of the Test Equipment which shall be in good working order
         (normal wear and tear excepted) and free and clear of all liens and
         attachments.

9.       CONDITIONS OF CLOSING.
         ----------------------

         9.1 CONDITIONS. The following conditions must be satisfied prior to
Seller's purchase of the Manufacturing Equipment and Initial Inventory
referenced in SECTION 3:

                  (a) Buyer shall visit Seller's Facility to complete its due
         diligence;

                  (b) The Parties shall validate pricing and bill of material
         costs as a ratio to the unit sell price. The Buyer and Seller commit to
         work together to meet the Seller's investment objective of ensuring the
         raw material and Component Part costs comprise no more than sixty (60%)
         percent of the purchase price;

                  (c) The Parties shall schedule training and exchange data with
         Buyer's Massachusetts manufacturing facility;

                                      -10-

<PAGE>

                  (d) Buyer has completed its additional financing to support
         this Agreement;

                  (e) The Parties have obtained their respective Board of
         Director's approval to proceed with this Agreement; and

                  (f) Receipt by each Party of the other's Closing Certification
         (in a form substantially similar to that attached hereto as EXHIBIT G).

10.      INDEMNIFICATION.
         ----------------

         10.1 PRODUCT INDEMNIFICATION. The Buyer agrees that it will indemnify
and hold harmless Seller against any and all claims, liabilities, damages, or
causes of action ("CLAIMS") hereafter brought or asserted by any person or
entity arising out of the design, installation or use of any Product(s)
manufactured by the Seller under this Agreement and in accordance with Buyer's
Specifications except for any intentional or negligent acts of Seller or any of
Seller's employees, agents or contractors.

         10.2 PATENTS, COPYRIGHT, TRADE SECRET AND OTHER PROPRIETARY RIGHTS. The
Buyer agrees to indemnify and hold harmless Seller against any Claims brought
against Seller alleging that the Products infringe on a patent, copyright, trade
secret and other proprietary right, foreign or domestic, and to pay the amount
of any settlement or the costs and damages finally awarded, provided that the
Seller promptly notifies the Buyer of any such Claims and provides the Buyer
with reasonable assistance in the defense of any such Claims.

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

         11.1 ENTIRE AGREEMENT. This Agreement (including all Exhibits attached
hereto) shall constitute the entire Agreement between the Parties with respect
to the transactions contemplated hereby and supersedes all prior agreements and
understandings between the Parties, whether written or oral, relating to such
transactions.

         The Buyer and Seller shall comply with all terms and conditions stated
in this Agreement and with Buyer's Specifications contained in issued Purchase
Orders. In the event of inconsistency, the order of precedence shall be as
follows:

         (a)      This Agreement

         (b)      Exhibits to this Agreement

         (c)      Buyer's Specifications on the face of Buyer's Purchase
                  Order(s)

         11.2 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors and permitted assigns.
Neither Party hereto shall in any way sell, transfer, assign, or otherwise
dispose of any of the rights, privileges, duties and obligations granted or
imposed upon it under this Agreement; provided however, (i) each Party shall
have the right to assign its rights, duties and responsibilities under this
Agreement to any Affiliate that agrees in writing to be bound by the terms and
conditions of this Agreement and is found to be reasonably creditworthy by the
non-assigning Party in its sole discretion; and (ii) each Party may assign all

                                      -11-

<PAGE>

of its rights, duties and obligations under this Agreement to any entity that
purchases substantially all of the assets of such Party or that acquires such
Party through merger or other acquisition transaction and is found to be
reasonably creditworthy by the non-assigning Party. In either case referenced in
(i) and (ii) above, if the assigning Party is reasonably creditworthy and elects
to remain primarily liable for the obligations of this Agreement, then the
condition of creditworthiness may be waived by the non-assigning Party in its
sole discretion.

         An "AFFILIATE" of a Party shall mean any corporation, partnership or
other business entity or natural person which controls or is controlled by, or
is under common control with such Party.

         11.3 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, except in those instances where removal or
elimination of such invalid, illegal, or unenforceable provision or provisions
would result in a failure of consideration under this Agreement, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.

         11.4 FORCE MAJEURE. The Parties shall not be liable to the other for
any delay in performance or failure to perform, in whole or in part when due to
labor dispute, strike, war or act of war (whether an actual declaration is made
or not), insurrection, riot, civil commotion, act of public enemy, accident,
fire, flood, or other act of God, or act of any governmental authority beyond
the reasonable control of the Parties. If an event of force majeure occurs, the
affected Party shall promptly notify the other Party and shall use its best
efforts to mitigate the effects thereof and minimize any such delay or failure
resulting therefrom.

         11.5 INDEPENDENT CONTRACTOR. The Seller and the Buyer are and shall be
independent contractors to one another, and nothing herein shall be deemed to
cause this Agreement to create an employment, agency, partnership, or joint
venture relationship between the Parties.

         11.6 DISPUTES. All disputes and controversies of every kind and nature
between the Parties arising out of or in connection with the existence,
construction, validity, interpretation, meaning, performance, non-performance,
enforcement, operation, breach, continuance or termination of this Agreement
shall be resolved solely by binding arbitration in accordance with the
Commercial Arbitration Rules (the "RULES") of the American Arbitration
Association ("AAA") at the offices of the AAA in Irvine, California, before a
single arbitrator.

         11.7 JURISPRUDENCE. This Agreement will be governed by and construed in
accordance with the laws of the State of California, without regard to its rules
as to conflicts of laws.

         11.8 CONFIDENTIALITY AND PUBLICITY. During the course of this
Agreement, either Party may have or may be provided access to the other's
confidential information and materials ("CONFIDENTIAL INFORMATION"). Each Party
agrees to maintain the other Party's Confidential Information in accordance with
the terms of this Agreement or any applicable separate nondisclosure agreement
between the Buyer and the Seller. In the absence of another written agreement,

                                      -12-

<PAGE>

AT A MINIMUM, each Party agrees to maintain such information in confidence and
limit disclosure within its organization on a need to know basis, to take all
reasonable precautions to prevent unauthorized disclosure, and to treat such
information as it treats its own information of a similar nature, until such
time, if ever, as the information becomes rightfully available to the public
through no fault of the non-disclosing Party. The Parties agree that neither
will disclose the existence of this Agreement, nor any of its details or the
existence of the relationship created by this Agreement, to any third party
without the specific and express written consent of the other. If disclosure of
this Agreement or any of the terms hereof is required by applicable law, rule or
regulation, or is compelled by a court or governmental agency, authority or
body: (i) the Parties shall use all legitimate and legal means available to
minimize the disclosure to third parties of the content of this Agreement,
including, without limitation, seeking a confidential treatment request or
protective order; (ii) the disclosing Party shall inform the other Party at
least ten (10) business days (i.e., not including Saturdays, Sundays or days on
which banks are not open for business in the geographic area in which the
non-disclosing Party's principal office is located) in advance of the
disclosure; and (iii) the disclosing Party shall give the other Party a
reasonable opportunity to review and comment upon disclosure, and any request
for confidential treatment or protective order pertaining thereto, prior to
making such disclosure. The Parties may disclose this Agreement in confidence to
their respective legal counsel, accountants and financing sources as necessary
in connection with obtaining services from such third parties.

         Upon the termination or expiration of this Agreement for any reason,
each Party shall deliver to the disclosing Party its Confidential Information
within three (3) weeks therefrom or, if the disclosing Party so requests,
destroy such Confidential Information and certify such destruction in writing to
the disclosing Party within three (3) weeks therefrom.

         The Parties acknowledge and agree that any breach or threatened breach
of this SECTION 11.8 will result in irreparable harm to the Party whose
Confidential Information is subject to such breach or threatened breach, for
which remedies at law will not be adequate. Each Party, as a disclosing Party,
shall therefore be entitled to obtain injunctive relief in any court of
competent jurisdiction in addition to any other remedy at law or in equity in
the event of a breach or threatened breach of this SECTION 11.8.

         11.9 COMPLIANCE WITH LAWS. The Parties shall comply with all national,
state, and local laws and regulations governing the manufacture, transportation,
and/or sale of Products and/or the performance of any of the Parties respective
rights, duties and obligations under the terms of the Agreement.

         11.10 OWNERSHIP. Any specifications, drawings, schematics, technical
information and other materials furnished by the Buyer, and all intellectual
property rights therein ("BUYER'S INTELLECTUAL PROPERTY"), are owned exclusively
by the Buyer, and the Seller has no ownership interest or other right or license
therein other than use for the sole purpose of Manufacturing the Products or
otherwise performing its obligations under this Agreement. Any modification,
deviations, improvements or other changes to Buyer's Intellectual Property, from
whatever source, shall vest in and remain the sole property of Buyer.

                                      -13-

<PAGE>

         11.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective on the Effective Date.

         11.12 WAIVER. No delay or omission by any Party to exercise any right
or power hereunder shall impair any such right or power or be construed to be a
waiver thereof. A waiver by any Party of any of the covenants, conditions or
contracts to be performed by the other or any breach thereof shall not be
construed to be a waiver of any succeeding breach thereof or of any other
covenant, condition or contract herein contained. No change, waiver or discharge
hereof shall be valid unless in writing and signed by an authorized
representative of the Party against which such change, waiver, or discharge is
sought to be enforced.

         11.13 CUMULATIVE REMEDIES. The rights and remedies provided in this
Agreement or otherwise under applicable laws shall be cumulative and the
exercise of any particular right or remedy shall not preclude the exercise of
any other rights or remedies in addition to, or as an alternative of, such right
or remedy, except as expressly provided otherwise in this Agreement.

         IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed as of the Effective Date set forth above.

Comtel Electronics, Inc. ("Seller")          Telenetics Corporation ("Buyer")

By:      /S/ LYLE JENSEN                     By:      /S/ JOHN D. MCLEAN
   ---------------------------------            --------------------------------

Name:      LYLE JENSEN                       Name:      JOHN D. MCLEAN
     -------------------------------              ------------------------------
         (print or type)                              (print or type)

Title:   CHIEF EXECUTIVE OFFICER             Title:   CHIEF OPERATING OFFICER
      ------------------------------               -----------------------------

                                      -14-DISTRIBUTION AGREEMENT

         THIS DISTRIBUTION AGREEMENT ("Agreement"), is entered into this 12th
day of March, 2001, by and between INGRAM MICRO INC. ("Ingram"), a Delaware
corporation, having its principal place of business at 1600 E. St. Andrew Place,
Santa Ana, California 92705, and Telenetics ("Vendor"), a California
corporation, having its principal place of business at 25111 Arctic Ocean, Lake
Forest, California 92630. The parties desire to and hereby do enter into a
distributor/supplier relationship, the governing terms and mutual promises of
which are set out in this Agreement.

1.       DISTRIBUTION RIGHTS.
         --------------------

         1.1 TERRITORY. Vendor grants to Ingram, including its affiliates for
resale, and Ingram accepts, the non-exclusive right to distribute worldwide all
computer products produced and/or offered by Vendor ("Product") during the term
of this Agreement. Ingram shall have the right to purchase, sell and ship to any
reseller within the territory or to Ingram's affiliate, or at Vendor's option
Ingram's affiliate may purchase direct from Vendor.

         1.2 PRODUCT. Vendor agrees to make available and to sell to Ingram such
Product as Ingram shall order from Vendor at the prices and subject to the terms
set forth in this Agreement. Ingram shall not be required to purchase any
minimum amount or quantity of the Product.

2.       TERM AND TERMINATION.
         ---------------------

         2.1 TERM. The initial term of this Agreement is one (1) year.
Thereafter the Agreement will automatically renew for successive one (1) year
terms, unless it is earlier terminated.

2.2      TERMINATION.

                  (a) Either party may terminate this Agreement, with or without
         cause, by giving thirty (30) days written notice to the other party.

                  (b) Either party may immediately terminate this Agreement with
         written notice if the other party:

                           (i) materially breaches any term of this Agreement
                  and such breach continues for thirty (30) business days after
                  written notification thereof; or

                           (ii) ceases to conduct business in the normal course,
                  becomes insolvent, makes a general assignment for the benefit
                  of creditors, suffers or permits the appointment of a receiver
                  for its business or assets, or avails itself of or becomes
                  subject to any proceeding under any Bankruptcy Act or any
                  other federal or state statute relating to insolvency or the
                  protection of rights of creditors; or

                           (iii) attempts to assign or otherwise transfer its
                  rights hereunder unless both have agreed in writing to such
                  assignment or transfer.

<PAGE>

3.       INGRAM OBLIGATIONS.
         -------------------

         3.1 PRODUCT AVAILABILITY. Ingram will list Product in its catalog(s) as
appropriate and endeavor to make such Product available to customers.

         3.2 ADVERTISING. Ingram will advertise and/or promote Product in a
commercially reasonable manner and will transmit as reasonably necessary Product
information and promotional materials to its customers.

         3.3 SUPPORT. Ingram will make its facilities reasonably available for
Vendor and will assist in Product training and support. Ingram will provide
reasonable, general Product technical assistance to its customers, and will
direct all other technical issues directly to Vendor.

3.4      ADMINISTRATION.

                  (a) Upon request, Ingram will furnish Vendor with a valid tax
         exemption certificate.

                  (b) Ingrain will provide Vendor standard sales-out and
         inventory reports via its electronic Bulletin Board System.

                  (c) Ingram may handle its customers' Product returns by
         batching them for return to Vendor at regular intervals.

4.       VENDOR OBLIGATIONS.
         -------------------

         4.1 SHIPPING/EXPORT.

                  (a) Vendor shall ship Product pursuant to Ingram purchase
         order(s) ("P.O."). Product shall be shipped F.O.B. destination to
         Ingram's designated warehouse or other specified location whereby
         Vendor pays all freight with title and risk of loss or damage to pass
         to Ingram upon delivery to the location specified in Ingram's P.O. For
         all shipments Vendor agrees to comply with Ingram's Vendor Routing and
         Packaging Guide attached hereto as Exhibit A (the "Guide"). Vendor is
         not obligated to utilize the carrier selection as specified in the
         routing matrix section of the Guide but is encouraged to do so. In the
         event Ingram is erroneously charged for freight costs, upon notice from
         Ingram, Vendor agrees to immediately reimburse Ingram via credit or via
         a check if there are no outstanding invoices.

                  (b) Ingram requires concurrent with the execution of this
         Agreement Export Administration Regulations product classification and
         supporting documentation: Certificate of Origin (General Use and/or
         NAFTA), Export Commodity Control Number's; (ECCN's), General License
         and/or Individual Validated License information and Schedule
         "B"/Harmonized Numbers. This applies when distribution rights granted
         under Section 1.1 are outside the United States for the initial
         Product/s and when additions or changes to these Products occurs.

         4.2 INVOICING. For each Product shipment to Ingram, Vendor shall issue
to Ingram an invoice showing Ingram's order number, the Product part number,
description, price and any discount. At least monthly, Vendor shall provide
Ingram with a current statement of account, listing all invoices outstanding and
any payments made and credits given since the date of the previous statement.

                                      -2-

<PAGE>

         4.3 PRODUCT AVAILABILITY. Vendor agrees to maintain sufficient Product
inventory to fill Ingram's orders. If a shortage of any Product exists, Vendor
agrees to allocate its available inventory of such Product to Ingram in
proportion to Ingram's percentage of all of Vendor's customer orders for such
Product during the previous sixty (60) days.

         4.4 PRODUCT MARKING. Vendor will clearly mark each unit of Product with
the Product name and computer compatibility. Such packaging will also bear a
machine-readable bar code identifier scannable in standard Uniform Product Code
(UPC) format. The bar code must identify the Product as specified by the Uniform
Code Council (UCC). If the Vendor or Ingram customers' require serial number
tracking the serial number must be clearly marked and bar coded on the outside
of the individual selling unit. The bar code shall fully comply with all
conditions regarding standard product labeling set forth in the Guide specified
in Section 4.1(a) above. Vendor may be assessed a reasonable per unit charge for
all Product not in conformance herewith.

         4.5 TECHNOTES. Vendor will within thirty (30) days of execution of this
Agreement sign the CIS/ Manufacture Product Information Library - TechNotes and
Content Distribution Agreements as shown in Exhibit B and provide the required
product information in the designated template format.

         4.6 SUPPORT. At no charge to Ingram, Vendor shall support Product and
any reasonable Ingram efforts to sell Product. Vendor shall also provide to
Ingram, its employees, and its customers reasonable amounts of sales literature,
advertising materials, and training and support in Product sales.

         4.7 NEW PRODUCT. Vendor shall endeavor to notify Ingram at least thirty
(30) days before the date any new Product is introduced. Vendor shall make such
Product available for distribution by Ingram no later than the date it is first
offered for sale in the marketplace.

         4.8 INSURANCE. Vendor shall carry insurance coverage for product
liability/completed operations with minimum limits of five million dollars
($5,000,000). Within ten (10) days of full execution of this Agreement, Vendor
shall provide Ingram with a Certificate of Insurance. This Certificate of
Insurance must include: (i) a broad form endorsement naming Ingram as an
additional insured, and (ii) a mandatory thirty (30) day notice to Ingram of
insurance cancellation.

4.9      WARRANTIES/CERTIFICATION.
         -------------------------

                  (a) GENERAL WARRANTY. Vendor represents and warrants that (i)
         it has good transferable title to the Products, (ii) the Product will
         perform in conformity with specifications and documentation supplied by
         Vendor, (iii) the Product or its use does not infringe any patents,
         copyrights, trademarks, trade secrets, or any other intellectual
         property rights, (iv) that there are no suits or proceedings pending or
         threatened which allege any infringement of such proprietary rights,
         and (v) the Product sales to Ingram do not in any way constitute
         violations of any law, ordinance, rule or regulation in the
         distribution territory.

                                      -3-

<PAGE>

                  (b) WARRANTY. Vendor hereby represents and warrants that any
         Product offered for distribution does not contain any obscene,
         defamatory or libelous matter or violate any right of publicity or
         privacy.

                  (c) END-USER WARRANTY. Vendor shall provide a warranty
         statement with Product for end user benefit. This warranty shall
         commence upon Product delivery to end-user.

                  (d) MILLENNIUM COMPLIANCE WARRANTY. Vendor warrants and
         represents that the Product will properly (a) record, store, process,
         calculate or present calendar dates falling on and after (and if
         applicable, spans of time including) January 1, 2000 as a result of the
         occurrence, or use of data consisting of, such dates and (b) calculate
         any information dependent on or relating to dates on or after January
         1, 2000 in the same manner, and with the same functionality, data
         integrity and performance, as such Product records, stores, processes,
         calculates and presents calendar dates on or before December 31, 1999,
         or information dependent on or relating to such dates.

                  (e) CLASS B WARRANTY. Vendor hereby represents and warrants
         that the Product has been or will be at the time of shipment certified
         as a Class B computing device as required by the rules of the U.S.A.
         Federal Communications Commission ("FCC Rules").

                  (f) EU WARRANTY. Vendor further warrants and represents for
         Products distributed to the European Union ("EU") that the Products
         will be accepted under all EU directives, regulations and the EU
         country's legislation.

                  (g) MADE IN AMERICA CERTIFICATION. Vendor by the execution of
         this Agreement certifies that it will not label any of its products as
         being "Made in America," "Made in U.S.A.," or with similar wording,
         unless all components or elements of such Product is in fact made in
         the United States of America. Vendor further agrees to defend,
         indemnify and hold harmless from and against any and all claims,
         demands, liabilities, penalties, damages, judgments or expenses
         (including attorney's fees and court costs) arising out of or resulting
         in any way from Product that does not conform to the Certification.

5.       PRICING.
         --------

         5.1 INGRAM PRICING. The suggested retail price and any Ingram discount
for Product is set out in Exhibit C. Vendor may modify Exhibit C with a minimum
of thirty (30) days advance written notice to Ingram. All Ingram orders for
Product will be billed at the price in effect when the order is placed. Ingram
shall have sole discretion as to selling price of Product to its customers.

         5.2 VENDOR PRICING. Vendor agrees that the prices and terms it offers
to Ingram are now and will continue to be at least as low as those it offers to
any of its customers. If Vendor offers price discounts, promotional discounts or
other special prices to its other customers, Ingram shall also be entitled to
participate in and receive notice of the same no later than Vendor's other
customers.

         5.3 INTERNATIONAL PRICING. If Vendor offers a better price outside the
U.S. and Ingram has distribution rights in that territory then the same price
shall be offered to Ingram for Product sales into that territory.

                                      -4-

<PAGE>

         5.4 PRICE ADJUSTMENTS. If Vendor reduces any Product price, or offers
increased discounts to any customers, Vendor will promptly credit Ingram for the
difference between the original Product price and the reduced Product price for
Ingram's and its customers' Product inventory, including: (i) any Customer
Product in-transit from/to Ingram, (ii) any unshipped orders, and (iii) orders
in-transit to Ingram on the price reduction or increased discount offer date. In
the event that Vendor shall raise the list price of a Product, all orders for
such Product placed prior to the effective date of the price increase shall be
invoiced at the lower price. Vendor shall provide Ingram with thirty (30) days
advance notice of any price increases.

         5.5 PAYMENT TERMS. Ingram's initial order payment terms shall be net
seventy five (75) days. Subsequent order payment terms shall be five percent
(5%) fifteen (15) days, net sixty (60) days. Payment shall be deemed made on the
payment postmark date.

         5.6 RIGHT TO WITHHOLD. Notwithstanding any other provision in this
Agreement to the contrary, Ingram shall not be deemed in default if it withholds
any specific amount to Vendor because of a legitimate dispute between the
parties as to that specific amount pending the timely resolution of the disputed
amount.

6.       MARKETING.
         ----------

         6.1 TRADEMARKS. Ingram may advertise and promote the Product and/or
Vendor, and may thereby use Vendor's trademarks, service marks and trade names.
Neither party shall acquire any rights in the trademarks, service marks or trade
names of the other.

         6.2 ADVERTISING. Vendor agrees to cooperate in Ingram's or Ingram's
customers' advertising and promotion of Product and hereby grants Ingram a
cooperative advertising allowance of five percent (5%) of Product invoice amount
for such advertising featuring Product and/or Vendor. Ingram shall submit
advertising to Vendor for review and approval prior to any initial release, and
Vendor shall not unreasonably withhold or delay such approval. Upon receipt of
reasonable evidence of such advertising expenditures, Vendor agrees to credit
the amount thereof against future Ingram purchases.

         6.3 PROGRAMS.

                  (a) Ingram may offer marketing programs to Vendor including
         but not limited to launch programs and reseller pass through
         opportunities. If Vendor elects to participate, Vendor agrees to pay
         such funds as may be required for this purpose.

                  (b) Vendor may be asked to prepay all marketing activities
         until a mutually agreed upon sell through rate is achieved.

         6.4 SUPPORT PRODUCT. Vendor shall consign a reasonable amount of
demonstration Product to aid Ingram in its support and promotion of Product. All
such consigned Product will be returned to Vendor upon request.

                                      -5-

<PAGE>

7.       RETURNS.
         --------

         7.1 STOCK BALANCING. Notwithstanding anything herein to the contrary,
Ingram may return throughout the term any Products which are in their original
packaging to Vendor for full credit of the Products' purchase price. In the
event that a Return Material Authorization (RMA) for the return of Product is
not issued within five (5) days of the request, Ingram shall have the right to
return any Product(s) to Vendor without an RMA, and Vendor shall be obligated to
accept such return for credit. Vendor will pay all freight charges for returned
Products.

         7.2 POST-TERM/TERMINATION. For one hundred eighty (180) days after the
expiration or earlier termination of this Agreement, Ingram may return to Vendor
any Product for credit- against outstanding invoices, or if there are no
outstanding invoices for a cash refund. Any credit or refund due Ingram for
returned Product shall be equal to the Product purchase price plus all freight
charges incurred by Ingram in returning the Product.

         7.3 PRODUCT DISCONTINUATION. Vendor shall give Ingram thirty (30) days'
advance written notice of Product discontinuation. Ingram may return all such
Product to Vendor for full credit of Product purchase price plus all freight
charges incurred by Ingram in returning the Product.

         7.4 DEFECTIVE PRODUCT.

                  (a) Ingram may return any Product to Vendor that Ingram or its
         customer finds defective. Vendor shall immediately credit Ingram for
         the Product purchase price, plus all freight charges incurred by Ingram
         in returning the defective Product.

                  (b) If any Product is recalled by Vendor because of defects,
         revisions or upgrades, Ingram will, at Vendor's request, provide
         reasonable assistance with the recall. Vendor will pay Ingram's
         expenses in connection with such recall.

8.       INDEMNIFICATION.

         8.1 PRODUCT INDEMNITY. Vendor shall defend, indemnify, and hold
harmless Ingram from and against any claims, demands, liabilities, or expenses
(including attorney's fees and costs) for any injury or damage, including, but
not limited to, any personal or bodily injury or property damage, arising out of
or resulting in any way from any defect in Products. This duty to indemnify
Ingram shall be in addition to the warranty obligations of Vendor.

         8.2 GENERAL INDEMNITY. Each party shall indemnify, defend and hold the
other harmless from and against any and all claims, actions, damages, demands,
liabilities, costs and expenses, including reasonable attorney's fees and
expenses, resulting from any act or omission of the acting party or its
employees under this Agreement, that causes or results in property damage,
personal injury or death.

         8.3 INTELLECTUAL PROPERTY RIGHTS INDEMNITY. Vendor shall defend,
indemnify and hold Ingram, its resellers and their customers, harmless from and
against all damages and costs incurred by any of them arising from the
infringement of any patent, copyright, trademark, trade secret or other
proprietary right by reason of the manufacture, sale, marketing, or use of
Product.

                                      -6-

<PAGE>

         8.4 PRODUCT INFRINGEMENT. Upon threat of claim of infringement, Vendor
may, at its expense and option (i) procure the right to continue using any part
of Product, (ii) replace the infringing Product with a non-infringing Product of
similar performance, or (iii) modify Product to make it non-infringing. If
Vendor does not so act within ninety (90) days after such claim, Ingrain may
return Product to Vendor for a full credit against future purchases or for a
cash refund, at Ingram's option.

         8.5 MULTI-MEDIA INDEMNITY. Vendor shall defend, indemnify and hold
Ingram, its resellers and their customers, harmless from and against all damages
and costs incurred by any of them to the extent it is based upon a claim that
the Product either (i) violates a third party's right of publicity and/or right
of privacy, or (ii) contains any obscene, defamatory or libelous matter.

         8.6 EUROPEAN INDEMNITY. For Products distributed to a country of the
EU, the Vendor accepts full responsibility for, and will indemnify Ingrain for,
all costs and damages arising from any non-compliance with any
manufacturer-directed EU decree, regulation or directive.

         8.7 MILLENNIUM COMPLIANCE INDEMNITY. Vendor agrees to indemnify and
hold Ingram and its shareholders, officers, directors, employees, agents,
successors, and assigns harmless from and against any and all claims, suits,
actions, liabilities, losses, costs, reasonable attorney's fees, expenses,
judgments or damages, whether ordinary, special or consequential, resulting from
any third party claim made or suit brought against Ingram or such persons, to
the extent such results from Vendor's breach of the warranty specified in
Section 4.9(d).

         8.8 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
FOR LOST PROFITS OF BUSINESS, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES,
WHETHER BASED IN CONTRACT OR TORT (INCLUDING NEGLIGENCE, STRICT LIABILITY OR
OTHERWISE), AND WHETHER OR NOT ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

         THIS LIMITATION IS IN NO WAY MEANT TO LIMIT VENDOR'S LIABILITY FOR
PERSONAL INJURY OR DEATH AS A RESULT OF A DEFECT IN ANY PRODUCT IN THOSE
JURISDICTIONS WHERE THE LAW DOES NOT ALLOW THIS LIMITATION.

9.       COMPLIANCE WITH FEDERAL LAWS AND REGULATIONS.
         ---------------------------------------------

         9.1 EXECUTIVE ORDER 11246. Vendor agrees to include the Equal
Employment Opportunity Clause by reference in every contract, agreement and
purchase order entered into with subcontractors or suppliers as required by 41
CFR 60-1.4.

         9.2 EMPLOYER INFORMATION REPORT EEO-1/WRITTEN AFFIRMATIVE ACTION
PROGRAM. Vendor agrees that if the value of any contract or purchase order is
fifty thousand dollars ($50,000) or more and the Vendor has fifty (50) or more
employees, Vendor will (i) file an EEO-1 report (Standard Form 100) and comply
with and file such other compliance reports as may be required under Executive
Order 11246, as amended, and Rules and Regulations adopted thereunder and (ii)
will develop a written affirmative action compliance program for each of its
establishments as required by Title 41 CFR 60-1.40.

                                      -7-

<PAGE>

         9.3 VETERANS EMPLOYMENT CLAUSE. Vendor agrees to abide by and comply
with the provisions of the Affirmative Action Clause, 41 CFR 60-250.4.

         9.4 EMPLOYMENT OF HANDICAPPED PERSONS. Vendor agrees that it will abide
by and comply with the provisions of the Affirmative Action Clause, 41 CFR
60-741.4.

         9.5 SMALL BUSINESS CONCERNS AND SMALL BUSINESS CONCERNS OWNED AND
CONTROLLED BY SOCIALLY AND ECONOMICALLY DISADVANTAGED INDIVIDUALS. Where a
government contract is expected to exceed five hundred thousand dollars
($500,000), Vendor agrees to comply with all requirements of P.L. 95-507 and
regulations promulgated thereunder. Vendor shall comply with instructions
contained in Exhibit D.

         9.6 WOMEN-OWNED BUSINESS CONCERNS. Vendor shall comply with
instructions contained in Exhibit D. Where a government contract is expected to
exceed five hundred thousand dollars ($500,000), Vendor agrees to comply with
all requirements of Executive Order 12138 and all regulations promulgated
thereunder.

10.      GOVERNMENT PROGRAM.
         -------------------

         10.1 PARTNERSHIP AMERICA. Vendor may, at its sole option, participate
in Ingram's government reseller program in which case the provisions of Exhibit
E, Partnership America, shall apply. A draft copy is provided solely for your
information and review.

11.      GENERAL PROVISIONS.
         -------------------

         11.1 NOTICES. Any notice which either party may desire to give the
other party must be in writing and may be given by (i) personal delivery to an
officer of the party, (ii) by mailing the same by registered or certified mail,
return receipt requested, to the party to whom the party is directed at the
address of such party as set forth at the beginning of this Agreement, or such
other address as the parties may hereinafter. designate, and (iii) by facsimile
or telex communication subsequently to be confirmed in writing pursuant to item
(ii) herein.

         11.2 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of California, except that body of law
concerning conflicts of law. The United Nations Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement.

         11.3 COOPERATION. Each party agrees to execute and deliver such further
documents and to cooperate as may be necessary to implement and give effect to
the provisions contained herein.

         11.4 FORCE MAJEURE. Neither party shall be liable to the other for any
delay or failure to perform which results from causes outside its reasonable
control.

         11.5 ATTORNEYS FEES. In the event there is any dispute concerning the
terms of this Agreement or the performance of any party hereto pursuant to the
terms of this Agreement, and any party hereto retains counsel for the purpose of
enforcing any of the provisions of this Agreement or asserting the terms of this
Agreement in defense of any suit filed against said party, each party shall be
solely responsible for its own costs and attorney's fees incurred in connection
with the dispute irrespective of whether or not a lawsuit is actually commenced
or prosecuted to conclusion.

                                      -8-

<PAGE>

         11.6 EXPORT REGULATIONS. Ingram agrees by the purchase of Products to
conform to, and abide by, the export laws and regulations of the United States,
including but not limited to, the Export Administration Act of 1979 as amended
and its implementing regulations. Ingram shall include a statement in it's
standard sales terms and conditions that any shipment of Product outside the
United States will require a valid export license. Ingram further agrees to
distribute Product in accordance with the territory as defined in Section 1.1.
Whenever a EU country is specified as Territory under Section 1.1, Territory
shall include all EU countries.

12.      AGREEMENT.
         ----------

         12.1 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

         12.2 SECTION HEADINGS. Section headings in this Agreement are for
convenience only, and shall not be used in construing the Agreement.

         12.3 INCORPORATION OF ALL EXHIBITS. Each and every exhibit referred to
hereinabove and attached hereto is hereby incorporated herein by reference as if
set forth herein in full.

         12.4 SEVERABILITY. A judicial determination that any provision of this
Agreement is invalid in whole or in part shall not affect the enforceability of
those provisions found to be valid.

         12.5 NO IMPLIED WAIVERS. If either party fails to require performance
of any duty hereunder by the other party, such failure shall not affect its
right to require performance of that or any other duty thereafter. The waiver by
either party of a breach of any provision of this Agreement shall not be a
waiver of the provision itself or a waiver of any breach thereafter, or a waiver
of any other provision herein.

         12.6 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto, and their respective
representatives, successors and permitted assigns. This Agreement shall not be
assignable by Vendor, without the express written consent of Ingram, which
consent shall not be unreasonably withheld, including to a Person in which it
has merged or which has otherwise succeeded to all or substantially all of such
party's business and assets to which this Agreement pertains and which has
assumed in writing or by operation of law its obligations under this Agreement.
Any attempted assignment in violation of this provision will be void.

         12.7 SURVIVAL. Sections 5.5 (Payment Terms), 5.6 (Right to Withhold),
7.2 (Post-Term Termination) and 8, (Indemnification) shall survive the
expiration or earlier termination of this Agreement.

         12.8 ENTIRETY. This Agreement constitutes the entire agreement between
the parties regarding its subject matter. This Agreement supersedes any and all
previous proposals, representations or statements, oral or written. Any previous
agreements between the parties pertaining to the subject matter of this
Agreement are expressly terminated. The terms and conditions of each party's

                                      -9-

<PAGE>

purchase orders, invoices, acknowledgments/confirmations or similar documents
shall not apply to any order under this Agreement, and any such terms and
conditions on any such document are objected to without need of further notice
or objection. Any modifications to this Agreement must be in writing and signed
by authorized representatives of both parties.

         12.9 AUTHORIZED REPRESENTATIVES. Either party's authorized
representative for execution of this Agreement or any amendment hereto shall be
president, a partner, or a duly authorized vice president of their respective
party. The parties executing this Agreement warrant that they have the requisite
authority to do so.

         IN WITNESS WHEREOF, the parties hereunto have executed this Agreement.

"Ingram"                                   "Vendor"

Ingram Micro Inc.
1600 E. St. Andrew Place                   -------------------------------------
Santa Ana, California 92705
                                           -------------------------------------

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

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

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

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

Date:                                      Date:
     --------------------------------           --------------------------------

*AGREEMENT MUST BE SIGNED BY PRESIDENT OR BY A DULY AUTHORIZED VICE PRESIDENT OR
PARTNER.

EXHIBITS:
---------

A - Vendor Routing and Packaging Guide

B - TechNotes

C - Product Price List

D - Small And Disadvantaged Business Certification

E - Partnership America

                                      -10-

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