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EXHIBIT 10.4

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED
OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
APPLICABLE STATE SECURITIES LAWS OR TELENETICS CORPORATION SHALL HAVE RECEIVED
AN OPINION OF ITS COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS
NOT REQUIRED.

                    AMENDED AND RESTATED WARRANT TO PURCHASE

                             SHARES OF COMMON STOCK

                                       OF

                             TELENETICS CORPORATION

                            Expires February 28, 2007

No.: W-___                                             Number of Shares: _______
Date of Issuance: March 1, 2003

         FOR VALUE RECEIVED, subject to the provisions hereinafter set forth,
the undersigned, Telenetics Corporation, a California corporation (together with
its successors and assigns, the "ISSUER"), hereby certifies that
________________________ or its registered assigns is entitled to subscribe for
and purchase, during the period specified in this Warrant, up to
_________________ (_______) shares (subject to adjustment as hereinafter
provided) of the duly authorized, validly issued, fully paid and non-assessable
Common Stock of the Issuer, at an exercise price per share equal to the Warrant
Price then in effect, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth. Capitalized terms used in this Warrant and not
otherwise defined herein shall have the respective meanings specified in SECTION
9 hereof.

1.       TERM.

         The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on the date of issuance of this Warrant and
shall expire at 5:00 p.m., eastern time, on February 28, 2007 (such period being
the "TERM").

2.       METHOD OF EXERCISE PAYMENT; ISSUANCE OF NEW WARRANT; TRANSFER AND
         EXCHANGE.

         (a) TIME OF EXERCISE. The purchase rights represented by this Warrant
may be exercised in whole or in part at any time and from time to time during
the Term.

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         (b) METHOD OF EXERCISE. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, together
with the payment to the Issuer of an amount of consideration therefor equal to
the Warrant Price in effect on the date of such exercise multiplied by the
number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder's election (i) by certified or official
bank check or by wire transfer to an account designated by the Issuer, (ii) by
"CASHLESS EXERCISE" by surrender to the Issuer for cancellation of a portion of
this Warrant representing that number of unissued shares of Warrant Stock which
is equal to the quotient obtained by dividing (A) the product obtained by
multiplying the Warrant Price by the number of shares of Warrant Stock being
purchased upon such exercise by (B) the Per Share Market Value as of the date of
such exercise, or (iii) by a combination of the foregoing methods of payment
selected by the Holder of this Warrant. In any case where the consideration
payable upon such exercise is being paid in whole or in part pursuant to the
provisions of clause (ii) of this subsection (b), such exercise shall be
accompanied by written notice from the Holder of this Warrant specifying the
manner of payment thereof and containing a calculation showing the number of
shares of Warrant Stock with respect to which rights are being surrendered
thereunder and the net number of shares to be issued after giving effect to such
surrender.

         (c) ISSUANCE OF STOCK CERTIFICATES. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise (if the deliveries required
to be made by the Holder pursuant to SECTION 2(B) are received by the Issuer
prior to 6:00 p.m. pacific time on the exercise date) and delivered to the
Holder hereof within a reasonable time, not exceeding three (3) Trading Days
after such exercise, and the Holder hereof shall be deemed for all purposes to
be the Holder of the shares of Warrant Stock so purchased as of the date of such
exercise, and (ii) unless this Warrant has expired, a new Warrant representing
the number of shares of Warrant Stock, if any, with respect to which this
Warrant shall not then have been exercised (less any amount thereof which shall
have been canceled in payment or partial payment of the Warrant Price as
hereinabove provided) shall also be issued to the Holder hereof at the Issuer's
expense within such time.

         (d) TRANSFERABILITY OF WARRANT. Subject to SECTION 2(E) and subject to
the provisions of the Purchase Agreement, this Warrant may be transferred by a
Holder without the consent of the Issuer. If transferred pursuant to this
paragraph and subject to the provisions of subsection (e) of this SECTION 2,
this Warrant may be transferred on the books of the Issuer by the Holder hereof
in person or by duly authorized attorney, upon surrender of this Warrant at the
principal office of the Issuer, properly endorsed (by the Holder executing an
assignment in the form attached hereto) and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. This
Warrant is exchangeable at the principal office of the Issuer for Warrants for
the purchase of the same aggregate number of shares of Warrant Stock, each new
Warrant to represent the right to purchase such number of shares of Warrant
Stock as the Holder hereof shall designate at the time of such exchange. All
Warrants issued on transfers or exchanges shall be dated the Original Issue Date
and shall be identical with this Warrant except as to the number of shares of
Warrant Stock issuable pursuant hereto.

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         (e) COMPLIANCE WITH SECURITIES LAWS.

                  (i) The Holder of this Warrant, by acceptance hereof,
         acknowledges that this Warrant or the shares of Warrant Stock to be
         issued upon exercise hereof are 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 will not offer, sell or otherwise
         dispose of this Warrant or any shares of Warrant Stock to be issued
         upon exercise hereof except pursuant to an effective registration
         statement, or an exemption from registration, under the Securities Act
         and any applicable state securities laws.

                  (ii) Except as provided in paragraph (iii) below, this Warrant
         and all certificates representing shares of Warrant Stock issued upon
         exercise hereof shall be stamped or imprinted with a legend in
         substantially the following form:

                           THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
                           UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER
                           THE SECURITIES ACT OF 1933, AS AMENDED (THE
                           "SECURITIES ACT") OR ANY STATE SECURITIES LAWS AND
                           MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
                           UNLESS REGISTERED UNDER THE SECURITIES ACT AND UNDER
                           APPLICABLE STATE SECURITIES LAWS OR TELENETICS
                           CORPORATION SHALL HAVE RECEIVED AN OPINION OF ITS
                           COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER
                           THE SECURITIES ACT AND UNDER THE PROVISIONS OF
                           APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

                  (iii) The restrictions imposed by this subsection (e) upon the
         transfer of this Warrant or the shares of Warrant Stock to be purchased
         upon exercise hereof shall terminate (A) when such securities shall
         have been resold pursuant to an effective registration statement under
         the Securities Act, (B) upon the Issuer's receipt of an opinion of
         counsel, in form and substance reasonably satisfactory to the Issuer,
         addressed to the Issuer to the effect that such restrictions are no
         longer required to ensure compliance with the Securities Act and state
         securities laws, or (C) upon the Issuer's receipt of other evidence
         reasonably satisfactory to the Issuer that such registration and
         qualification under the Securities Act and state securities laws are
         not required. Whenever such restrictions shall cease and terminate as
         to any such securities, the Holder thereof shall be entitled to receive
         from the Issuer (or its transfer agent and registrar), without expense
         (other than applicable transfer taxes, if any), new Warrants (or, in
         the case of shares of Warrant Stock, new stock certificates) of like
         tenor not bearing the applicable legend required by paragraph (ii)
         above relating to the Securities Act and state securities laws.

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         (f) CONTINUING RIGHTS OF HOLDER. The Issuer will, at the time of or at
any time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant,
provided that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Issuer to afford such
rights to such Holder.

3.       STOCK FULLY PAID; RESERVATION AND LISTING OF SHARES; COVENANTS.

         (a) STOCK FULLY PAID. The Issuer represents, warrants, covenants and
agrees that all shares of Warrant Stock which may be issued upon the exercise of
this Warrant or otherwise hereunder will, upon issuance, be duly authorized,
validly issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue upon
exercise of this Warrant a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.

         (b) RESERVATION. If any shares of Common Stock required to be reserved
for issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible under
the applicable securities exchange rules, all unissued shares of Warrant Stock
which are at any time issuable hereunder, so long as any shares of Common Stock
shall be so listed. The Issuer will also so list on each securities exchange or
market, and will maintain such listing of, any other securities which the Holder
of this Warrant shall be entitled to receive upon the exercise of this Warrant
if at the time any securities of the same class shall be listed on such
securities exchange or market by the Issuer.

         (c) COVENANTS. The Issuer shall not by any action including, without
limitation, amending the Articles of Incorporation or the by-laws of the Issuer,
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate to protect
the rights of the Holder hereof against dilution (to the extent specifically
provided herein) or impairment. Without limiting the generality of the
foregoing, the Issuer will (i) not permit the par value, if any, of its Common
Stock to exceed the then effective Warrant Price, (ii) take all such action as
may be reasonably necessary in order that the Issuer may validly and legally
issue fully paid and nonassessable shares of Common Stock, free and clear of any
liens, claims, encumbrances and restrictions (other than as provided herein)
upon the exercise of this Warrant, and (iii) use its best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be reasonably necessary to enable the Issuer
to perform its obligations under this Warrant.

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         (d) LOSS, THEFT, DESTRUCTION OF WARRANTS. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing the
right to purchase the same number of shares of Common Stock.

         (e) REGISTRATION RIGHTS. The Warrant Stock of the Issuer is entitled to
the benefits and subject to the terms of the Registration Rights Agreement dated
as of the date hereof between the Issuer and the Holder.

4.       ADJUSTMENT OF WARRANT PRICE AND WARRANT SHARE NUMBER.

         The Warrant Price shall be adjusted as set forth in this SECTION 4.
Upon each adjustment to the Warrant Price, the Holder shall thereafter be
entitled to receive upon exercise of this Warrant, at the Warrant Price
resulting from such adjustment, the number of shares of Common Stock obtained by
(i) multiplying the Warrant Price in effect immediately prior to such adjustment
by the number of shares of Common Stock purchasable hereunder immediately prior
to such adjustment, and (ii) dividing the product thereof by the Warrant Price
resulting from such adjustment. The Issuer shall give the Holder notice of any
event described below which requires an adjustment pursuant to this SECTION 4 in
accordance with SECTION 5.

         (a) The Warrant Price shall be further adjusted as follows:

                  (i) In the case of any amendment to the Issuer's Articles of
         Incorporation to change the designation of the Common Stock or the
         rights, privileges, restrictions or conditions with respect to the
         Common Stock or division of the Common Stock, this Warrant shall be
         adjusted so as to provide that upon exercise thereof, the Holder shall
         receive, in lieu of each share of Common Stock theretofore issuable
         upon such exercise, the kind and amount of shares, other securities,
         money and property receivable upon such designation, change or division
         by the Holder issuable upon such exercise had the exercise occurred
         immediately prior to such designation, change or division. This Warrant
         shall be deemed thereafter to provide for adjustments that shall be as
         nearly equivalent as may be practicable to the adjustments provided for
         in this SECTION 4. The provisions of this SUBSECTION 4(a)(i) shall
         apply in the same manner to successive reclassifications, changes,
         consolidations and mergers.

                  (ii) If the Issuer shall at any time subdivide its outstanding
         shares of Common Stock into a greater number of shares of Common Stock,
         or declare a dividend or make any other distribution upon the Common
         Stock payable in shares of Common Stock, the Warrant Price in effect
         immediately prior to such subdivision or dividend or other distribution
         shall be proportionately reduced, and conversely, in case the
         outstanding shares of Common Stock shall be combined into a smaller
         number of shares of Common Stock, the Warrant Price in effect
         immediately prior to such combination shall be proportionately
         increased.

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                  (iii) If any capital reorganization or reclassification of the
         capital stock of the Issuer, or any consolidation or merger of the
         Issuer with or into another corporation or other entity, or the sale of
         all or substantially all of the Issuer's assets to another corporation
         or other entity shall be effected in such a way that holders of shares
         of Common Stock shall be entitled to receive stock, securities, other
         evidence of equity ownership or assets with respect to or in exchange
         for shares of Common Stock, then, as a condition of such
         reorganization, reclassification, consolidation, merger or sale (except
         as otherwise provided below in this SECTION 4), lawful and adequate
         provisions shall be made whereby the Holder shall thereafter have the
         right to receive upon the exercise hereof upon the basis and upon the
         terms and conditions specified herein, such shares of stock,
         securities, other evidence of equity ownership or assets as may be
         issued or payable with respect to or in exchange for a number of
         outstanding shares of such Common Stock equal to the number of shares
         of Common Stock immediately theretofore purchasable and receivable upon
         the exercise of this Warrant under this SECTION 4 had such
         reorganization, reclassification, consolidation, merger or sale not
         taken place, and in any such case appropriate provisions shall be made
         with respect to the rights and interests of the Holder to the end that
         the provisions hereof (including, without limitation, provisions for
         adjustments of the Warrant Price and of the number of shares of Common
         Stock receivable upon the exercise of this Warrant) shall thereafter be
         applicable, as nearly as may be practicable, in relation to any shares
         of stock, securities, other evidence of equity ownership or assets
         thereafter deliverable upon the exercise hereof. Subject to the terms
         of this Warrant, in the event of a merger or consolidation of the
         Company with or into another corporation or other entity as a result of
         which the number of shares of common stock of the surviving corporation
         or other entity issuable to holders of Common Stock, is greater or
         lesser than the number of shares of Common Stock outstanding
         immediately prior to such merger or consolidation, then the Warrant
         Price in effect immediately prior to such merger or consolidation shall
         be adjusted in the same manner as though there were a subdivision or
         combination of the outstanding shares of Common Stock.

                  (iv) In case the Issuer shall, at any time prior to exercise
         of this Warrant, consolidate or merge with any other corporation or
         other entity (where the Issuer is not the surviving entity) or transfer
         all or substantially all of its assets to any other corporation or
         other entity, then the Issuer shall, as a condition precedent to such
         transaction, cause effective provision to be made so that the Holder of
         this Warrant upon the exercise of this Warrant after the effective date
         of such transaction shall be entitled to receive the kind and amount of
         shares, evidences of indebtedness and/or other securities or property
         receivable on such transaction by a holder of the number of shares of
         Common Stock as to which this Warrant was exercisable immediately prior
         to such transaction (without giving effect to any restriction upon such
         exercise); and, in any such case, appropriate provision shall be made
         with respect to the rights and interest of the Holder of this Warrant
         to the end that the provisions of this Warrant shall thereafter be
         applicable (as nearly as may be practicable) with respect to any
         shares, evidences of indebtedness or other securities or assets
         thereafter deliverable upon exercise of this Warrant.

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                  (v) No fractional shares of Common Stock shall be issued in
         connection with any exercise of this Warrant, but in lieu of such
         fractional shares, the Issuer shall make a cash payment therefor equal
         in amount to the product of the applicable fraction multiplied by the
         Warrant Price then in effect.

         (b) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable and the
Warrant Price then in effect provided for in this SECTION 4:

                  (i) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
         this SECTION 4 shall be made whenever and as often as any specified
         event requiring an adjustment shall occur, except that any adjustment
         of the number of shares of Common Stock for which this Warrant is
         exercisable that would otherwise be required may be postponed (except
         in the case of a subdivision or combination of shares of the Common
         Stock, as provided for in SECTION 4(a)(ii)) up to, but not beyond the
         date of exercise if such adjustment either by itself or with other
         adjustments not previously made adds or subtracts less than one percent
         (1%) of the shares of Common Stock for which this Warrant is
         exercisable immediately prior to the making of such adjustment. Any
         adjustment representing a change of less than such minimum amount
         (except as aforesaid) which is postponed shall be carried forward and
         made as soon as such adjustment, together with other adjustments
         required by this SECTION 4 and not previously made, would result in a
         minimum adjustment or on the date of exercise. For the purpose of any
         adjustment, any specified event shall be deemed to have occurred at the
         close of business on the date of its occurrence.

                  (ii) FRACTIONAL INTERESTS. In computing adjustments under this
         SECTION 4, fractional interests in Common Stock shall be taken into
         account to the nearest one one-hundredth (1/100th) of a share.

                  (iii) WHEN ADJUSTMENT NOT REQUIRED. If the Issuer shall take a
         record of the holders of its Common Stock for the purpose of entitling
         them to receive a dividend or distribution or subscription or purchase
         rights and shall, thereafter and before the distribution to
         stockholders thereof, legally abandon its plan to pay or deliver such
         dividend, distribution, subscription or purchase rights, then
         thereafter no adjustment shall be required by reason of the taking of
         such record and any such adjustment previously made in respect thereof
         shall be rescinded and annulled.

         (c) FORM OF WARRANT AFTER ADJUSTMENTS. The form of this Warrant need
not be changed because of any adjustments in the Warrant Price or the number and
kind of Securities purchasable upon the exercise of this Warrant.

5.       NOTICE OF ADJUSTMENTS.

         Whenever the Warrant Price or Warrant Share Number shall be adjusted
pursuant to SECTION 4 hereof (for purposes of this SECTION 5, each an
"ADJUSTMENT"), the Issuer shall cause its Chief Financial Officer to prepare and
execute a certificate setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such

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adjustment was calculated (including a description of the basis on which the
Board made any determination hereunder), and the Warrant Price and Warrant Share
Number after giving effect to such adjustment, and shall cause copies of such
certificate to be delivered to the Holder of this Warrant promptly after each
adjustment.

6.       FRACTIONAL SHARES.

         No fractional shares of Warrant Stock will be issued in connection with
an exercise hereof, but in lieu of such fractional shares, the Issuer shall make
a cash payment therefor equal in amount to the product of the applicable
fraction multiplied by the Per Share Market Value then in effect.

7.       OWNERSHIP CAP AND CERTAIN EXERCISE RESTRICTIONS.

         (a) Notwithstanding anything to the contrary set forth in this Warrant,
at no time may a holder of this Warrant exercise this Warrant if the number of
shares of Common Stock to be issued pursuant to such exercise would exceed, when
aggregated with all other shares of Common Stock beneficially owned by such
holder at such time, the number of shares of Common Stock which would result in
such holder beneficially owning more than 4.999% of all of the Common Stock
outstanding at such time; provided, however, that upon a holder of this Warrant
providing the Issuer with sixty (60) days notice (pursuant to SECTION 13 hereof)
(the "WAIVER NOTICE") that such holder would like to waive this SECTION 7(a)
with regard to any or all shares of Common Stock issuable upon exercise of this
Warrant, this SECTION 7(a) will be of no force or effect with regard to all or a
portion of the Warrant referenced in the Waiver Notice.

         (b) The Holder may not exercise the Warrant hereunder to the extent
such exercise would result in the Holder beneficially owning (as determined in
accordance with SECTION 13(d) of the Exchange Act and the rules thereunder) in
excess of 9.999% of the then issued and outstanding shares of Common Stock,
including shares issuable upon exercise of the Warrant held by the Holder after
application of this Section.

8.       INTENTIONALLY OMITTED.

9.       DEFINITIONS.

         For the purposes of this Warrant, the following terms have the
following meanings:

         "ARTICLES OF INCORPORATION" means the Articles of Incorporation of the
Issuer as in effect on the Original Issue Date, and as hereafter from time to
time amended, modified, supplemented or restated in accordance with the terms
hereof and thereof and pursuant to applicable law.

         "BOARD" shall mean the Board of Directors of the Issuer.

         "CAPITAL STOCK" means and includes (i) any and all shares, interests,
participations or other equivalents of or interests in (however designated)
corporate stock, including, without limitation, shares of preferred or
preference stock, (ii) all partnership interests (whether general or limited) in
any Person which is a partnership, (iii) all membership interests or limited
liability company interests in any limited liability company, and (iv) all
equity or ownership interests in any Person of any other type.

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         "COMMON STOCK" means the Common Stock, no par value per share, of the
Issuer and any other Capital Stock into which such stock may hereafter be
changed.

         "GOVERNMENTAL AUTHORITY" means any governmental, regulatory or
self-regulatory entity, department, body, official, authority, commission,
board, agency or instrumentality, whether federal, state or local, and whether
domestic or foreign.

         "HOLDERS" mean the Persons who shall from time to time own any Warrant.
The term "HOLDER" means one of the Holders.

         "INDEPENDENT APPRAISER" means a nationally recognized or major regional
investment banking firm or firm of independent certified public accountants of
recognized standing (which may be the firm that regularly examines the financial
statements of the Issuer) that is regularly engaged in the business of
appraising the Capital Stock or assets of corporations or other entities as
going concerns, and which is not affiliated with either the Issuer or the Holder
of any Warrant.

         "ISSUER" means Telenetics Corporation, a California corporation, and
its successors.

         "MAJORITY HOLDERS" means at any time the Holders of Warrants
exercisable for a majority of the shares of Warrant Stock issuable under the
Warrants at the time outstanding.

         "NASDAQ" means The Nasdaq SmallCap Market or The Nasdaq National
Market.

         "NOTES" means the secured promissory notes issued in connection with
the Purchase Agreement.

         "ORIGINAL ISSUE DATE" means March 1, 2003.

         "OTC BULLETIN BOARD" means the over-the-counter electronic bulletin
board.

         "OTHER COMMON" means any other Capital Stock of the Issuer of any class
which shall be authorized at any time after the date of this Warrant (other than
Common Stock) and which shall have the right to participate in the distribution
of earnings and assets of the Issuer without limitation as to amount.

         "PERSON" means an individual, corporation, limited liability company,
partnership, joint stock company, trust, unincorporated organization, joint
venture, Governmental Authority or other entity of whatever nature.

         "PER SHARE MARKET VALUE" means on any particular date (a) the closing
price per share of the Common Stock on such date on the OTC Bulletin Board or
another registered national stock exchange on which the Common Stock is then
listed, or if there is no such price on such date, then the closing price on
such exchange or quotation system on the date nearest preceding such date, or
(b) if the Common Stock is not then reported by the OTC Bulletin Board or the
Pink Sheets LLC (or similar organization or agency succeeding to its functions

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of reporting prices), then the average of the "PINK SHEET" quotes for the
relevant conversion period, as determined in good faith by the holder, or (c) if
the Common Stock is not then publicly traded the fair market value of a share of
Common Stock as determined by an Independent Appraiser selected in good faith by
the Majority Holders; provided, however, that the Issuer, after receipt of the
determination by such Independent Appraiser, shall have the right to select an
additional Independent Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Independent Appraiser;
and provided, further that all determinations of the Per Share Market Value
shall be appropriately adjusted for any stock dividends, stock splits or other
similar transactions during such period. The determination of fair market value
by an Independent Appraiser shall be based upon the fair market value of the
Issuer determined on a going concern basis as between a willing buyer and a
willing seller and taking into account all relevant factors determinative of
value, and shall be final and binding on all parties. In determining the fair
market value of any shares of Common Stock, no consideration shall be given to
any restrictions on transfer of the Common Stock imposed by agreement or by
federal or state securities laws, or to the existence or absence of, or any
limitations on, voting rights.

         "PURCHASE AGREEMENT" means the Amended and Restated Note and Warrant
Purchase Agreement dated as of March 1, 2003 among the Issuer and the investors
a party thereto.

         "SECURITIES" means any debt or equity securities of the Issuer, whether
now or hereafter authorized, any instrument convertible into or exchangeable for
Securities or a Security, and any option, warrant or other right to purchase or
acquire any Security. "SECURITY" means one of the Securities.

         "SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute then in effect.

         "SUBSIDIARY" means any corporation at least 50% of whose outstanding
Voting Stock shall at the time be owned directly or indirectly by the Issuer or
by one or more of its Subsidiaries, or by the Issuer and one or more of its
Subsidiaries.

         "TERM" has the meaning specified in SECTION 1 hereof.

         "TRADING DAY" means (a) a day on which the Common Stock is traded on
the OTC Bulletin Board, or (b) if the Common Stock is not listed on the OTC
Bulletin Board, a day on which the Common Stock is traded on Nasdaq or any
registered national stock exchange, or (c) if the Common Stock is not traded on
the OTC Bulletin Board, Nasdaq 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 Pink Sheets LLC (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), (b) and (c) 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.

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         "VOTING STOCK" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated) having
ordinary voting power for the election of a majority of the members of the Board
of Directors (or other governing body) of such corporation, other than Capital
Stock having such power only by reason of the happening of a contingency.

         "WARRANTS" means the Warrants issued and sold pursuant to the Purchase
Agreement, including, without limitation, this Warrant, and any other warrants
of like tenor issued in substitution or exchange for any thereof pursuant to the
provisions of SECTION 2(C), 2(D) OR 2(E) hereof or of any of such other
Warrants.

         "WARRANT PRICE" means U.S. $.44064, as such price may be adjusted from
time to time as shall result from the adjustments specified in this Warrant,
including SECTION 4 hereof.

         "WARRANT SHARE NUMBER" means at any time the aggregate number of shares
of Warrant Stock which may at such time be purchased upon exercise of this
Warrant, after giving effect to all prior adjustments and increases to such
number made or required to be made under the terms hereof.

         "WARRANT STOCK" means Common Stock issuable upon exercise of any
Warrant or Warrants or otherwise issuable pursuant to any Warrant or Warrants.

10.      OTHER NOTICES.

         In case at any time:

         (a) the Issuer shall make any distributions to the holders of Common
Stock; or

         (b) the Issuer shall authorize the granting to all holders of its
Common Stock of rights to subscribe for or purchase any shares of Capital Stock
of any class; or

         (c) there shall be any reclassification of the Capital Stock of the
Issuer; or

         (d) there shall be any capital reorganization by the Issuer; or

         (e) there shall be any (i) consolidation or merger involving the Issuer
or (ii) sale, transfer or other disposition of all or substantially all of the
Issuer's property, assets or business (except a merger or other reorganization
in which the Issuer shall be the surviving corporation and its shares of Capital
Stock shall continue to be outstanding and unchanged and except a consolidation,
merger, sale, transfer or other disposition involving a wholly-owned
Subsidiary); or

         (f) there shall be a voluntary or involuntary dissolution, liquidation
or winding-up of the Issuer or any partial liquidation of the Issuer or
distribution to holders of Common Stock;

then, in each of such cases, the Issuer shall give written notice to the Holder
of the date on which (i) the books of the Issuer shall close or a record shall
be taken for such dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, disposition,
dissolution, liquidation or winding-up, as the case may be, shall take place.

                                       11
<PAGE>

Such notice also shall specify the date as of which the holders of Common Stock
of record shall participate in such dividend, distribution or subscription
rights, or shall be entitled to exchange their certificates for Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be. Such notice shall be given at least ten (10)
days prior to the action in question and not less than ten (10) days prior to
the record date or the date on which the Issuer's transfer books are closed in
respect thereto. The Issuer shall give to the Holder notice of all meetings and
actions by written consent of its stockholders, at the same time in the same
manner as notice of any meetings of stockholders is required to be given to
stockholders who do not waive such notice (or, if such requires no notice, then
two (2) Trading Days written notice thereof describing the matters upon which
action is to be taken). The Holder shall have the right to send two (2)
representatives selected by it to each meeting, who shall be permitted to
attend, but not vote at, such meeting and any adjournments thereof. This Warrant
entitles the Holder to receive copies of all financial and other information
distributed or required to be distributed to the holders of the Common Stock.

11.      AMENDMENT AND WAIVER.

         Any term, covenant, agreement or condition in this Warrant may be
amended, or compliance therewith may be waived (either generally or in a
particular instance and either retroactively or prospectively), by a written
instrument or written instruments executed by the Issuer and the Majority
Holders; provided, however, that no such amendment or waiver shall reduce the
Warrant Share Number, increase the Warrant Price, shorten the period during
which this Warrant may be exercised or modify any provision of this SECTION 11
without the consent of the Holder of this Warrant.

12.      GOVERNING LAW.

         THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW.

13.      NOTICES.

         Any and all notices or other communications or deliveries required or
permitted to be provided hereunder shall be in writing and shall be deemed given
and effective on the earlier of (i) the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice prior to 5:00 p.m., eastern time, on a Trading Day, (ii)
the Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile telephone number specified for
notice later than 5:00 p.m., eastern time, on any date and earlier than 11:59
p.m., eastern time, on such date, (iii) the Trading Day following the date of
mailing, if sent by nationally recognized overnight courier service or (iv)
actual receipt by the party to whom such notice is required to be given. The
addresses for such communications shall be with respect to the Holder of this
Warrant or of Warrant Stock issued pursuant hereto, addressed to such Holder at
its last known address or facsimile number appearing on the books of the Issuer
maintained for such purposes, or with respect to the Issuer, addressed to:

                                       12
<PAGE>

         Telenetics Corporation
         25111 Arctic Ocean
         Lake Forest, California 92630
         Attention: President
         Attention: Chief Financial Officer
         Telecopier: (949) 455-9324
         Telephone: (949) 455-4000

with copies (which copies shall not constitute notice to the Company) to:

         Rutan & Tucker, LLP
         611 Anton Boulevard, Suite 1400
         Costa Mesa, California 92626
         Attention: Larry A. Cerutti, Esq.
         Telecopier: (714) 546-9035
         Telephone: (714) 641-5100

Any party hereto may from time to time change its address for notices by giving
at least ten (10) days written notice of such changed address to the other party
hereto.

14.      WARRANT AGENT.

         The Issuer may, by written notice to each Holder of this Warrant,
appoint an agent having an office in New York, New York for the purpose of
issuing shares of Warrant Stock on the exercise of this Warrant pursuant to
subsection (b) of SECTION 2 hereof, exchanging this Warrant pursuant to
subsection (d) of SECTION 2 hereof or replacing this Warrant pursuant to
subsection (d) of SECTION 3 hereof, or any of the foregoing, and thereafter any
such issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.

15.      REMEDIES.

         The Issuer stipulates that the remedies at law of the Holder of this
Warrant in the event of any default or threatened default by the Issuer in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate and that, to the fullest extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any of
the terms hereof or otherwise.

16.      SUCCESSORS AND ASSIGNS.

         This Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors and assigns of the Issuer, the Holder
hereof and (to the extent provided herein) the Holders of Warrant Stock issued
pursuant hereto, and shall be enforceable by any such Holder or Holder of
Warrant Stock.

                                       13
<PAGE>

17.      MODIFICATION AND SEVERABILITY.

         If, in any action before any court or agency legally empowered to
enforce any provision contained herein, any provision hereof is found to be
unenforceable, then such provision shall be deemed modified to the extent
necessary to make it enforceable by such court or agency. If any such provision
is not enforceable as set forth in the preceding sentence, the unenforceability
of such provision shall not affect the other provisions of this Warrant, but
this Warrant shall be construed as if such unenforceable provision had never
been contained herein.
18. HEADINGS.

         The headings of the Sections of this Warrant are for convenience of
reference only and shall not, for any purpose, be deemed a part of this Warrant.

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

                                                     TELENETICS CORPORATION

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

                                       14
<PAGE>

                                  EXERCISE FORM

                             TELENETICS CORPORATION

The undersigned _______________, pursuant to the provisions of the within
Warrant, hereby elects to purchase _____ shares of Common Stock of Telenetics
Corporation covered by the within Warrant.

Dated: _________________                 Signature _____________________________

                                         Address _______________________________

                                   ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the within Warrant and all rights evidenced thereby and does
irrevocably constitute and appoint _____________, attorney, to transfer the said
Warrant on the books of the within named corporation.

Dated: _________________                 Signature _____________________________

                                         Address _______________________________

                               PARTIAL ASSIGNMENT

FOR VALUE RECEIVED, _________________ hereby sells, assigns and transfers unto
__________________ the right to purchase _________ shares of Warrant Stock
evidenced by the within Warrant together with all rights therein, and does
irrevocably constitute and appoint ___________________, attorney, to transfer
that part of the said Warrant on the books of the within named corporation.

Dated: _________________                 Signature _____________________________

                                         Address _______________________________

                           FOR USE BY THE ISSUER ONLY:

This Warrant No. W-_____ canceled (or transferred or exchanged) this _____ day
of ___________, _____, shares of Common Stock issued therefor in the name of
_______________, Warrant No. W-_____ issued for ____ shares of Common Stock in
the name of _______________.

                                       15<PAGE>

EXHIBIT 10.5

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-________                                                     $___________
Dated: March 1, 2003

         For value received, TELENETICS CORPORATION, a California corporation
(the "MAKER"), hereby promises to pay to the order of _______________________
(together with its successors, representatives, and permitted assigns, the
"HOLDER"), in accordance with the terms hereinafter provided, the principal
amount of _________________________ ($____________), 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%) IN THE CASE OF THE DOLPHIN OFFSHORE PARTNERS AND TEN
         PERCENT (10%) IN THE CASE OF ALL OTHER HOLDERS] 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:

                           (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

                                       5
<PAGE>

                  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

                                       7
<PAGE>

         prior written notice to the Holder (the "MAKER'S PREPAYMENT NOTICE")
         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.

                                       8
<PAGE>

         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.

         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

                                       9
<PAGE>

         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."

         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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