Document:

TELENETICS CORPORATION
                             2000 STOCK OPTION PLAN
                        INCENTIVE STOCK OPTION AGREEMENT

         This Option Agreement (this "Agreement") is made and entered into by
and between Telenetics Corporation, a California corporation ("Company"), and
______________ ("Optionee"), as of __________, 2000 ("Date of Grant"). If the
Optionee is presently or subsequently becomes employed by a subsidiary of the
Company, the term "Company" shall be deemed to refer collectively to Telenetics
Corporation and the subsidiary or subsidiaries that employs the Optionee.

                                    RECITALS

         A. The Board of Directors and shareholders of the Company have adopted
the Telenetics Corporation 2000 Stock Option Plan ("Plan") as an employee
incentive to retain key employees, officers, directors, and consultants of the
Company and to enhance the ability of the Company to attract new employees,
officers, directors, and consultants whose services are considered unusually
valuable by providing an opportunity to have a proprietary interest in the
success of the Company.

         B. The Board of Directors has established a Committee to administer the
Plan ("Committee"), and the Board of Directors has approved the granting of an
option to the Optionee pursuant to the Plan to provide an incentive to the
Optionee to focus on the long-term growth of the Company.

         In consideration of the mutual covenants and conditions hereinafter set
forth and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Company and the Optionee agree as follows:

         1. GRANT OF OPTION. The Company hereby grants to the Optionee the right
and option ("Option") to purchase an aggregate of _____________ (_____) shares
(such number being subject to adjustment as provided in paragraph 10 below and
Section 13 of the Plan) of the Common Stock of the Company ("Stock") on the
terms and conditions herein set forth. This Option may be exercised in whole or
in part and from time to time as hereinafter provided. The Option granted under
this Agreement is intended to be an "incentive stock option" as set forth in
Section 422 of the Internal Revenue Code of 1986, as amended ("Code").

         2. VESTING OF OPTION. The Option shall vest and become exercisable in
five equal annual installments commencing on _______________.

         3. PURCHASE PRICE. The price at which the Optionee shall be entitled to
purchase the Stock covered by the Option shall be $______ per share, which price
is 100% of the Fair Market Value (as defined in the Plan) of the Stock on the
Date of Grant.

<PAGE>

         4. TERM OF OPTION. The Option granted under this Agreement shall
expire, unless otherwise exercised, ten years from the Date of Grant, through
and including the normal close of business of the Company on __________, 2010
("Expiration Date"), subject to earlier termination as provided in paragraph 8
below.

         5. EXERCISE OF OPTION. The Option may be exercised by the Optionee as
to all or any part of the Stock then vested by delivery to the Company of
written notice of exercise and payment of the purchase price as provided in
paragraphs 6 and 7 below.

         6. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of
this Agreement, the Option may be exercised by timely delivery to the Company of
written notice, which notice shall be effective on the date received by the
Company ("Effective Date"). The notice shall state the Optionee's election to
exercise the Option, the number of shares in respect of which an election to
exercise has been made, the method of payment elected (see paragraph 7 below),
the exact name or names in which the shares will be registered and the taxpayer
identification number of the Optionee. The notice shall be signed by the
Optionee and shall be accompanied by payment of the purchase price of such
shares. If the Option is exercised by a person or persons other than Optionee
pursuant to paragraph 8 below, the notice shall be signed by the other person or
persons and shall be accompanied by proof acceptable to the Company of the legal
right of the person or persons to exercise the Option. All shares delivered by
the Company upon exercise of the Option shall be fully paid and nonassessable
upon delivery.

         7. METHOD OF PAYMENT FOR OPTIONS. Payment for shares purchased upon the
exercise of the Option shall be made by the Optionee in cash or such other
method permitted by the Committee and communicated to the Optionee in writing
prior to the date the Optionee exercises all or any portion of the Option.

         8. TERMINATION OF EMPLOYMENT.

                  8.1 GENERAL. If the Optionee terminates employment for any
other reason than for Cause (as that term is defined in the Plan) or voluntary
resignation of any agreement to remain in the employ of the Company, then the
Optionee may at any time within three months after the effective date of
termination of employment exercise the Option to the extent that the Optionee
was entitled to exercise the Option at the date of termination, provided that in
no event shall the Option be exercisable after the Expiration Date. If the
Optionee terminates employment for Cause or voluntary resignation of any
agreement to remain in the employ of the Company, the Optionee may at any time
within 30 days after the effective date of such termination of employment
exercise the Option to the extent that the Optionee was entitled to exercise the
Option at the date of termination, provided that in no event shall the Option,
or any part thereof, be exercisable after the Expiration Date.

                  8.2 DEATH OR DISABILITY OF OPTIONEE. In the event of the death
or Disability (as that term is defined in the Plan) of the Optionee within a
period during which the Option, or any part thereof, could have been exercised
by the Optionee, including three months after termination of employment other
than for Cause or voluntary resignation of any agreement to remain in the employ
of the Company ("Option Period"), the Option shall lapse unless it is exercised
within the Option Period and in no event later than twelve months after the date
of the Optionee's death or Disability by the Optionee or the Optionee's legal

                                      -2-

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representative or representatives in the case of a Disability or, in the case of
death, by the person or persons entitled to do so under the Optionee's last will
and testament or if the Optionee fails to make a testamentary disposition of the
Option or shall die intestate, by the person or persons entitled to receive the
Option under the applicable laws of descent and distribution. An Option may be
exercised following the death or Disability of the Optionee only if the Option
was exercisable by the Optionee immediately prior to his death or Disability. In
no event shall the Option be exercisable after the Expiration Date. The
Committee shall have the right to require evidence satisfactory to it of the
rights of any person or persons seeking to exercise the Option under this
paragraph 8 to exercise the Option.

         9. NONTRANSFERABILITY. The Option granted by this Option Agreement
shall be exercisable only during the term of the Option provided in paragraph 4
above and, except as provided in paragraph 8 above, only by the Optionee during
his lifetime and while an Optionee of the Company. This Option shall not be
transferable by the Optionee or any other person claiming through the Optionee,
either voluntarily or involuntarily, except by will or the laws of descent and
distribution or such other events as are set forth in the Plan.

         10. ADJUSTMENTS IN NUMBER OF SHARES AND OPTION PRICE. In the event of a
stock dividend or if the Stock is changed into or exchanged for a different
number or class of shares of stock of the Company or of another corporation,
whether through reorganization, recapitalization, stock split-up, combination of
shares, merger or consolidation, there shall be substituted for each remaining
share of Stock then subject to this Option the number and class of shares of
stock into which each outstanding share of Stock is to be so exchanged, all
without any change in the aggregate purchase price for the shares then subject
to the Option, all as set forth in Section 13 of the Plan.

         11. DELIVERY OF SHARES. No shares of Stock shall be delivered upon
exercise of the Option until (i) the purchase price has been paid in full in the
manner herein provided; (ii) applicable taxes required to be withheld have been
paid or withheld in full; (iii) approval of any governmental authority required
in connection with the Option, or the issuance of shares thereunder, has been
received by the Company; and (iv) if required by the Committee, the Optionee has
delivered to the Committee an Investment Letter in form and content satisfactory
to the Company as provided in paragraph 12 below.

         12. SECURITIES ACT. The Company shall not be required to deliver any
shares of Stock pursuant to the exercise of all or any part of the Option if, in
the opinion of counsel for the Company, the issuance would violate the
Securities Act of 1933 or any other applicable federal or state securities laws
or regulations. The Committee may require that the Optionee, prior to the
issuance of any shares pursuant to exercise of the Option, sign and deliver to
the Company a written statement ("Investment Letter") stating (i) that the
Optionee is purchasing the shares for investment and not with a view to the sale
or distribution thereof; (ii) that the Optionee will not sell any shares
received upon exercise of the Option or any other shares of the Company that the
Optionee may then own or thereafter acquire except either (a) through a broker
on a national securities exchange or (b) with the prior written approval of the
Company; and (iii) containing such other terms and conditions as counsel for the
Company may reasonably require to assure compliance with the Securities Act of
1933 or other applicable federal or state securities laws and regulations. The
Investment Letter shall be in form and content acceptable to the Committee in
its sole discretion.

                                      -3-

<PAGE>

         13. FEDERAL AND STATE TAXES. Upon exercise of the Option, or any part
thereof, the Optionee may incur certain liabilities for federal, state or local
taxes and the Company may be required by law to withhold taxes for payment to
taxing authorities. Upon determination by the Company of the amount of taxes
required to be withheld, if any, with respect to the shares to be issued
pursuant to the exercise of the Option, the Optionee shall pay all federal state
and local tax withholding requirements to the Company.

         14. DEFINITIONS; COPY OF PLAN. To the extent not specifically provided
herein, all capitalized terms used in this Agreement have the same meanings
ascribed to them in the Plan. By the execution of this Agreement, the Optionee
acknowledges receipt of a copy of the Plan.

         15. ADMINISTRATION. This Agreement shall at all times be subject to the
terms and conditions of the Plan and the Plan shall in all respects be
administered by the Committee in accordance with the terms of and as provided in
the Plan. The Committee shall have the sole and complete discretion with respect
to all matters reserved to it by the Plan and decisions of the majority of the
Committee with respect thereto and to this Option Agreement shall be final and
binding upon the Optionee and the Company. In the event of any conflict between
the terms and conditions of this Agreement and the Plan, the provisions of the
Plan shall control.

         16. CONTINUATION OF EMPLOYMENT. This Agreement shall not be construed
to confer upon the Optionee any right to continue in the employ of the Company
and shall not limit the right of the Company, in its sole discretion, to
terminate the employment of the Optionee at any time.

         17. OBLIGATION TO EXERCISE. The Optionee shall have no obligation to
exercise any option granted by this Agreement.

         18. GOVERNING LAW. This Agreement shall be interpreted and administered
under the laws of the State of California.

         19. AMENDMENTS. This Agreement may be amended only by a written
agreement executed by the Company and the Optionee. The Company and the Optionee
acknowledge that changes in federal tax laws enacted subsequent to the Date of
Grant, and applicable to stock options, may provide for tax benefits to the
Company or the Optionee. In that event, the Company and the Optionee agree that
this Agreement may be amended as necessary to secure for the Company and the
Optionee any benefits that may result from that legislation. Any amendment shall
be made only upon the mutual consent of the parties, which consent (of either
party) may be withheld for any reason.

         20. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
between the parties with regard to the subject matter of this Agreement. All
agreements, covenants, representations and warranties, express or implied, oral
and written, of the parties with regard to the subject matter of this Agreement
are contained in this Agreement and the documents referred to or implementing
the provisions of this Agreement. No other agreements, covenants,
representations or warranties, express or implied, oral or written, have been
made by either party to the other with respect to the subject matter of this
Agreement. All prior and contemporaneous conversations, negotiations, covenants
and warranties with respect to the subject matter of this Agreement are waived,
merged in this Agreement and superseded by this Agreement.

                                      -4-

<PAGE>

         21. TAX INFORMATION AND NOTICE OF DISQUALIFYING DISPOSITION. This
Option is intended to be eligible for treatment as an Incentive Stock Option
under Section 422 of the Code. Whether this Option will receive that tax
treatment will depend, in part, on the actions by the Optionee after exercise of
this Option. For example, if the Optionee disposes of any of the Stock acquired
under this Option within two years after the Date of Grant or within one year of
the date of exercise of this Option, the Optionee may lose the benefits of Code
Section 422. Accordingly, the Company makes no representations by way of the
Plan, this Agreement, or otherwise, with respect to the actual tax consequences
of the grant or exercise of this Option or the subsequent disposition of the
Stock acquired under this Option.

                  If the Optionee sells or makes a disposition (within the
meaning of Section 422 of the Code) of any of the Stock acquired under this
Option prior to the later of (i) one year from the date of exercise of this
Option, or (ii) two years from the Date of Grant, the Optionee agrees to give
written notice to the Company of the disposition. The notice shall include the
Optionee's name, the number, exercise price and exercise date of the shares of
Stock disposed of, and the date of disposition.

         IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officers thereunto duly authorized and the Optionee has hereunto
set his or her hand as of the date first written above.

TELENETICS CORPORATION                               OPTIONEE

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

                                      -5-SECURITIES PURCHASE AGREEMENT

         THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
October 31, 2000, by and among Telenetics Corporation, Inc., a California
corporation, with headquarters located at 25111 Arctic Ocean, Lake Forest,
California 92630 (the "Company"), and the Buyers listed on Schedule I attached
hereto(individually, a "Buyer" or collectively "Buyers" ).

                                   WITNESSETH:

         WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");

         WHEREAS, The Company has authorized the following new series of its
Preferred Stock, no par value (the "Preferred Stock"): the Company's Series A
Convertible Preferred Stock (the "Series A Preferred Shares"), which shall be
convertible into shares of the Company's Common Stock, no par value (the "Common
Stock") (as converted, the "Conversion Shares"), in accordance with the terms of
the Company's Certificate of Determination of Rights, Preferences and Privileges
of the Series A Preferred Shares, substantially in the form attached hereto as
Exhibit "A" (the "Certificate of Determination");

         WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to 200 shares of Series A
Preferred Stock, for a total purchase price of Two Million Dollars ($2,000,000)
(the "Purchase Price") in the respective amounts set forth opposite each
Buyer(s) name on Schedule I ( the "Subscription Amount"); and

         WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit B (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the 1933 Act and the rules and
regulations promulgated there under, and applicable state securities laws; and

         WHEREAS, the Series A Preferred Shares are being offered through May
Davis Group, Inc. (the "Placement Agents"), as the Company's exclusive placement
agents for the offering and

         WHEREAS, the aggregate proceeds of the sale of the Series A Preferred
Shares Series A Preferred Shares contemplated hereby shall be held in escrow
pursuant to the terms of an escrow agreement substantially in the form attached
hereto as Exhibit C.

         NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:

<PAGE>

         1. PURCHASE AND SALE OF SERIES A PREFERRED SHARES.

                  (a) PURCHASE OF THE SERIES A PREFERRED SHARES. Subject to the
         satisfaction (or waiver) of the terms and conditions of this Agreement,
         the Company shall issue and sell to the Buyer(s) and the Buyer(s) shall
         purchase from the Company up to 200 shares of Series A Preferred
         Shares, in amounts corresponding with the Subscription Amount set forth
         opposite each Buyer's name on Schedule I hereto for a purchase price of
         $10,000 per share (the "PURCHASE PRICE").

                  Upon execution hereof by a Buyer, the Buyer shall wire
         transfer the Subscription Amount set forth opposite his name on
         Schedule I in same-day funds, which Subscription Amount shall be held
         in escrow pursuant to the terms of the Escrow Agreement (as hereinafter
         defined) and disbursed in accordance therewith. Notwithstanding the
         foregoing, a Buyer may withdraw his Subscription Amount and terminate
         this Agreement as to such Buyer at any time after the execution hereof
         and prior to Closing (as hereinafter defined).

                  (b) CLOSING DATE. The closing of the purchase and sale of the
         Series A Preferred Shares (the "Closing") shall take place at 10:00
         a.m. Eastern Daylight Time on the fifth business day ("Closing Date")
         following the date hereof, subject to notification of satisfaction (or
         waiver) of the conditions to the Closing set forth in Sections 6 and 7
         below (or such later date as is mutually agreed to by the Company and
         the Buyers). The Closing shall occur on the Closing Date at the offices
         of Butler Gonzalez LLP 1000 Stuyvesant Avenue, Suite 6, Union, NJ 07083
         (or such other place as is mutually agreed to by the Company and the
         Buyers).

                  (c) ESCROW ARRANGEMENTS; FORM OF PAYMENT. Upon execution
         hereof by Buyer(s) and pending Closing, the aggregate proceeds of the
         sale of the Series A Preferred Shares to Buyer(s) pursuant hereto, less
         the fees and expenses of the Placement Agents, shall be deposited in a
         non-interest bearing escrow account with First Union National Bank, as
         escrow agent ("Escrow Agent"), pursuant to the terms of an escrow
         agreement between the Company, the Placement Agents and the Escrow
         Agent in the form attached hereto as Exhibit C (the "Escrow
         Agreement"). Subject to the satisfaction of the terms and conditions of
         this Agreement, on the Closing Date, (i) the Escrow Agent shall deliver
         to the Company in accordance with the terms of the Escrow Agreement
         such aggregate gross proceeds for the Series A Preferred Shares to be
         issued and sold to such Buyer(s) at the Closing, by wire transfer of
         immediately available funds in accordance with the Company's written
         wire instructions, and (ii) the Company shall deliver to each Buyer the
         Series A Preferred Shares which such Buyer(s) is purchasing in amounts
         indicated opposite such Buyer's name on Schedule I.

                                       2

<PAGE>

         2. BUYER'S REPRESENTATIONS AND WARRANTEES.

                  Each Buyer represents and warrants, severally and not jointly,
         that as of the date hereof:

                  (a) INVESTMENT PURPOSE. Each Buyer is acquiring the Series A
         Preferred Shares and, upon conversion of Series A Preferred Shares, the
         Buyer will acquire the Conversion Shares then issuable, for its own
         account for investment only and not with a view towards, or for resale
         in connection with, the public sale or distribution thereof, except
         pursuant to sales registered or exempted under the 1933 Act; provided,
         however, that by making the representations herein, such Buyer reserves
         the right to dispose of Conversion Shares at any time in accordance
         with or pursuant to an effective registration statement covering such
         Conversion Shares or an available exemption under the 1933 Act.

                  (b) ACCREDITED BUYER STATUS. Each Buyer is an "accredited
         Buyer" as that term is defined in Rule 501(a)(3) of Regulation D.

                  (c) RELIANCE ON EXEMPTIONS. Each Buyer understands that the
         Series A Preferred Shares and the Conversion Shares are being offered
         and sold to it in reliance on specific exemptions from the registration
         requirements of United States Federal and state securities laws and
         that the Company is relying in part upon the truth and accuracy of, and
         such Buyer's compliance with, the representations, warranties,
         agreements, acknowledgments and understandings of such Buyer set forth
         herein in order to determine the availability of such exemptions and
         the eligibility of such Buyer to acquire such securities.

                  (d) INFORMATION. Such Buyer and its advisors (and his or, its
         counsel), if any, have been furnished with all materials relating to
         the business, finances and operations of the Company and information he
         deems material to making an informed investment decision regarding his
         purchase of the Series A Preferred Shares and the Conversion Shares,
         which have been requested by such Buyer. Such Buyer and its advisors,
         if any, have been afforded the opportunity to ask questions of the
         Company and its management. Neither such inquiries nor any other due
         diligence investigations conducted by such Buyer or its advisors, if
         any, or its representatives shall modify, amend or affect such Buyer's
         right to rely on the Company's representations and warranties contained
         in Section 3 below. Such Buyer understands that its investment in the
         Series A Preferred Shares and the Conversion Shares involves a high
         degree of risk. Buyer is in a position regarding the Company, which,
         based upon employment, family relationship or economic bargaining
         power, enabled and enables Buyer to obtain information from the Company
         in order to evaluate the merits and risks of this investment. Such
         Buyer has sought such accounting, legal and tax advice as it has
         considered necessary to make an informed investment decision with
         respect to its acquisition of the Series A Preferred Shares and the
         Conversion Shares.

                                       3

<PAGE>

                  (e) NO GOVERNMENTAL REVIEW. Such Buyer understands that no
         United States Federal or state agency or any other government or
         governmental agency has passed on or made any recommendation or
         endorsement of the Series A Preferred Shares or the Conversion Shares,
         or the fairness or suitability of the investment in the Series A
         Preferred Shares or the Conversion Shares, nor have such authorities
         passed upon or endorsed the merits of the offering of the Series A
         Preferred Shares or the Conversion Shares.

                  (f) TRANSFER OR RESALE. Such Buyer understands that except as
         provided in the Registration Rights Agreement: (i) the Series A
         Preferred Shares, the Conversion Shares and the Warrants have not been
         and are not being registered under the 1933 Act or any state securities
         laws, and may not be offered for sale, sold, assigned or transferred
         unless (A) subsequently registered there under, or (B) such Buyer shall
         have delivered to the Company an opinion of counsel, in form and
         substance acceptable to the Company, to the effect that such securities
         to be sold, assigned or transferred may be sold, assigned or
         transferred pursuant to an exemption from such registration
         requirements; (ii) any sale of such securities made in reliance on Rule
         144 under the 1933 Act (or a successor rule thereto) ("Rule 144") may
         be made only in accordance with the terms of Rule 144 and further, if
         Rule 144 is not applicable, any resale of such securities under
         circumstances in which the seller (or the person through whom the sale
         is made) may be deemed to be an underwriter (as that term is defined in
         the 1933 Act) may require compliance with some other exemption under
         the 1933 Act or the rules and regulations of the SEC there under; and
         (iii) neither the Company nor any other person is under any obligation
         to register such securities under the 1933 Act or any state securities
         laws or to comply with the terms and conditions of any exemption there
         under. The Company reserves the right to place stop transfer
         instructions against the shares and certificates for the Conversion
         Shares and Warrant Shares.

                  (g) LEGENDS. Such Buyer understands that the certificates,
         Warrants or other instruments representing the stock certificates
         representing the Series A Preferred Shares and the Conversion Shares
         shall bear a restrictive legend in substantially the following form
         (and a stop transfer order may be placed against transfer of such stock
         certificates):

                           THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
                           NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
                           AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
                           SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
                           PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY
                           NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
                           ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                           STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
                           OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
                           LAWS, OR AN OPINION OF COUNSEL, IN A FORM AND
                           SUBSTANCE ACCEPTABLE TO THE COMPANY, THAT
                           REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
                           APPLICABLE STATE SECURITIES LAWS.

                                       4

<PAGE>

         The legend set forth above shall be removed and the Company shall issue
         a certificate without such legend to the holder of the Series A
         Preferred Shares or the Conversion Shares upon which it is stamped, if,
         unless otherwise required by state securities laws, (i) in connection
         with a sale transaction, provided the Series A Preferred Shares or the
         Conversion Shares, as applicable, are registered under the 1933 Act or
         (ii) in connection with a sale transaction, such holder provides the
         Company with an opinion of counsel, in form and substance acceptable to
         the Company and its counsel, to the effect that a public sale,
         assignment or transfer of the Conversion Shares may be made without
         registration under the 1933 Act.

                  (h) AUTHORIZATION, ENFORCEMENT. This Agreement has been duly
         and validly authorized, executed and delivered on behalf of such Buyer
         and is a valid and binding agreement of such Buyer enforceable in
         accordance with its terms, except as such enforceability may be limited
         by general principles of equity and to applicable bankruptcy,
         insolvency, reorganization, moratorium, liquidation and other similar
         laws relating to, or affecting generally, the enforcement of applicable
         creditors' rights and remedies.

                  (i) RECEIPT OF DOCUMENTS. Such Buyer and his or its counsel
         has received and read in their entirety: (i) this Agreement and each
         representation, warranty and covenant set forth herein, the
         Registration Rights Agreement, and the Escrow Agreement; (ii) all due
         diligence and other information necessary to verify the accuracy and
         completeness in all material respects of such representations,
         warranties and covenants; (iii) the Company's Form 10-Q for the fiscal
         quarter ended June 30, 2000; and (v) answers to all questions the Buyer
         submitted to the Company regarding an investment in the Company; and
         the Buyer has relied on the information contained therein and has not
         been furnished any other documents, literature, memorandum or
         prospectus.

                  (j) DUE FORMATION OF CORPORATE AND OTHER BUYERS. If the
         Buyer(s) is a corporation, trust, partnership or other entity that is
         not an individual person, it has been formed and validly exists and has
         not been organized for the specific purpose of purchasing the Series A
         Preferred Shares and is not prohibited from doing so.

                  (k) DUE AUTHORIZATION OF FIDUCIARY BUYERS. If the Buyer(s) is
         purchasing the in a fiduciary capacity for another person or entity,
         including without limitation a corporation, partnership, trust or any
         other entity, the Buyer(s) has been duly authorized and empowered to
         execute this Agreement and such other person fulfills all the
         requirements for purchase of the Series A Preferred Shares and agrees
         to be bound by the obligations, representations, warranties, and
         covenants contained herein. Upon request of the Company, the Buyer(s)
         will provide true, complete and current copies of all relevant
         documents creating the Buyers, authorizing its investment in the
         Company and/or evidencing the satisfaction of the foregoing.

                                       5

<PAGE>

                  (l) FURTHER REPRESENTATIONS BY FOREIGN BUYERS. If Buyer(s) is
         not a U.S. Person (as defined), such Buyer hereby represents that such
         Buyer(s) is satisfied as to full observance of the laws of such Buyer's
         jurisdiction in connection with any invitation to subscribe for the
         securities or any use of this Agreement, including: (i) the legal
         requirements of such Buyer's jurisdiction for the purchase of the
         securities, (ii) any foreign exchange restrictions applicable to such
         purchase, (iii) any governmental or other consents that may need to be
         obtained, and (iv) the income tax and other tax consequences, if any,
         which may be relevant to the purchase, holding, redemption, sale, or
         transfer of the securities. Such Buyer's subscription and payment for,
         and such Buyer's continued beneficial ownership of, the securities will
         not violate any applicable securities or other laws of such Buyer's
         jurisdiction. The term "U.S. Person" as used herein shall mean any
         person who is a citizen or resident of the United States, or any state,
         territory or possession thereof, including but not limited to any
         estate of any such person, or any corporation, partnership, trust or
         other entity created or existing under the laws thereof, or any entity
         controlled or owned by any of the foregoing.

                  (m) NO LEGAL ADVICE FROM THE COMPANY. The Buyer(s) acknowledge
         that it had the opportunity to review this Agreement and the
         transactions contemplated by this Agreement with his or its own legal
         counsel and investment and tax advisors. The Buyer is relying solely on
         such counsel and advisors and not on any statements or representations
         of the Company or any of its representatives or agents for legal, tax
         or investment advice with respect to this investment, the transactions
         contemplated by this Agreement or the securities laws of any
         jurisdiction.

         3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

         The Company represents and warrants to each of the Buyer (s) that
         except as otherwise specified in the Company's filings with the SEC or
         in this Agreement, as of the date hereof:

                  (a) ORGANIZATION AND QUALIFICATION. The Company and its
         subsidiaries are corporations duly organized and validly existing in
         good standing under the laws of the jurisdiction in which they are
         incorporated, and have the requisite corporate power to own their
         properties and to carry on their business as now being conducted. Each
         of the Company and its subsidiaries is duly qualified as a foreign
         corporation to do business and is in good standing in every
         jurisdiction in which the nature of the business conducted by it makes
         such qualification necessary, except to the extent that the failure to
         be so qualified or be in good standing would not have a material
         adverse effect on the Company and its subsidiaries taken as a whole.

                  (b) AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
         INSTRUMENTS. (i) The Company has the requisite corporate power and
         authority to enter into and perform this Agreement, the Registration
         Rights Agreement and any related agreements, and to issue the Series A
         Preferred Shares and the Conversion Shares, the Warrants (as defined
         herein below), or shares of Common Stock issuable upon exercise of the
         Warrants (the "Warrant Shares") in accordance with the terms hereof and
         thereof, (ii) the execution and delivery of this Agreement, the
         Registration Rights Agreement and any related agreements by the Company
         and the consummation by it of the transactions contemplated hereby and
         thereby, including without limitation the issuance of the Series A

                                       6

<PAGE>

         Preferred Shares, the Conversion Shares and the Warrants and the
         reservation for issuance and the issuance of the Conversion Shares and
         the Warrant Shares issuable upon conversion or exercise thereof, have
         been duly authorized by the Company's Board of Directors and no further
         consent or authorization is required by the Company, its Board of
         Directors or its shareholders, (iii) this Agreement and the
         Registration Rights Agreement and any related agreements have been duly
         executed and delivered by the Company, (iv) this Agreement, the
         Registration Rights Agreement and any related agreements constitute the
         valid and binding obligations of the Company enforceable against the
         Company in accordance with their terms, except as such enforceability
         may be limited by general principles of equity or applicable
         bankruptcy, insolvency, reorganization, moratorium, liquidation or
         similar laws relating to, or affecting generally, the enforcement of
         creditors' rights and remedies, and (v) prior to the Closing Date, the
         Certificate of Determination will have been filed with the Secretary of
         State of the State of California and will be in full force and effect,
         enforceable against the Company in accordance with its terms.

                  (c) CAPITALIZATION. As of the date hereof, the authorized
         capital stock of the Company consists of 25,000,000 shares of Common
         Stock, no par value, and 5,000,000 shares of Preferred Stock, no par
         value, of which as of October 31, 2000, 16,058,813 shares of Common
         Stock and no shares of Preferred Stock were issued and outstanding. All
         of such outstanding shares have been validly issued and are fully paid
         and nonassessable. Except as disclosed in Schedule 3(c), no shares of
         Common Stock are subject to preemptive rights or any other similar
         rights or any liens or encumbrances suffered or permitted by the
         Company. Except as disclosed in Schedule 3(c), as of the date of this
         Agreement, (i) there are no outstanding options, warrants, scrip,
         rights to subscribe to, calls or commitments of any character
         whatsoever relating to, or securities or rights convertible into, any
         shares of capital stock of the Company or any of its subsidiaries, or
         contracts, commitments, understandings or arrangements by which the
         Company or any of its subsidiaries is or may become bound to issue
         additional shares of capital stock of the Company or any of its
         subsidiaries or options, warrants, scrip, rights to subscribe to, calls
         or commitments of any character whatsoever relating to, or securities
         or rights convertible into, any shares of capital stock of the Company
         or any of its subsidiaries, (ii) there are no outstanding debt
         securities and (iii) there are no agreements or arrangements under
         which the Company or any of its subsidiaries is obligated to register
         the sale of any of their securities under the 1933 Act (except pursuant
         to the Registration Rights Agreements). There are no securities or
         instruments containing anti-dilution or similar provisions that will be
         triggered by the issuance of the Series A Preferred Shares or the
         Conversion Shares, as described in this Agreement. The Company has
         furnished to the Buyer true and correct copies of the Company's
         Articles of Incorporation, as amended and as in effect on the date
         hereof (the "Articles of Incorporation"), and the Company's By-laws, as
         in effect on the date hereof (the "By-laws"), and the terms of all
         securities convertible into or exercisable for Common Stock and the
         material rights of the holders thereof in respect thereto other than
         stock options issued to employees and consultants.

                                       7

<PAGE>

                  (d) ISSUANCE OF SECURITIES. The Series A Preferred Shares are
         duly authorized and, upon issuance in accordance with the terms hereof,
         shall be duly issued, fully paid and nonassessable, are free from all
         taxes, liens and charges with respect to the issue thereof. The
         Conversion Shares issuable upon conversion of the Series A Preferred
         Shares have been duly authorized and reserved for issuance. Upon
         conversion or exercise in accordance with the Certificate of
         Determination or the terms of the Warrants and receipt of payment
         therefore (in the case of the Warrant Shares), the Conversion Shares
         and the Warrant Shares will be duly issued, fully paid and
         nonassessable.

                  (e) NO CONFLICTS. Except as disclosed in Schedule 3(e), the
         execution, delivery and performance of this Agreement by the Company
         and the consummation by the Company of the transactions contemplated
         hereby will not (i) result in a material violation of the Articles of
         Incorporation, any Certificate of Determination of any outstanding
         series of preferred stock of the Company or By-laws or (ii) conflict
         with or constitute a default (or an event which with notice or lapse of
         time or both would become a default) under, or give to others any
         rights of termination, amendment, acceleration or cancellation of, any
         material agreement, indenture or instrument to which the Company or any
         of its subsidiaries is a party, or result in a material violation of
         any law, rule, regulation, order, judgment or decree (including federal
         and state securities laws and regulations and the rules and regulations
         of The Nasdaq Stock Market Inc.'s National Market on which the Common
         Stock is quoted) applicable to the Company or any of its subsidiaries
         or by which any property or asset of the Company or any of its
         subsidiaries is bound or affected. Except as disclosed in Schedule
         3(e), neither the Company nor its subsidiaries is in violation of any
         term of or in default under its Articles of Incorporation or By-laws or
         their organizational charter or by-laws, respectively, or any material
         contract, agreement, mortgage, indebtedness, indenture, instrument,
         judgment, decree or order or any statute, rule or regulation applicable
         to the Company or its subsidiaries. The business of the Company and its
         subsidiaries is not being conducted, and shall not be conducted in
         violation of any material law, ordinance, regulation of any
         governmental entity. Except as specifically contemplated by this
         Agreement and as required under the 1933 Act and any applicable state
         securities laws, the Company is not required to obtain any consent,
         authorization or order of, or make any filing or registration with, any
         court or governmental agency in order for it to execute, deliver or
         perform any of its obligations under or contemplated by this Agreement
         or the Registration Rights Agreement in accordance with the terms
         hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
         authorizations, orders, filings and registrations which the Company is
         required to obtain pursuant to the preceding sentence have been
         obtained or effected on or prior to the date hereof. The Company and
         its subsidiaries are unaware of any facts or circumstance, which might
         give rise to any of the foregoing.

                  (f) SEC DOCUMENTS: FINANCIAL STATEMENTS. The Company has filed
         all reports, schedules, forms, statements and other documents required
         to be filed by it with the SEC under of the Securities Exchange Act of
         1934, as amended (the "1934 Act") (all of the foregoing filed prior to
         the date hereof and all exhibits included therein and financial
         statements and schedules thereto and documents incorporated by

                                       8

<PAGE>

         reference therein, being hereinafter referred to as the "SEC
         Documents"). The Company has delivered to the Buyers or their
         representatives, or made available through the SEC's website at
         http://www.sec.gov., true and complete copies of the SEC Documents. As
         of their respective dates, the financial statements of the Company
         disclosed in the SEC Documents (the "Financial Statements") complied as
         to form in all material respects with applicable accounting
         requirements and the published rules and regulations of the SEC with
         respect thereto. Such financial statements have been prepared in
         accordance with generally accepted accounting principles, consistently
         applied, during the periods involved (except (i) as may be otherwise
         indicated in such financial statements or the notes thereto, or (ii) in
         the case of un-audited interim statements, to the extent they may
         exclude footnotes or may be condensed or summary statements) and fairly
         present in all material respects the financial position of the Company
         as of the dates thereof and the results of its operations and cash
         flows for the periods then ended (subject, in the case of un-audited
         statements, to normal year-end audit adjustments). No other information
         provided by or on behalf of the Company to the Buyer which is not
         included in the SEC Documents, including, without limitation,
         information referred to in Section 2(d) and (i) of this Agreement,
         contains any untrue statement of a material fact or omits to state any
         material fact necessary in order to make the statements therein, in the
         light of the circumstances under which they were made, not misleading.

                  (g) 10(B)-5. As of the date filed, the SEC Documents do not
         include any untrue statements of material fact, nor do they omit to
         state any material fact required to be stated therein necessary to make
         the statements made, in light of the circumstances under which they
         were made, not misleading.

                  (h) ABSENCE OF CERTAIN CHANGES. Since September 6, 2000 except
         as disclosed in Schedules to this Agreement and the SEC Documents,
         there has been no material adverse change and no material adverse
         development in the business, properties, operations, financial
         condition, results of operations or prospects of the Company or its
         subsidiaries. The Company has not taken any steps, and does not
         currently expect to take any steps, to seek protection pursuant to any
         bankruptcy law nor does the Company or its subsidiaries have any
         knowledge or reason to believe that its creditors intend to initiate
         involuntary bankruptcy proceedings.

                  (i) ABSENCE OF LITIGATION. Except as disclosed on Schedule
         3(i) to this Agreement there is no action, suit, proceeding, inquiry or
         investigation before or by any court, public board, government agency,
         self-regulatory organization or body pending against or affecting the
         Company, the Common Stock or any of the Company's subsidiaries, wherein
         an unfavorable decision, ruling or finding would (i) have a material
         adverse effect on the transactions contemplated hereby (ii) adversely
         affect the validity or enforceability of, or the authority or ability
         of the Company to perform its obligations under, this Agreement or any
         of the documents contemplated herein, or (iii) except as expressly
         disclosed in the SEC Documents, have a material adverse effect on the
         business, operations, properties, financial condition or results of
         operation of the Company and its subsidiaries taken as a whole.

                                       9

<PAGE>

                  (j) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE SERIES A
         PREFERRED SHARES. The Company acknowledges and agrees that the Buyer(s)
         is acting solely in the capacity of an arm's length purchaser with
         respect to this Agreement and the transactions contemplated hereby. The
         Company further acknowledges that the Buyer(s) is not acting as a
         financial advisor or fiduciary of the Company (or in any similar
         capacity) with respect to this Agreement and the transactions
         contemplated hereby and any advice given by the Buyer(s) or any of
         their respective representatives or agents in connection with this
         Agreement and the transactions contemplated hereby is merely incidental
         to such Buyer's purchase of the Series A Preferred Shares or the
         Conversion Shares. The Company further represents to the Buyer that the
         Company's decision to enter into this Agreement has been based solely
         on the independent evaluation by the Company and its representatives.

                  (k) EMPLOYEE RELATIONS. Neither the Company nor any of its
         subsidiaries is involved in any labor dispute nor, to the knowledge of
         the Company or any of its subsidiaries, is any such dispute threatened.
         None of the Company's or its subsidiaries' employees is a member of a
         union and the Company and its subsidiaries believe that their relations
         with their employees are good.

                  (l) INTELLECTUAL PROPERTY RIGHTS. Except as set forth on
         Schedule 3(l) attached hereto, the Company and its subsidiaries own or
         possess adequate rights or licenses to use all trademarks, trade names,
         service marks, service mark registrations, service names, patents,
         patent rights, copyrights, inventions, licenses, approvals,
         governmental authorizations, trade secrets and rights necessary to
         conduct their respective businesses as now conducted. Except as
         disclosed in Schedules to this Agreement and the SEC Documents , the
         Company and its subsidiaries do not have any knowledge of any
         infringement by the Company or its subsidiaries of trademark, trade
         name rights, patents, patent rights, copyrights, inventions, licenses,
         service names, service marks, service mark registrations, trade secret
         or other similar rights of others, and, to the knowledge of the
         Company, there is no claim, action or proceeding being made or brought
         against, or to the Company's knowledge, being threatened against, the
         Company or its subsidiaries regarding trademark, trade name, patents,
         patent rights, invention, copyright, license, service names, service
         marks, service mark registrations, trade secret or other infringement;
         and the Company and its subsidiaries are unaware of any facts or
         circumstances which might give rise to any of the foregoing.

                  (m) ENVIRONMENTAL LAWS. The Company and its subsidiaries are
         (i) in compliance with any and all applicable foreign, federal, state
         and local laws and regulations relating to the protection of human
         health and safety, the environment or hazardous or toxic substances or
         wastes, pollutants or contaminants ("Environmental Laws"), (ii) have
         received all material permits, licenses or other approvals required of
         them under applicable Environmental Laws to conduct their respective
         businesses and (iii) are in compliance with all material terms and
         conditions of any such permit, license or approval.

                                       10

<PAGE>

                  (n) TITLE. The Company and its subsidiaries have good and
         marketable title in fee simple to all real property and good and
         marketable title to all personal property owned by them which is
         material to the business of the Company and its subsidiaries, in each
         case free and clear of all liens, encumbrances and defects except such
         as are described in Schedule 3(n), are disclosed in the SEC Documents
         or such as do not materially affect the value of such property and do
         not interfere with the use made and proposed to be made of such
         property by the Company and its subsidiaries. Any real property and
         facilities held under lease by the Company and its subsidiaries are
         held by them under valid, subsisting and enforceable leases with such
         exceptions as are not material and do not interfere with the use made
         and proposed to be made of such property and buildings by the Company
         and its subsidiaries.

                  (o) INSURANCE. The Company and each of its subsidiaries are
         insured by insurers of recognized financial responsibility against such
         losses and risks and in such amounts as management of the Company
         believes to be prudent and customary in the businesses in which the
         Company and its subsidiaries are engaged. Neither the Company nor any
         such subsidiary has been refused any insurance coverage sought or
         applied for and neither the Company nor any such subsidiary has any
         reason to believe that it will not be able to renew its existing
         insurance coverage as and when such coverage expires or to obtain
         similar coverage from similar insurers as may be necessary to continue
         its business at a cost that would not materially and adversely affect
         the condition, financial or otherwise, or the earnings, business or
         operations of the Company and its subsidiaries, taken as a whole.

                  (p) REGULATORY PERMITS. Except as disclosed in Schedules to
         this Agreement, the Company and its subsidiaries possess or have
         applied for all certificates, authorizations and permits issued by the
         appropriate federal, state or foreign regulatory authorities necessary
         to conduct their respective businesses, and neither the Company nor any
         such subsidiary has received any notice of proceedings relating to the
         revocation or modification of any such certificate, authorization or
         permit.

                  (q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
         subsidiaries maintain a system of internal accounting controls
         sufficient to provide reasonable assurance that (i) transactions are
         executed in accordance with management's general or specific
         authorizations, (ii) transactions are recorded as necessary to permit
         preparation of financial statements in conformity with generally
         accepted accounting principles and to maintain asset accountability,
         and (iii) the recorded amounts for assets is compared with the existing
         assets at reasonable intervals and appropriate action is taken with
         respect to any differences.

                  (r) NO MATERIAL ADVERSE BREACHES, ETC. Except as set forth in
         the SEC Documents, neither the Company nor any of its subsidiaries is
         subject to any charter, corporate or other legal restriction, or any
         judgment, decree, order, rule or regulation which in the judgment of
         the Company's officers has or is expected in the future to have a
         material adverse effect on the business, properties, operations,
         financial condition, results of operations or prospects of the Company
         or its subsidiaries. Neither the Company nor any of its subsidiaries is

                                       11

<PAGE>

         in breach of any material contract or agreement which breach, in the
         judgment of the Company's officers, has or is expected to have a
         material adverse effect on the business, properties, operations,
         financial condition, results of operations or prospects of the Company
         or its subsidiaries.

                  (s) TAX STATUS. Except as set forth on Schedule 3(s) hereto,
         the Company and each of its subsidiaries has made or filed all federal
         and state income and all other tax returns, reports and declarations
         required by any jurisdiction to which it is subject and (unless and
         only to the extent that the Company and each of its subsidiaries has
         set aside on its books provisions reasonably adequate for the payment
         of all unpaid and unreported taxes) has paid all taxes and other
         governmental assessments and charges that are material in amount, shown
         or determined to be due on such returns, reports and declarations,
         except those being contested in good faith and has set aside on its
         books provision reasonably adequate for the payment of all taxes for
         periods subsequent to the periods to which such returns, reports or
         declarations apply. There are no unpaid taxes in any material amount
         claimed to be due by the taxing authority of any jurisdiction, and the
         officers of the Company know of no basis for any such claim.

                  (t) CERTAIN TRANSACTIONS. Except as set forth in the SEC
         Documents and except for arm's length transactions pursuant to which
         the Company makes payments in the ordinary course of business upon
         terms no less favorable than the Company could obtain from third
         parties and other than the grant of stock options disclosed on Schedule
         3(c), none of the officers, directors, or employees of the Company is
         presently a party to any transaction with the Company (other than for
         services as employees, officers and directors), including any contract,
         agreement or other arrangement providing for the furnishing of services
         to or by, providing for rental of real or personal property to or from,
         or otherwise requiring payments to or from any officer, director or
         such employee or, to the knowledge of the Company, any corporation,
         partnership, trust or other entity in which any officer, director, or
         any such employee has a substantial interest or is an officer,
         director, trustee or partner.

                  (u) FEES AND RIGHTS OF FIRST REFUSAL. The Company is not
         obligated to offer the securities offered hereunder on a right of first
         refusal basis or otherwise to any third parties including, but not
         limited to, current or former shareholders of the Company,
         underwriters, brokers, agents or other third parties.

         4. COVENANTS.

                  (a) BEST EFFORTS. Each party shall use its best efforts timely
         to satisfy each of the conditions to be satisfied by it as provided in
         Sections 6 and 7 of this Agreement.

                                       12

<PAGE>

                  (b) FORM D. The Company agrees to file a Form D with respect
         to the Conversion Shares as required under Regulation D and to provide
         a copy thereof to each Buyer promptly after such filing. The Company
         shall, on or before the Closing Date, take such action as the Company
         shall reasonably determine is necessary to qualify the Conversion
         Shares for, or obtain on exemption for the Conversion Shares for, sale
         to the Buyers at the Closing pursuant to this Agreement under
         applicable securities or "Blue Sky" laws of the states of the United
         States, and shall provide evidence of any such action so taken to the
         Buyers on or prior to the Closing Date.

                  (c) REPORTING STATUS. Until the earlier of (i) the date as of
         which the Buyer(s) may sell all of the Conversion Shares and the
         Warrant Shares without restriction pursuant to Rule 144(k) promulgated
         under the 1933 Act (or successor thereto), or (ii) the date on which
         (A) the Buyer(s) shall have sold all the Conversion Shares and (B) none
         of the Series A Preferred Shares or the Warrants are outstanding (the
         "Registration Period"), the Company shall file in a timely manner all
         reports required to be filed with the SEC pursuant to the 1934 Act and
         the regulations of the SEC there under, and the Company shall not
         terminate its status as an issuer required to file reports under the
         1934 Act even if the 1934 Act or the rules and regulations there under
         would otherwise permit such termination.

                  (d) USE OF PROCEEDS. The Company will use the proceeds from
         the sale of the Series A Preferred Shares for acquisitions and general
         corporate purposes.

                  (e) RESERVATION OF SHARES. The Company shall take all action
         reasonably necessary to at all times have authorized, and reserved for
         the purpose of issuance, such number of shares of Common Stock as shall
         be necessary to effect the issuance of the Conversion Shares and the
         Warrant Shares. If at any time the Company does not have available such
         shares of Common Stock as shall from time to time be sufficient to
         effect the conversion of all of the Conversion Shares and the exercise
         of the Warrant Shares the Company shall call and hold a special meeting
         within one hundred and twenty days (120) of such occurrence, for the
         sole purpose of increasing the number of shares authorized. The
         Company's management shall recommend to the shareholders to vote in
         favor of increasing the number of shares of Common Stock authorized.
         Management shall also vote all of its shares in favor of increasing the
         number of shares of Common Stock authorized.

                  (f) LISTINGS OR QUOTATION. The Company shall promptly secure
         the listing or quotation of the Conversion Shares upon each national
         securities exchange, automated quotation system or over-the-counter
         bulletin board or other market, if any, upon which shares of Common
         Stock are then listed or quoted (subject to official notice of
         issuance) and shall use it best efforts to maintain, so long as any
         other shares of Common Stock shall be so listed, such listing of all
         Conversion Shares from time to time issuable under the terms of this
         Agreement. The Company shall maintain the Common Stock's authorization
         for quotation in the over-the counter market.

                                       13

<PAGE>

                  (g) EXPENSES. Each of the Company and the Buyer(s) shall pay
         all costs and expenses incurred by such party in connection with the
         negotiation, investigation, preparation, execution and delivery of this
         Agreement and the Registration Rights Agreement; provided, however,
         that the legal fees and expenses incurred by the Placement Agent in
         connection with the Offering (as defined in that certain Placement
         Agent Agreement, dated of even date herewith, between the Company and
         the Placement Agent), up to a maximum of $20,000 shall be paid for by
         the Company at Closing in accordance with the terms of the Placement
         Agency Agreement between the Company and the Placement Agent, dated
         simultaneously herewith.

                  (h) CORPORATE EXISTENCE. So long as any of the Series A
         Preferred Shares remain outstanding, the Company shall not directly or
         indirectly consummate any merger, reorganization, restructuring,
         consolidation, sale of all or substantially all of the Company's assets
         or any similar transaction or related transactions (each such
         transaction, a "Sale of the Company") unless, prior to the consummation
         of a Sale of the Company, the Company makes appropriate provision to
         insure that, upon the consummation of such Sale of the Company, each of
         the holders of the Series A Preferred Shares will thereafter have the
         right to acquire and receive such shares of stock, securities or assets
         as may be issued or payable with respect to or in exchange for the
         number of shares of Common Stock immediately theretofore acquirable and
         receivable upon the conversion of such holder's Series A Preferred
         Shares had such Sale of the Company not taken place. In any such case,
         the Company will make appropriate provision with respect to such
         holders' rights and interests to insure that the provisions of this
         Section 4(h) will thereafter be applicable to the Series A Preferred
         Shares.

                  (i) TRANSACTIONS WITH AFFILIATES. Unless the approval of a
         majority of the independent members of the Company's Board of Directors
         is obtained, so long as any Series A Preferred Shares are outstanding,
         the Company shall not, and shall cause each of its subsidiaries not to,
         enter into, amend, modify or supplement, or permit any subsidiary to
         enter into, amend, modify or supplement any agreement, transaction,
         commitment, or arrangement with any of its or any subsidiary's
         officers, directors, person who were officers or directors at any time
         during the previous two years, stockholders who beneficially own 5% or
         more of the Common Stock, or affiliates, or with any individual related
         by blood, marriage, or adoption to any such individual or with any
         entity in which any such entity or individual owns a 5% or more
         beneficial interest (each a "Related Party"), except for (a) customary
         employment arrangements and benefit programs on reasonable terms, (b)
         any investment in an affiliate of the Company, (c) any agreement,
         transaction, commitment, or arrangement on an arms-length basis on
         terms no less favorable than terms which would have been obtainable
         from a person other than such Related Party, (d) any agreement
         transaction, commitment, or arrangement which is approved by a majority
         of the disinterested directors of the Company or purposes hereof, any
         director who is also an officer of the Company or any subsidiary of the
         Company shall not be a disinterested director with respect to any such
         agreement, transaction, commitment, or arrangement. "Affiliate" for
         purposes hereof means, with respect to any person or entity, another
         person or entity that, directly or indirectly, (i) has a 5% or more
         equity interest in that person or entity, (ii) has 10% or more common
         ownership with that person or entity, (iii) controls that person or
         entity, or (iv) shares common control with that person or entity.
         "Control" or "controls" for purposes hereof means that a person or
         entity has the power, direct or indirect, to conduct or govern the
         policies of another person or entity.

                                       14

<PAGE>

                  (j) LOCK UP PERIOD. On the date hereof, the Company shall
         obtain from Michael Armani and Shala Shashani, a lock-up agreement, in
         the form annexed hereto as Schedule 4(j) agreeing to only sell in
         compliance with the volume limitation of Rule 144.

                  (k) WARRANT ISSUANCES. Subject to the satisfaction of the
         terms and condition of this Agreement, May Davis Group, Inc., as the
         Placement Agent will receive on the Closing Date warrants ("Convertible
         Warrants") to purchase 500,000 shares of Common Stock (the "Convertible
         Warrant Shares") at an exercise price of Three Dollars ($3.00) per
         share. The Warrants shall be exercisable for a period of five (5) years
         from the date of issuance and shall be substantially in the form of the
         form of Warrant hereto as Exhibit D.

                  (l) TRANSFER AGENT. The Company covenants and agrees that, in
         the event that the Company's agency relationship with the transfer
         agent should be terminated for any reason prior to a date which is two
         (2) years after the Closing Date, the Company shall immediately appoint
         a new transfer agent and shall require that the transfer agent execute
         and agree to be bound by the terms of the Irrevocable Instructions to
         Transfer Agent.

         5. TRANSFER AGENT INSTRUCTIONS.

                  The Company will act as its own transfer agent with respect to
         the Series A Preferred Shares. Upon conversion of the Series A
         Preferred Shares or the exercise of the Warrants, the Company shall
         issue irrevocable instructions to its transfer agent, in the form
         attached hereto as Exhibit E, to issue certificates, registered in the
         name of the Buyer(s) or its respective nominee(s), for the Conversion
         Shares and the Warrant Shares representing the shares of Common Stock
         issuable upon such conversion or exercise and payment therefore (the
         "Irrevocable Transfer Agent Instructions"). Prior to registration of
         the Conversion Shares and the Warrant Shares under the 1933 Act, all
         such certificates shall bear the restrictive legend specified in
         Section 2(g) of this Agreement. The Company warrants that no
         instruction other than the Irrevocable Transfer Agent Instructions
         referred to in this Section 5, and stop transfer instructions to give
         effect to Section 2(f) hereof (in the case of the Conversion Shares or
         the Warrant Shares, prior to registration of such shares under the 1933
         Act) will be given by the Company to its transfer agent and that the
         Conversion Shares or the Warrant Shares shall otherwise be freely
         transferable on the books and records of the Company as and to the
         extent provided in this Agreement and the Registration Rights
         Agreement. Nothing in this Section 5 shall affect in any way the
         Buyer's obligations and agreement to comply with all applicable
         securities laws upon resale of Conversion Shares or the Warrant Shares.
         If the Buyer(s) or Warrant holder provides the Company with an opinion
         of counsel, in form and substance acceptable to the Company, that
         registration of a resale by the Buyer(s) of any of the Conversion
         Shares, or the Warrant Shares is not required under the 1933 Act, the
         Company shall permit the transfer, and, in the case of the Conversion

                                       15

<PAGE>

         Shares or the Warrant Shares, promptly instruct its transfer agent to
         issue one or more certificates in such name and in such denominations
         as specified by the Buyer. The Company acknowledges that a breach by it
         of its obligations hereunder will cause irreparable harm to the Buyer
         by vitiating the intent and purpose of the transaction contemplated
         hereby. Accordingly, the Company acknowledges that the remedy at law
         for a breach of its obligations under this Section 5 will be inadequate
         and agrees, in the event of a breach or threatened breach by the
         Company of the provisions of this Section 5, that the Buyer(s) shall be
         entitled, in addition to all other available remedies, to an injunction
         restraining any breach and requiring immediate issuance and transfer,
         without the necessity of showing economic loss and without any bond or
         other security being required.

         6.       CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
                  ----------------------------------------------

                  The obligation of the Company hereunder to issue and sell the
         Series A Preferred Shares to the Buyer(s) at the Closing is subject to
         the satisfaction, at or before the Closing Date, of each of the
         following conditions, provided that these conditions are for the
         Company's sole benefit and may be waived by the Company at any time in
         its sole discretion:

                  (a) Each Buyer shall have executed this Agreement and the
         Registration Rights Agreement and delivered the same to the Company.

                  (b) The Certificate of Determination shall have been filed
         with the Secretary of State of the State of California.

                  (c) The Buyer(s) shall have delivered to the Escrow Agent the
         Purchase Price for the Series A Preferred Shares in respective amounts
         as set forth next to each Buyer as outlined on Schedule I attached
         hereto and the Escrow Agent shall have delivered such funds to the
         Company by wire transfer of immediately available U.S. funds pursuant
         to the wire instructions provided by the Company.

                  (d) The representations and warranties of the Buyer(s) shall
         be true and correct in all material respects as of the date when made
         and as of the Closing Date as though made at that time (except for
         representations and warranties that speak as of a specific date), and
         the Buyer(s) shall have performed, satisfied and complied in all
         material respects with the covenants, agreements and conditions
         required by this Agreement to be performed, satisfied or complied with
         by the Buyer(s) at or prior to the Closing Date.

         7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.

                  The obligation of the Buyer(s) hereunder to purchase the
         Series A Preferred Shares at the Closing is subject to the
         satisfaction, at or before the Closing Date, of each of the following
         conditions, provided that these conditions are for the Buyer's sole
         benefit and may be waived by the Buyer(s) at any time in its sole
         discretion:

                                       16

<PAGE>

                  (a) The Company shall have executed this Agreement and the
         Registration Rights Agreement, and delivered the same to the Buyer(s).

                  (b) The Common Stock shall be authorized for quotation on The
         Nasdaq SmallCap Market or OTC Bulletin Board, trading in the Common
         Stock shall not have been suspended for any reason and all of the
         Conversion Shares issuable upon conversion of the Series A Preferred
         Shares shall be approved for listing or quotation on The Nasdaq
         SmallCap Market.

                  (c) The representations and warranties of the Company shall be
         true and correct in all material respects (except to the extent that
         any of such representations and warranties is already qualified as to
         materiality in Section 3 above, in which case such representations and
         warranties shall be true and correct without further qualification) as
         of the date when made and as of the Closing Date as though made at that
         time (except for representations and warranties that speak as of a
         specific date) and the Company shall have performed, satisfied and
         complied in all material respects with the covenants, agreements and
         conditions required by this Agreement to be performed, satisfied or
         complied with by the Company at or prior to the Closing Date. The Buyer
         shall have received a certificate, executed by an executive officer of
         the Company, dated as of the Closing Date, to the foregoing effect and
         as to such other matters as may be reasonably requested by the Buyer
         including, without limitation an update as of the Closing Date
         regarding the representation contained in Section 3(c) above.

                  (d) The Buyer shall have received the opinion of the Company's
         counsel dated as of the Closing Date, in form, scope and substance
         reasonably satisfactory to the Buyer and in substantially the form of
         Exhibit "F" attached hereto.

                  (e) The Company shall have executed and delivered to the
         Buyer(s) the certificates for the Series A Preferred Shares in the
         respective amounts set forth opposite each Buyer(s) name on Schedule I.

                  (f) As of the Closing Date, the Company shall have reserved
         out of its authorized and unissued Common Stock, solely for the purpose
         of effecting the conversion of the Series A Preferred Shares and
         permitting the exercise of the Warrants, such shares of Common Stock to
         effect the conversion of all of the Conversion Shares and the exercise
         of all the Warrants then outstanding.

                  (g) The Board of Directors of the Company shall have adopted
         the resolutions in substantially the form of Exhibit "G" attached
         hereto.

                                       17

<PAGE>

         8. INDEMNIFICATION.

                  (a) In consideration of the Buyer's execution and delivery of
         this Agreement and acquiring of the Series A Preferred Shares and the
         Conversion Shares hereunder, and in addition to all of the Company's
         other obligations under this Agreement, the Company shall defend,
         protect, indemnify and hold harmless the Buyer(s) and each other holder
         of the Series A Preferred Shares and the Conversion Shares, and all of
         their officers, directors, employees and agents (including, without
         limitation, those retained in connection with the transactions
         contemplated by this Agreement) (collectively, the " Buyer
         Indemnitees") from and against any and all actions, causes of action,
         suits, claims, losses, costs, penalties, fees, liabilities and damages,
         and expenses in connection therewith (irrespective of whether any such
         Buyer Indemnitee is a party to the action for which indemnification
         hereunder is sought), and including reasonable attorneys' fees and
         disbursements (the "Indemnified Liabilities"), incurred by the Buyer
         Indemnitees or any of them as a result of, or arising out of, or
         relating to (a) any misrepresentation or breach of any representation
         or warranty made by the Company in this Agreement or the Registration
         Rights Agreement or any other certificate, instrument or document
         contemplated hereby or thereby, (b) any breach of any covenant,
         agreement or obligation of the Company contained in this Agreement, the
         Certificate of Determination, or the Registration Rights Agreement or
         any other certificate, instrument or document contemplated hereby or
         thereby, or (c) any cause of action, suit or claim brought or made
         against such Buyer Indemnitees and arising out of or resulting from the
         execution, delivery, performance or enforcement of this Agreement or
         any other instrument, document or agreement executed pursuant hereto by
         any of the Buyer Indemnitees, any transaction financed or to be
         financed in whole or in part, directly or indirectly, with the proceeds
         of the issuance of the Series A Preferred Shares or the status of the
         Buyer or holder of the Series A Preferred Shares, the Conversion
         Shares, as a Buyer in the Company. To the extent that the foregoing
         undertaking by the Company may be unenforceable for any reason, the
         Company shall make the maximum contribution to the payment and
         satisfaction of each of the Indemnified Liabilities, which is
         permissible under applicable law.

                  (b) In consideration of the Company's execution and delivery
         of this Agreement, and in addition to all of the Buyer's other
         obligations under this Agreement, the Buyer shall defend, protect,
         indemnify and hold harmless the Company and all of its officers,
         directors, employees and agents (including, without limitation, those
         retained in connection with the transactions contemplated by this
         Agreement) (collectively, the "Company Indemnitees") from and against
         any and all Indemnified Liabilities incurred by the Company Indemnitees
         or any of them as a result of, or arising out of, or relating to (a)
         any misrepresentation or breach of any representation or warranty made
         by the Buyer(s) in this Agreement, instrument or document contemplated
         hereby or thereby executed by the Buyer, (b) any breach of any
         covenant, agreement or obligation of the Buyer(s) contained in this
         Agreement, the Registration Rights Agreement or any other certificate,
         instrument or document contemplated hereby or thereby executed by the
         Buyer(s), or (c) any cause of action, suit or claim brought or made
         against such Company Indemnitees based on material misrepresentations
         or due to a material breach and arising out of or resulting from the
         execution, delivery, performance or enforcement of this Agreement or
         any other instrument, document or agreement executed pursuant hereto by
         any of the Company Indemnities. To the extent that the foregoing
         undertaking by the Buyer(s) may be unenforceable for any reason, the
         Buyer(s) shall make the maximum contribution to the payment and
         satisfaction of each of the Indemnified Liabilities, which is
         permissible under applicable law.

                                       18

<PAGE>

         9. GOVERNING LAW: MISCELLANEOUS.

                  (a) GOVERNING LAW. This Agreement shall be governed by and
         interpreted in accordance with the laws of the State of New York
         without regard to the principles of conflict of laws. The parties
         further agree that any action between them shall be heard in New York
         City, New York, and expressly consent to the jurisdiction and venue of
         the Supreme Court of New York and the United States District Court for
         the Southern District of New York for the adjudication of any civil
         action asserted pursuant to this Section.

                  (b) COUNTERPARTS. This Agreement may be executed in two or
         more identical counterparts, all of which shall be considered one and
         the same agreement and shall become effective when counterparts have
         been signed by each party and delivered to the other party. In the
         event any signature page is delivered by facsimile transmission, the
         party using such means of delivery shall cause four (4) additional
         original executed signature pages to be physically delivered to the
         other party within five (5) days of the execution and delivery hereof

                  (c) HEADINGS. The headings of this Agreement are for
         convenience of reference and shall not form part of, or affect the
         interpretation of, this Agreement.

                  (d) SEVERABILITY. If any provision of this Agreement shall be
         invalid or unenforceable in any jurisdiction, such invalidity or
         unenforceability shall not affect the validity or enforceability of the
         remainder of this Agreement in that jurisdiction or the validity or
         enforceability of any provision of this Agreement in any other
         jurisdiction.

                  (e) ENTIRE AGREEMENT, AMENDMENTS. This Agreement supersedes
         all other prior oral or written agreements between the Buyer(s), the
         Company, their affiliates and persons acting on their behalf with
         respect to the matters discussed herein, and this Agreement and the
         Schedules and Exhibits attached hereto, and the instruments referenced
         herein contain the entire understanding of the parties with respect to
         the matters covered herein and therein and, except as specifically set
         forth herein or therein, neither the Company nor any Buyer makes any
         representation, warranty, covenant or undertaking with respect to such
         matters. No provision of this Agreement may be waived or amended other
         than by an instrument in writing signed by the party to be charged with
         enforcement.

                  (f) NOTICES. Any notices, consents, waivers, or other
         communications required or permitted to be given under the terms of
         this Agreement must be in writing and will be deemed to have been
         delivered (i) upon receipt, when delivered personally; (ii) upon
         receipt, when sent by facsimile (provided confirmation of receipt is
         received by the sending party); (iii) three (3) days after being sent
         by U.S. certified mail, return receipt requested, or (iv) one (1) day
         after deposit with a nationally recognized overnight delivery service,
         in each case properly addressed to the party to receive the same. The
         addresses and facsimile numbers for such communications shall be:

                                       19

<PAGE>

                           If to the Company, to:

                           TELENETICS CORPORATION.
                           25111 Arctic Ocean
                           Lake Forest, CA 92630
                           Attention:
                           Telephone: (949) 455-4000
                           Facsimile: (949) 455-4010

                           With a copy to:
                           Rutan & Tucker, LLP
                           611 Anton Boulevard
                           Suite 1400
                           Costa Mesa, CA 92626
                           Attention: Larry A. Cerutti, Esq.
                           Telephone: (714) 641-5100
                           Facsimile: (714) 546-9035

                           If to the Transfer Agent, to:
                           __________________________________
                           __________________________________
                           __________________________________
                           Telephone:
                           Facsimile:

                  If to the Buyer(s), to its address and facsimile number on
         Schedule I, with copies to the Buyer's counsel as set forth on Schedule
         I. Each party shall provide five (5) days' prior written notice to the
         other party of any change in address or facsimile number.

                  (g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
         upon and inure to the benefit of the parties and their respective
         successors and assigns. Neither the Company nor any Buyer shall assign
         this Agreement or any rights or obligations hereunder without the prior
         written consent of the other party hereto.

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

                                       20

<PAGE>

                  (i) SURVIVAL. Unless this Agreement is terminated under
         Section 9(l), the representations and warranties of the Buyer(s)
         contained in Section 2, the agreements and covenants set forth in
         Sections 4, 5 and 9, and the indemnification provisions set forth in
         Section 8, shall survive the Closing for a period of one (1) year
         following the date on which the Series A Preferred Shares are converted
         in full. The representations and warranties set forth in Section 3
         shall survive for a period of one (1) year from the date of closing.
         The Buyer(s) shall be responsible only for its own representations,
         warranties, agreements and covenants hereunder.

                  (j) PUBLICITY. The Company and the Buyer(s) shall have the
         right to approve, before issuance, any press release or any other
         public statement with respect to the transactions contemplated hereby
         made by any party; provided, however, that the Company shall be
         entitled, without the prior approval of the Buyer(s), to issue any
         press release or other public disclosure with respect to such
         transactions required under applicable securities or other laws or
         regulations (the Buyer(s) shall be consulted by the Company in
         connection with any such press release or other public disclosure prior
         to its release and Buyer(s) shall be provided with a copy thereof upon
         release thereof).

                  (k) FURTHER ASSURANCES. Each party shall do and perform, or
         cause to be done and performed, all such further acts and things, and
         shall execute and deliver all such other agreements, certificates,
         instruments and documents, as the other party may reasonably request in
         order to carry out the intent and accomplish the purposes of this
         Agreement and the consummation of the transactions contemplated hereby.

                  (1) TERMINATION. In the event that the Closing shall not have
         occurred with respect to the Buyers on or before ten (10) business days
         from the date hereof due to the Company's or the Buyer's failure to
         satisfy the conditions set forth in Sections 6 and 7 above (and the
         non-breaching party's failure to waive such unsatisfied condition(s)),
         the non-breaching party shall have the option to terminate this
         Agreement with respect to such breaching party at the close of business
         on such date without liability of any party to any other party;
         provided, however, that if this Agreement is terminated pursuant to
         this Section 9(l), the Company acknowledges that it shall remain
         obligated to pay the Placement Agent for its legal fees as described in
         Section 4(g) above.

                  (m) FINDER. The Company acknowledges that it has engaged May
         Davis Group, Inc., as placement agent in connection with the sale of
         the Series A Preferred Shares. The Company shall be responsible for the
         payment of any placement agent fees, as specified in the Placement
         Agency Agreement dated October 31, 2000, (which includes cash and
         warrants to May Davis Group, Inc., to purchase Common Stock) relating
         to or arising out of the transactions contemplated hereby and from the
         proceeds thereof.

                  (n) NO STRICT CONSTRUCTION. The language used in this
         Agreement will be deemed to be the language chosen by the parties to
         express their mutual intent, and no rules of strict construction will
         be applied against any party.

            [THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]

                                       21

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

                                            By: /s/ Terry S. Parker
-----------------------------                  ---------------------------------
Name:                                           Name: Terry S. Parker
Title:                                          Title: President

                                            INVESTOR

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

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            /s/ Terry L. Conner
                                            /s/ Carol S. Conner

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            By: /s/ Timothy Borne
                                               ---------------------------------

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            /s/ Marvin Strauss

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            /s/ Bonney Goldstein

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            /s/ Chien C. Chang

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            By: /s/ Milan Tyburec
                                               ---------------------------------

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            By: /s/ Stephen Melges
                                               ---------------------------------

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            /s/ Kenneth E. Rogers

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            /s/ Rance Merkel

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            By: /s/ Ronald Horner
                                               ---------------------------------

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

                                            By: /s/ Terry S. Parker
-----------------------------                  ---------------------------------
Name:                                           Name: Terry S. Parker
Title:                                          Title: President

                                            INVESTOR

                                            By: /s/ John McCarthy
                                               ---------------------------------

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

                                            By: /s/ Terry S. Parker
-----------------------------                  ---------------------------------
Name:                                           Name: Terry S. Parker
Title:                                          Title: President

                                            INVESTOR

                                            By: /s/ Lam King Shan
                                               ---------------------------------
                                               Name: Lam King Shan

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

                                            By: /s/ Terry S. Parker
-----------------------------                  ---------------------------------
Name:                                           Name: Terry S. Parker
Title:                                          Title: President

                                            INVESTOR

                                            By: /s/ Peter Che Nan Chen
                                               ---------------------------------
                                               Name: Peter Che Nan Chen

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

                                            By: /s/ Terry S. Parker
-----------------------------                  ---------------------------------
Name:                                           Name: Terry S. Parker
Title:                                          Title: President

                                            INVESTOR

                                            By: /s/ Kwok Leung Lai
                                               ---------------------------------
                                               Name: Kwok Leung Lai

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

                                            By: /s/ Terry S. Parker
-----------------------------                  ---------------------------------
Name:                                           Name: Terry S. Parker
Title:                                          Title: President

                                            INVESTOR

                                            By: /s/ Wei Z. Yen
                                               ---------------------------------
                                               Name: Wei Z. Yen

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

                                            By: /s/ Terry S. Parker
-----------------------------                  ---------------------------------
Name:                                           Name: Terry S. Parker
Title:                                          Title: President

                                            INVESTOR

                                            By: /s/ illegible signature
                                               ---------------------------------
                                               Keyway Holding Co.
                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                                /s/ Vernon Koto
                                               ---------------------------------
                                                /s/ Denise Koto
                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            By: /s/ Jon Cummings
                                               ---------------------------------

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

                                            By: /s/ Terry S. Parker
-----------------------------                  ---------------------------------
Name:                                           Name: Terry S. Parker
Title:                                          Title: President

                                            INVESTOR

                                            By: /s/ Sui Wa Chau
                                               ---------------------------------

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

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

                                            INVESTOR

                                            By: /s/ Glenn Keyser
                                               ---------------------------------

                                       22

<PAGE>

         IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.

ATTEST:                                     TELENETICS CORPORATION

                                            By: /s/ Terry S. Parker
-----------------------------                  ---------------------------------
Name:                                           Name: Terry S. Parker
Title:                                          Title: President

                                            INVESTOR

                                            By: /s/ Nathan Eisen
                                               ---------------------------------

                                       22

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