Exhibit 10.12

                    SUNRISE TECHNOLOGIES INTERNATIONAL, INC.
                  OFFSHORE NOTE AND WARRANT PURCHASE AGREEMENT

                  This   Offshore   Common  Stock   Purchase   Agreement   (this
"Agreement")  is made as of the  Closing  Date (as  hereinafter  defined) by and
between Sunrise  Technologies  International,  Inc., a Delaware corporation (the
"Company),  with its principal office at 47257 Fremont  Boulevard,  Fremont,  CA
94538,  Pennsylvania  Merchant Group Ltd (the "Placement Agent") and each of the
purchasers who are  signatories  hereto and any other  purchasers who are made a
party to this Agreement  pursuant to Section 1(d)  (individually,  a "Purchaser"
and collectively, the "Purchasers").

                                    RECITALS

                  The Company has engaged the Placement Agent as exclusive agent
of the Company in connection  with the placement  and sale (the  "Offering")  of
$1,500,000 Convertible Subordinated Notes (the "Notes") with Warrants. The Notes
will be  convertible  into shares of the Company's  $.001 par value common stock
("Common Stock")  commencing on the Closing Date (as hereinafter  defined) at an
initial conversion price (the "Conversion  Price") of $0.875 per share of Common
Stock.  The Notes are  Redeemable at the Company's  option,  in whole but not in
part,  at any time on or after March 31, 1997, at a price equal to the principal
of the Notes then  outstanding  plus accrued and unpaid  interest to the date of
redemption (the "Redemption  Date").  Holders of the Notes will receive not more
than 60 nor fewer days than 30 days' notice prior to the Redemption Date, during
such time they may exercise their conversion rights. Each Purchaser will receive
one warrant to purchase  Common Stock,  substantially  in the form attached (the
"Warrants") for each $1.75 in Notes  purchased by such  Purchaser.  Each Warrant
entitles  the holder to purchase  one share of Common Stock for $1.00 during the
five  year  period  commencing  on the  initial  Closing  Date  (as  hereinafter
defined).  The Notes and  Warrants  will be sold by the  Company  to  Purchasers
pursuant to  Regulations  D and S under the  Securities  Act of 1933, as amended
(the "Act")  (individually  the  "Regulation  D  Purchasers"  and  "Regulation S
Purchasers").  Regulation S Purchasers will purchase Notes and Warrants pursuant
to this  Agreement  and  Regulation  D  Purchasers  will  purchase the Notes and
Warrants  pursuant to a U.S.  Note and Warrant  Purchase  Agreement of even date
herewith  (the "U.S.  Agreement").  Offers and sales of Notes and Warrants  will
only be made pursuant to the  Confidential  Private  Offering  Memorandum  dated
February  5, 1997  (together  with all  amendments,  supplements,  exhibits  and
attachments thereto, the "Private Placement Materials").

                                    AGREEMENT

                  In  consideration  of the  mutual  promises,  representations,
warranties  and  conditions  set  forth in this  Agreement,  the  Company,  each
Purchaser  (severally and not jointly) and the Placement  Agent  intending to be
legally bound agree as follows:

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         1.       PURCHASE AND SALE OF NOTES AND WARRANTS.

                  1.1      Issue of Notes and Warrants.

                           (a) The Company has  authorized the issuance and sale
of up to  $1,500,000  Notes,  and up to  1,714,286  share of Common  Stock  (the
"Conversion  Shares")  pursuant to the  conversion  of the Notes,  up to 857,143
Warrants  and up to 857,143  additional  shares of Common  Stock  (the  "Warrant
Shares") pursuant to the exercise of the Warrants, pursuant to the provisions of
this Agreement and the U.S. Agreement made as of the Closing Date

                           (b) In reliance upon the Purchaser's  representations
and  warranties  contained  in Section 4 hereof and upon the  Placement  Agent's
representations and warranties contained in Section 6 hereof, and subject to the
terms and conditions set forth herein, the Company hereby agrees to sell to each
Purchaser  the  aggregate  amount of Notes and  Warrants  set forth  below  such
Purchaser's signature on the subscription page bearing such Purchaser's name.

                           (c)  In  reliance   upon  the   representations   and
warranties  of the  Company  contained  herein,  and  subject  to the  terms and
conditions set forth herein, each Purchaser hereby agrees to purchase the amount
of  Notes  and  Warrants  set  forth  on  the  subscription  page  bearing  such
Purchaser's  name at the purchase price set forth above.  Each  Purchaser  shall
severally,  and not jointly, be liable for only the amount of Notes and Warrants
that appear on the subscription page hereof that relates to such Purchaser.

                           (d)  The  Company's   agreement   with  each  of  the
Purchasers  is a separate  agreement,  and the sale of the Notes and Warrants to
each of the Purchasers is a separate sale.

         2.       CLOSING DATE; DELIVERY.

                  2.1      Closing.

                           (a) The initial  closing of the sale and  purchase of
the Notes  under this  Agreement  (the  "Closing"),  together  with the  initial
closing of the sale and  purchase  of Notes under the U.S.  Agreement,  shall be
held at 10:00 a.m.  (Pacific  Standard Time) on or before February 20, 1997 (the
"Closing Date"), at the offices of Thelen,  Marrin,  Johnson & Bridges, San Jose
CA, or at such other time and place as the Company and the  Placement  Agent may
agree. There is no minimum amount of Notes required for an initial closing.

                           (b)  From  time to time  prior to and  following  the
Closing Date, the Company may, but shall not be obligated to, offer and sell the
balance of the Notes  authorized  but not sold as of the Closing  Date herein to
other purchasers (the "Other  Purchasers") at one or more subsequent closings to
be held no later than February 20, 1997 unless otherwise extended by the Company
and the Placement Agent. By executing this Agreement,  the Purchasers  hereunder
agree to the inclusion of such Other Purchasers as parties to this Agreement and
the  Registration  Rights  Agreement  referenced  in Section  7.l(d) herein (the
"Registration Rights Agreement"), and it shall be a condition to each subsequent
closing that the Other Purchasers, if any shall become parties to this Agreement
and the  Registration  Rights  Agreement  and  subject  to the terms  hereof

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and  thereof.  If such a subsequent  closing is held,  the terms  "Closing"  and
"Closing Date", as used herein,  shall be deemed to apply to the initial closing
and each such subsequent closing.

                  2.2  Delivery.  At  the  Closing,  subject  to the  terms  and
conditions  hereof,  the  Company  will  deliver  to each  Purchaser  the  Notes
subscribed  for by such  Purchaser,  dated as of the Closing Date, and Warrants,
against  payment of the purchase price  therefor by wire transfer,  unless other
means of payment shall have been agreed upon by such Purchaser, on one hand, and
the Company, and the Placement Agent, on the other hand.

         3.       REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

                  Subject  to and  except as  disclosed  by the  Company  in the
Private Placement Materials,  the Company hereby represents and warrants to each
Purchaser  as of the date hereof as follows,  and all such  representations  and
warranties  shall be true and correct as of the Closing Date as if then made and
shall survive the Closing:

                  3.1 Organization.  Each of the Company and Laser Biotech, Inc.
as its  subsidiary  (the  "Subsidiary")  is a  corporation,  duly  incorporated,
validly  existing and in good standing under the laws of the jurisdiction of its
incorporation.  The  Company  and the  Subsidiary  has all  requisite  power and
authority  to own or lease its  properties  and to conduct  its  business as now
conducted.  Each of the Company holds all licenses and permits  required for the
conduct of its business as now conducted,  which, if not obtained,  would have a
material  adverse  effect on the  business,  financial  condition  or results of
operations  of the  Company  taken  as a  whole.  Each  of the  Company  and the
Subsidiary  is  qualified  as a foreign or domestic  corporation  and is in good
standing in all states  where the conduct of its  business or its  ownership  or
leasing of property requires such qualification,  except where the failure to so
qualify  would not have a material  adverse  effect on the  business,  financial
condition or results of operations of the Company taken as a whole.  The Company
has  previously  delivered  a true  and  complete  copy  of its  Certificate  of
Incorporation ("Certificate") and Bylaws to the Placement Agent.

                  3.2  Capitalization.  The  authorized,  issued and outstanding
capital stock of the Company on September 30, 1996 is as set forth in the Report
on Form 10-Q  (September  30,1996)  which is included in the Offering  Materials
(Tab A).  Since  September  30, 1996,  there has been no material  change in the
capitalization  of the  Company,  except as has been  described  in the  Private
Placement  Materials.  All of the issued and outstanding  shares of Common Stock
have been duly authorized,  validly issued and are fully paid and nonassessable.
Except as stated in the  Private  Placement  Materials  and  except  for  rights
granted  under  the  Company's  stock  option  plans,   there  are  no  existing
subscriptions,  options, warrants, calls, commitments, agreements, conversion or
other rights of any character (contingent or otherwise) to purchase or otherwise
acquire from the Company at any time, or upon the happening of any stated event,
any shares of the capital stock of the Company.

                  3.3 Authority.  The Company has all requisite  corporate power
and authority to enter into this Agreement,  the Warrants,  Registration  Rights
Agreement,  and the  warrant to  purchase  up to 85,714  shares of Common  Stock
issued to the Placement Agent (the "Placement Agent Warrant"), and to consummate
the transactions  contemplated hereby and thereby. The

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execution and delivery of this Agreement,  the Warrants, the Registration Rights
Agreement  and  the  Placement  Agent  Warrant  and  the   consummation  of  the
transactions  contemplated hereby and thereby,  have been duly authorized by all
necessary corporate action on the part of the Company,  and upon their execution
and delivery by the Company,  such documents will  constitute  valid and binding
obligations of the Company,  enforceable  against the Company in accordance with
their terms, except as the  indemnification  and contribution  provisions of the
Registration Rights Agreement may be limited by principles of public policy, and
subject   as   to   enforceability   to   applicable   bankruptcy,   insolvency,
reorganization,  moratorium and similar laws relating to or affecting creditors'
rights from time to time in effect and subject to general equity principles.

                  3.4  Securities  Filings.  The  Company  has  filed  with  the
Securities  and Exchange  Commission  (the "SEC") the documents set forth in the
Private Placement Materials included herein under Tab A (the "SEC Filings"). The
Company has filed with the SEC all reports and all other filings  required to be
filed with the SEC under the rules and regulations of the SEC.

                           (a)  The  SEC  Filings   conformed  in  all  material
respects to the requirements of the Securities  Exchange Act of 1934, as amended
(the "Exchange  Act"), and the rules and regulations of the SEC thereunder as of
their  respective  filing  dates and did not  contain an untrue  statement  of a
material fact or omit to state a material fact required to be stated  therein or
necessary  to make the  statements  therein not  misleading.  The  documents  or
portions thereof that were incorporated by reference in the SEC Filings pursuant
to the  requirements  of the Exchange Act, when such  incorporated  documents or
portions were first filed with the SEC,  conformed in all material respects with
any applicable requirements of the Exchange Act and the rules and regulations of
the SEC thereunder.

                           (b)  The  consolidated  financial  statements  of the
Company  included in the SEC Filings fairly  presented in all material  respects
the  financial  position  and  results  of  operations  of the  Company  and the
Subsidiary at their  respective  dates and for the  respective  periods to which
they apply; and such financial  statements have been prepared in accordance with
generally accepted  accounting  principles  consistently  applied throughout the
periods involved except as otherwise stated therein.

                           (c)  Notwithstanding  any  provision  therein  to the
contrary, it is understood by the Company and the Purchasers that the Company is
not  representing  or warranting  any  statement in the SEC Filings  relating to
future, anticipated or possible circumstances, occurrences or developments.

                  3.5  Issuance of the Notes.  The Notes,  when  issued  against
payment  therefor  pursuant  to the  terms of this  Agreement,  will be duly and
validly authorized and issued, fully paid and nonassessable.

                  3.6 No Conflict with Law or Documents. The execution, delivery
and  consummation of this Agreement,  the Warrants and the  Registration  Rights
Agreement  and the  transactions  contemplated  hereby and thereby  will not (a)
conflict  with any  provisions  of the  Articles or Bylaws of the Company or the
Subsidiary;  (b)  result in any  violation  of or  default  or loss of a benefit
under, or permit the  acceleration  of any obligation  under (in each case, upon
the

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giving of notice, the passage of time, or both) any mortgage,  indenture, lease,
agreement or other instrument,  permit,  franchise,  license,  judgment,  order,
decree,  law,  ordinance,  rule or  regulation  applicable  to the Company,  the
Subsidiary or their respective properties.

                  3.7 Consents,  Approvals and Private Offering.  Except for any
filings  required under federal and  applicable  state  securities  laws, all of
which shall have been made as of the Closing  Date to the extent  required as of
such time, no consent,  approval,  order or  authorization  of, or registration,
declaration or filing with, any federal,  state,  local or foreign  governmental
authority is required to be made or obtained by the Company in  connection  with
the execution and delivery of this Agreement,  the Registration Rights Agreement
and the consummation of the transactions contemplated hereby and thereby.

                  3.8 Absence of Certain  Developments.  Except as  described in
the Private Placement  Materials,  since September 30, 1996, neither the Company
has (a)  incurred or become  subject to any  material  liabilities  (absolute or
contingent) except current liabilities incurred, and liabilities under contracts
entered  into,  in  the  ordinary  course  of  business,  consistent  with  past
practices;  (b)  mortgaged,  pledged or subjected  to any lien,  charge or other
encumbrance  any of its assets,  tangible or intangible;  (c) sold,  assigned or
transferred any of its assets or canceled any debts or obligations except in the
ordinary course of business,  consistent  with past practices;  (d) suffered any
extraordinary  losses,  or waived any rights of substantial  value;  (e) entered
into any material  transaction  other than in the  ordinary  course of business,
consistent  with  past  practices;  or  (f)  otherwise  had  any  change  in its
condition,  financial  or  otherwise,  except  as shown on or  reflected  in the
consolidated  balance  sheet as of  September  30,  1996 that is included in the
Company's  Report on Form 10-Q for the quarter ended September 30, 1996,  except
for changes in the ordinary course of business,  consistent with past practices,
none of which individually or in the aggregate has been materially adverse,  and
excepted  further  that the Company  continues to incur  additional  substantial
losses of the nature set forth in and/or  otherwise  contemplated by the Private
Placement Materials. Except as described in the SEC Filings, neither the Company
nor the  Subsidiary has entered into any agreement  since  September 30, 1996 of
the type that would be  required  under the SEC's  rules and  regulations  to be
filed as an exhibit to a Report on Form 10-K.

                  3.9 Litigation.  Except as described in the Private  Placement
Materials, to the Company's knowledge,  there are no actions, suits, proceedings
or  investigations  pending  against or affecting the Company or the  Subsidiary
that in the aggregate could  reasonably be anticipated to result in any material
adverse effect on the Company.

                  3.10 Registration Rights. Except for shares issued or issuable
in connection with the Company's existing stock option plans and those disclosed
in the  Private  Placement  Materials  the Company has not granted any rights to
have any of the Company's securities registered under the Act.

                  3.11 Disclosure.  The Private  Placement  Materials taken as a
whole do not contain any untrue  statement  of material  fact or omit to state a
material fact required to be stated  therein or necessary to make the statements
therein not misleading.

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                  3.12  Security  Interest.  In order to  secure  the  Company's
obligations  under the Notes and perfect the Purchasers'  security  interests in
all of the Company's pending and issued ophthalmic patents, the Company has made
all the  necessary  filings  and has not  granted a  security  interest  in such
patents to any other party.

         4.       REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.

                  Each Purchaser hereby represents,  warrants and covenants with
the Company as follows:

                  4.1  Legal  Power.  Purchaser  has  the  requisite  corporate,
partnership,  trust or fiduciary  power, as appropriate,  and is authorized,  if
Purchaser is a corporation,  partnership or trust,  to enter into this Agreement
and the  Registration  Rights  Agreement,  to  purchase  the Notes and  Warrants
hereunder,  and to carry out and perform its obligations under the terms of this
Agreement and the Registration Rights Agreement.

                  4.2 Due Execution.  This Agreement and the Registration Rights
Agreement have been duly authorized, if Purchaser is a corporation, partnership,
trust or fiduciary, executed and delivered by Purchaser, and, upon due execution
and  delivery  by the  Company,  this  Agreement  and  the  Registration  Rights
Agreement will be valid and binding  agreements of Purchaser,  and subject as to
enforceability to applicable bankruptcy, insolvency, reorganization,  moratorium
and similar laws relating to or affecting creditors' rights from time to time in
effect and subject to general equity principles.

                  4.3      Investment Representations.

                  Each Purchaser represents and agrees that:

                           (a)  Purchaser  is  acquiring  the  Notes for its own
account, not as a nominee or agent, for investment and not with a view to or for
resale in connection  with, any  distribution or public offering  thereof within
the meaning of the Act, except pursuant to an effective  registration  statement
under the Act;

                           (b) Such  Purchaser is not a U.S.  Person (as defined
in  Regulation  S) and is  not an  affiliate  of  the  Company  (as  defined  in
Regulation S);

                           (c) At the time  such  Purchaser's  buy order for the
Notes and the  Warrants was  originated  such  Purchaser  was outside the United
States, its territories and possessions;

                           (d) The Purchaser:

                                    (i) will not,  during the period  commencing
on the latest Closing Data and ending on the day 40 days after the final Closing
Date  (the  "Restricted  Period"),  offer or sell any of the  Securities  in the
United States,  its territories or  possessions,  or to a U.S. Person or for the
account or benefit of a U.S.  Person  (other than  distributors),  other than in
accordance with Rules 903 or 904 of Regulation S; and

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                                    (ii)  will,  after  the  expiration  of  the
Restricted  Period,  offer,  sell, pledge or otherwise  transfer the Shares only
pursuant to registration under the Act or an available  exemption therefrom and,
in any case, in accordance with applicable state and foreign securities laws.

                           (e) None of such  Purchaser,  its  affiliates  or any
person acting on behalf of the Purchaser or any such affiliates has engaged,  or
will engage,  in any Directed  Selling Efforts (as defined in Regulation S under
the Act) with respect to the  Securities  or any  distribution,  as that term is
used in the definition of Distributor (as defined in Rule 902CC) in Regulation S
under the Act, with respect to the Securities.

                           (f) The transactions contemplated by this Agreement:

                                    (i)  have  not  been   pre-arranged  with  a
purchaser located in the United States,  its territories or possessions,  or who
is a U.S. Person; and

                                    (ii)  are not  part of a plan or  scheme  to
evade the registration provisions of the Act.

                           (g) The Purchaser is purchasing the Notes for its own
account for the purpose of investment and not (A) with a view to, or for sale in
connection with, any distribution thereof or (B) for the account or on behalf of
any U.S. Person.

                           (h) The Purchaser is not a corporation  that has been
formed  principally  for the purpose of investing in securities  not  registered
under the Act.

                           (i) Neither the Company,  the Placement Agent nor any
person or entity  acting on its or their  behalf  made to the  Purchaser  or any
person  acting on its behalf in the  United  States any  statement  conveying  a
purpose or intent to sell the Shares to the Purchaser. The person executing this
Agreement  on behalf  of the  Purchaser  was  outside  the  United  States,  its
territories and possessions at the time of such execution.

                           (j)  Neither  the  Purchaser,  any  affiliate  of the
Purchaser, nor any person or entity acting on its or their behalf has undertaken
or carried out any  activity  for the purpose  of, or that could  reasonably  be
expected to have the effect of,  conditioning  the market in the United  States,
its territories or possessions, for any of the Shares.

                           (k) If the  Purchaser  offers  and  sells  any of the
Securities  during  the  Restricted  Period,  then it will  do so  only:  (i) in
accordance  with the provisions of Regulations S; (ii) pursuant to  registration
of the Shares under the Act; or (iii)  pursuant to an available  exemption  from
the registration requirements of the Act.

                           (1)  Purchaser  understands  that the Shares have not
been registered under the Act by reason of a specific exemption  therefrom,  and
may not be  transferred or resold except  pursuant to an effective  registration
statement or exemption from  registration and each certificate  representing the
Shares will be endorsed with the following legends:

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                                    (i)     THE  SECURITIES  REPRESENTED  HEREBY
                                            HAVE NOT BEEN  REGISTERED  UNDER THE
                                            UNITED  STATES   SECURITIES  ACT  OF
                                            1933,  AS AMENDED  (THE  "SECURITIES
                                            ACT"),  AND SUCH SECURITY MAY NOT BE
                                            OFFERED,  SOLD, PLEDGED OR OTHERWISE
                                            TRANSFERRED   EXCEPT   (1)   IN   AN
                                            OFFSHORE  TRANSACTION  IN ACCORDANCE
                                            WITH   RULE   903  OR  RULE  904  OF
                                            REGULATION  S UNDER  THE  SECURITIES
                                            ACT, OR (2) PURSUANT TO AN EXEMPTION
                                            FROM  REGISTRATION  AS  CONFIRMED IN
                                            ANY OPINION OF COUNSEL  SATISFACTORY
                                            TO THE COMPANY,  AND IN EACH CASE IN
                                            ACCORDANCE WITH ANY OTHER APPLICABLE
                                            LAW.

                                    (ii)  Any  legend   required  to  be  placed
thereon by applicable federal or state securities laws, and

                                    (iii) the Company will instruct any transfer
agent  not  to  register  the  transfer  of any of  the  Securities  unless  the
conditions specified in the foregoing legends are satisfied.

                           (m) Receipt and review of  Offering  Materials.  Each
Purchaser  represents  that  Purchaser  has  received  and  reviewed the Private
Placement  Materials and has been given full and complete  access to the Company
and/or the Placement Agent for the purpose of obtaining such  information as the
Purchaser or its qualified  representative has reasonably requested and has been
afforded the opportunity to ask questions  regarding the Company and the Shares,
all as Purchaser or its qualified  representative has found necessary to make an
informed investment decision.

         5.       COVENANTS OF THE COMPANY.

                  5.1      Information.

                  So long as the  Company is subject to the  periodic  reporting
requirements  of the Exchange  Act pursuant to Section 13 or l5(d),  the Company
shall deliver to each holder of Notes or Warrants all annual, quarterly or other
reports furnished to its public security  holders;  provided that if the Company
is not subject to the  requirements  of Section 13 or 15(d) of the Exchange Act,
the Company  will  promptly  furnish to each holder of Notes or Warrants  (i) as
soon as available,  and in any event within 90 days after the end of each fiscal
year of the  Company,  a  consolidated  balance  sheet  of the  Company  and its
consolidated  subsidiaries,  if any,  as of the end of such  fiscal year and the
related consolidated  statements of income,  stockholders' equity and cash flows
for such fiscal year, setting forth in each case in comparative form the figures
for the previous fiscal year, all prepared in accordance with generally accepted
accounting   principles  and  reported  on  by  independent   certified   public
accountants of recognized national standing; and (ii) as soon as available,  and
in any event  within 45 days  after  the end of each of the first  three

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fiscal quarters of each fiscal year of the Company, a consolidated balance sheet
of the Company and its consolidated subsidiaries,  if any, as of the end of such
quarter  and the related  consolidated  statements  of income and  stockholder's
equity (together with any other quarterly financial statements being prepared by
the Company at such time),  setting forth in each case in  comparative  form the
figures  for the  corresponding  quarter  and the  corresponding  portion of the
Company's  previous  fiscal  year,  all  certified  (subject to normal  year-end
adjustments)  as to  fairness  of  presentation  and  consistency  by the  chief
financial officer or the chief accounting officer of the Company.

                  6.   REPRESENTATIONS  OF  PLACEMENT  AGENT;   COMPENSATION  OF
PLACEMENT AGENT.

                  The Company has authorized the Placement  Agent to conduct the
Private Placement of the Securities (the "Private Placement") under Regulation D
and Regulation S of the Act, and the Placement Agent  represents and agrees with
the Company as follows:

                  6.1   Regulation  S  Compliance.   Offers  and  sales  of  the
Securities to Regulation S Purchasers will be made in compliance with Regulation
S and have not and will not be made to any U.S.  Person or for the  account  and
benefit of any U.S. Person. Neither the Placement Agent nor any of its employees
or  affiliates  or any person or entity acting on its behalf has or shall engage
in any directed selling efforts (as defined by Regulation S) with respect to the
Securities.

                  6.2  Compliance  Generally.  The Placement  Agent has and will
observe all securities laws and regulations applicable to it in any jurisdiction
in which it has or may offer, sell or deliver Notes and it will not, directly or
indirectly,   offer,  sell  or  deliver  Notes  or  distribute  or  publish  any
prospectus,  circular,  advertisement or other offering  material in relation to
the Notes in or from any state in the United  States or country or  jurisdiction
except under  circumstances  that will result in compliance  with any applicable
laws and regulations.

                  6.3  Sales  Commissions.  In  consideration  of the  Placement
Agent's  services  hereunder,  the Company shall pay Placement  Agent in cash on
each  Closing Date a  commission  of seven and  one-half  percent (7.5 %) of the
proceeds of the Securities sold at such Closing (the "Placement Fee").

                  6.4 Placement Agent Expenses.  Upon the initial  closing,  the
Company shall  reimburse the Placement  Agent for its  reasonable  out-of-pocket
expenses of the Private Placement, including the reasonable fees and expenses of
the  Placement  Agent's  counsel,  up to a maximum of  $50,000.  This amount may
include  expenses  from other  pending or abandoned  transactions  involving the
Placement Agent.

                  6.5 Placement  Agent  Warrant.  At each  Closing,  the Company
agrees to sell to the  Placement  Agent a Warrant to purchase a number of shares
of the  Company's  Common  Stock  equal to five  percent  (5%) of the  number of
Conversion Shares into which the Notes sold at such Closing are convertible (the
"Placement  Agent  Warrant")  at a  purchase  price of $.001 per share of Common
Stock covered by the Placement  Agent Warrant.  The Placement Agent Warrant will
be exercisable at any time before the fifth  anniversary of the initial  Closing
at a price of  $0.875

                                      -9-

<PAGE>

(subject to adjustments for stock  dividends,  splits,  combinations and certain
other issuances of Common Stock or Common Stock equivalents,  all as provided in
the Placement  Agent  Warrant).  The  Placement  Agent Warrant will be in a form
reasonably satisfactory to the Company and the Placement Agent.

                  6.6 Right of First Refusal to Manage Future  Offerings.  For a
period of one (1) year  commencing  upon the last  Closing Date  hereunder,  the
Placement  Agent  shall  have a right of first  refusal  to act as the  managing
underwriter  for any and all equity  offerings  (excluding  offerings to Company
employees,  or to others as consideration  for the purchase of assets for use in
the  Company's  business,  or in  one  or  more  business  combinations)  of any
securities of the Company, or any successor to or any subsidiary of the Company.
The Placement Agent must exercise this right of first refusal within thirty (30)
days of  receipt  of  written  notice  from the  Company,  or its  successor  or
subsidiary, of its intention to offer securities for sale.

                  6.7 Blue Sky Compliance.  The Placement Agent will comply with
the state securities or blue sky laws of each state in which the Securities have
been or will be offered  ("Applicable  Blue Sky Laws").  The Placement Agent has
ensured  and will  ensure  that all  applications,  notices  and  other  filings
required to be made under  Applicable  Blue Sky Laws have been or will be timely
made. The Placement Agent has ensured that all legends or other notices required
to be either printed in the Private  Placement  Memorandum or otherwise given to
offerees or purchasers of the  Securities  under  Applicable  Blue Sky Laws have
been so printed or given.

         7.       CONDITIONS TO CLOSING.

                  7.1  Conditions  to   Obligations   of  the  Purchaser.   Each
Purchaser's  obligation to purchase the  Securities at the Closing is subject to
the  fulfillment,  at or  prior  to  such  Closing,  of  all  of  the  following
conditions:

                           (a) Representations and Warranties True;  Performance
of  Obligations.  The  representations  and  warranties  made by the  Company in
Section 3 hereof  shall be true and  correct  in all  material  respects  on the
Closing  Date with the same  force and effect as if they had been made on and as
of said date;  except as described in or contemplated  by the Private  Placement
Materials,  the business,  assets, financial condition and results of operations
of the Company shall not have been adversely  affected in any material way prior
to the Closing Date;  and the Company shall have performed all  obligations  and
conditions  herein  required  to be  performed  by it on or prior to the Closing
Date.

                           (b)  Proceedings  and  Documents.  All  corporate and
other  proceedings  in  connection  with the  transactions  contemplated  at the
Closing hereby and all documents and instruments  incident to such  transactions
shall be reasonably satisfactory in substance and form to the Purchaser.

                           (c)    Qualifications,    Legal    Investment.    All
authorizations,  approvals, or permits, if any, of any governmental authority or
regulatory  body of the  United  States or of any  state  that are  required  in
connection with the lawful sale and issuance of the Securities  pursuant to this
Agreement  shall have been duly obtained and shall be effective on and as of the
Closing Date.

                                      -10-

<PAGE>

No stop order or other order  enjoining  the sale of the  Securities  shall have
been  issued and no  proceedings  for such  purpose  shall be pending or, to the
knowledge  of the  Company,  threatened  by the  SEC,  or  any  commissioner  of
corporations  or similar  officer  of any state  having  jurisdiction  over this
transaction. At the time of the Closing, the sale and issuance of the Securities
shall be legally  permitted by all laws and  regulations  to which the Purchaser
and the Company are subject.

                           (d) Registration Rights Agreement.  The Company shall
have entered into the Registration  Rights  Agreement in substantially  the form
included in the Private Placement Materials (Tab C).

                           (e) Legal Opinion.  Counsel to the Company shall have
provided  a  legal  opinion  to  the  Purchasers  reasonably  acceptable  to the
Placement Agent.

                  7.2 Conditions to  Obligations  of the Company.  The Company's
obligation  to issue and sell the  Securities  at the  Closing is subject to the
fulfillment to the Company's  satisfaction,  on or prior to the Closing,  of the
following conditions:

                           (a)   Representations   and   Warranties   True.  The
representations and warranties made by each Purchaser in Section 4 hereof and by
the Placement Agent in Section 6 hereof shall be true and correct at the Closing
Date with the same  force  and  effect as if they had been made on and as of the
Closing Date.

                           (b) Performance of Obligations.  Each Purchaser shall
have performed and complied with all agreements and conditions  herein  required
to be performed or complied with by them on or before the Closing Date, and each
Purchaser shall have delivered payment to the Company in respect of its purchase
of Securities.

                           (c)    Qualifications,    Legal    Investment.    All
authorizations,  approvals, or permits, if any, of any governmental authority or
regulatory  body of the  United  States or of any  state  that are  required  in
connection with the lawful sale and issuance of the Securities  pursuant to this
Agreement  shall have been duly obtained and shall be effective on and as of the
Closing Date. No stop order or other order  enjoining the sale of the Securities
shall have been issued and no proceedings  for such purpose shall be pending or,
to the knowledge of the Company,  threatened by the SEC or any  commissioner  of
corporations  or similar  officer  of any state  having  jurisdiction  over this
transaction. At the time of the Closing, the sale and issuance of the Securities
shall be legally  permitted by all laws and  regulations to which each Purchaser
and the Company are subject.

         8.       MISCELLANEOUS.

                  8.1  Governing  Law. This  Agreement  shall be governed by and
construed  under the laws of the  Commonwealth  of  Pennsylvania  as  applied to
agreements among California residents,  made and to be performed entirely within
the  Commonwealth  of  Pennsylvania  without regard to principles of conflict of
laws.

                                      -11-

<PAGE>

                  8.2  Successors  and Assigns.  Except as  otherwise  expressly
provided  herein,  the  provisions  hereof shall inure to the benefit of, and be
binding upon, the successors,  assigns, heirs, executors,  and administrators of
the parties hereto.

                  8.3 Entire  Agreement.  This Agreement and the Exhibits hereto
and thereto,  and the other  documents  delivered  pursuant  hereto and thereto,
constitute  the full and entire  understanding  and agreement  among the parties
with regard to the subjects  hereof and no party shall be liable or bound to any
other  party in any manner by any  representations,  warranties,  covenants,  or
agreements  except as specifically set forth herein or therein.  Nothing in this
Agreement,  express or implied, is intended to confer upon any party, other than
the parties  hereto and their  respective  successors  and assigns,  any rights,
remedies,  obligations,  or  liabilities  under or by reason of this  Agreement,
except as expressly provided herein.

                  8.4  Separability.  In case any  provision  of this  Agreement
shall be invalid, illegal, or unenforceable, it shall to the extent practicable,
be  modified  so as to make it  valid,  legal and  enforceable  and to retain as
nearly as practicable the intent of the parties, and the validity, legality, and
enforceability  of the remaining  provisions shall not in any way be affected or
impaired thereby.

                  8.5 Amendment and Waiver. Except as otherwise provided herein,
any term of this  Agreement  may be amended,  and the  observance of any term of
this  Agreement  may be waived  (either  generally or in a particular  instance,
either retroactively or prospectively, and either for a specified period of time
or indefinitely), with the written consent of the Company and the Purchaser. Any
amendment or waiver  effected in  accordance  with this section shall be binding
upon  each  future  holder  of  any  security  purchased  under  this  Agreement
(including  securities  into which such  securities have been converted) and the
Company.

                  8.6 Notices. All notices and other communications  required or
permitted  hereunder shall be in writing and shall be deemed  effectively  given
upon personal delivery, on the first business day following mailing by overnight
courier,  or on the fifth day following mailing by registered or certified mail,
return  receipt  requested,  postage  prepaid,  addressed to the Company and the
Purchaser at the respective addresses included herein.

                  8.7 Fees and Expenses.  The Company and the  Purchasers  shall
bear their own  expenses  and legal fees  incurred on its behalf with respect to
this Agreement and the transactions  contemplated hereby;  provided, that in the
event  that the  transactions  contemplated  hereby  close,  the  Company  shall
reimburse the Placement  Agent in accordance with the provisions of Section 6.5.
The fees and expenses for which the Company shall be liable  hereunder  shall in
no event  exceed  $50,000  in the  aggregate.  Purchasers  acknowledge  that the
Placement Agent will receive a commission  equal to 7.5% of the aggregate amount
sold in the Offering and will be entitled to purchase for nominal  consideration
a  five-year  warrant to purchase up to 85,714  shares of the  Company's  Common
Stock at an  exercise  price  equal  to  $0.875,  as  described  in the  Private
Placement Materials under the heading "Summary of the Offering."

                                      -12-

<PAGE>

                  8.8 Titles and  Subtitles.  The titles of the  paragraphs  and
subparagraphs  of this  Agreement are for  convenience of reference only and are
not to be considered in construing this Agreement.

                  8.9 Counterparts. This Agreement may be executed in any number
of  counterparts,  each of which shall be deemed an  original,  but all of which
together shall constitute one instrument.

                                      -13-