Exhibit 10.11

                    SUNRISE TECHNOLOGIES INTERNATIONAL, INC.

                    U.S. NOTE AND WARRANT PURCHASE AGREEMENT


         This 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  1.1(c)
(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 D Purchasers will purchase Notes and Warrants pursuant
to this Agreement and  Regulation S Purchasers  will purchase Notes and Warrants
pursuant  to an  Offshore  Note and  Warrant  Purchase  Agreement  of even  date
herewith (the "Offshore 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 "Offering 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,  up to  1,714,286  shares  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 an Offshore 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  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 Offshore 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 and Warrants 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 and Warrants 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 7.1(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,  subject to the terms
hereof and thereof.  If such a subsequent  closing is held, the terms  "Closing"

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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  shall  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 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.  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.  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.  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 Private  Placement
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  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,  the  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  Warrant   Agreement,   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
creditor's  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,  when filed,  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 of the
Subsidiary;  (b)  result in any  violation  of or  default  or

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loss of a benefit under, or permit the  acceleration of any obligation under (in
each  case,  upon the  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  resignation,
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,  since  September  30,  1996,  the  Company has not (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 opthalmic 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. Each of this Agreement and the Registration
Rights  Agreement  has been duly  authorized,  if  Purchaser  is a  corporation,
partnership,  trust or  fiduciary,  and has been  executed and  delivered by the
Purchaser,  and, upon due execution and delivery by the Company,  this Agreement
and the Registration  Rights  Agreement will be valid and binding  agreements of
the  Purchaser  and  subject  as to  enforceability  to  applicable  bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or affecting
creditor's  rights  from time to time in effect and  subject  to general  equity
principles.

                  4.3      Investment Representations.

                           (a)  Purchaser  is  acquiring  the  Notes for its own
account,  not as 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  Securities  Act of 1933,  as amended  (the  "Act"),  except
pursuant to an effective registration statement under the Act.

                           (b) Purchaser understands that (i) the Warrants,  the
Conversion Shares and the Warrant Shares  (collectively,  the "Securities") 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;  (ii)  each  of such
Securities  (unless  such  Warrant  Shares  have  been  registered  prior to the
exercise of such Warrants) will be endorsed with the following legends:

                  A) THE SECURITIES  REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),  OR UNDER THE
         SECURITIES  LAWS  OF  ANY  STATE.   THESE  SECURITIES  ARE  SUBJECT  TO
         RESTRICTIONS ON  TRANSFERABILITY  AND RESALE AND MAY NOT BE TRANSFERRED
         OR RESOLD EXCEPT AS PERMITTED  UNDER THE ACT AND THE  APPLICABLE  STATE
         SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION  THEREFROM.  THE
         ISSUER OF THESE  SECURITIES  MAY  REQUIRE AN OPINION OF COUNSEL IN

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         FORM AND  SUBSTANCE  SATISFACTORY  TO THE ISSUER TO THE EFFECT THAT ANY
         PROPOSED  TRANSFER  OR  RESALE  IS IN  COMPLIANCE  WITH THE ACT AND ANY
         APPLICABLE STATE SECURITIES LAWS;

         B) Any legend  required  to be placed  thereon by  applicable  federal,
         state, or Canadian Provincial 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;

                           (c)  Purchaser  has received and reviewed the Private
Placement  Materials.  In  addition,  Purchaser  has been  furnished  with  such
materials and has been given access to such information  relating to the Company
as it or its  qualified  representative  has requested and has been afforded the
opportunity to ask questions  regarding the Company and the  Securities,  all as
Purchaser has found necessary to make an informed investment decision.

                           (d)  Purchaser  is an  "accredited  investor" as such
term is  defined  in Rule  501 of the Act and was not  formed  for the  specific
purpose of acquiring the Securities.

                           (e)  Purchaser  is not a  resident  of  Canada or any
territory  thereof,  or of any  jurisdiction  outside the United  States and its
territories.

                  4.4      Pennsylvania Requirements.

                  Each  Purchaser who is a Pennsylvania  resident,  or which has
its principal  place of business in  Pennsylvania  and is not an  "institutional
investor"  within the  meaning  of the  Pennsylvania  Securities  Act of 1972 as
amended and the  regulations  thereunder,  hereby  agrees not to sell any of the
Securities for a period of 12 months from the date hereof,  except in accordance
with the  requirements  of  section  203(d) of such act and  regulation  204.011
thereunder.

         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 the 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  fiscal

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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 Sales to  Accredited  Investors.  Placement  Agent has and
will only make offers and sales of the  Securities to Regulation D Purchasers or
potential  Regulation  D Purchasers  it  reasonably  believes to be  "accredited
investors" as that term is defined in Rule 501(a) under the Act;

                  6.2   Regulation  D  Compliance.   Offers  and  sales  of  the
Securities  have and will be made in compliance with Regulation D, to the extent
applicable to the Placement Agent, and the Placement Agent has not and shall not
offer to sell the  Securities  by any form of  general  solicitation  or general
advertising that is prohibited by Rule 502(c) promulgated under the Act.

                  6.3  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 any of the Securities and it will
not,  directly or  indirectly,  offer,  sell or deliver any of the Securities or
distribute or publish any prospectus,  circular, advertisement or other offering
material in relation to any of the Securities 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.

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

                  6.5 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.

                  6.6 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

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equal to five  percent (5%) of the number of  Conversion  Shares sold 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
(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.

                  6.7 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.

                  6.8 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.

                                      -9-

<PAGE>

                           (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 the Purchasers
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  dated  as of the  Closing  Date
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 and by the
Placement  Agent in Sec. 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 and
the Placement  Agent 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 Notes.

                           (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.

                                      -10-

<PAGE>

         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.

                  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 and
with  respect to any  amendment  or waiver of the  provisions  of Section 6, the
Placement  Agent.  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

                                      -11-

<PAGE>

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."

                  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.


                                      -12-