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     EXHIBIT 10.75


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                        PURCHASE AND DISTRIBUTORSHIP AGREEMENT

     This Agreement made and entered into on this 23rd day of January, 1997 by
     and between Biomagnetic Technologies, Inc., a California corporation having
     its principal place of business at 9727 Pacific Heights Boulevard, San
     Diego, California 92121, U.S.A. ("BTi") and Sumitomo Metal Industries,
     Ltd., a Japanese corporation having its principal place of business at 1-3,
     Otemachi 1-chome, Chiyoda-ku, Tokyo, 100 Japan ("Sumitomo").

                                     WITNESSETH:

     WHEREAS, BTi has developed, manufactured and sold biomagnetometers, and has
     also placed up-graded successors thereof on the market;

     WHEREAS, under the Purchase & Distributorship Agreement entered into on the
     22nd day of January, 1990 between BTi and Sumitomo (the "Original
     Agreement"), BTi appointed Sumitomo as an exclusive distributor of BTi's
     biomagnetometers in Japan and certain other countries and Sumitomo accepted
     such appointment.

     WHEREAS, Sumitomo has completed clinical experiments of BTi's 37ch
     biomagnetometer and obtained the governmental approval for sale thereof as
     a medical device from the Ministry of Public Welfare of Japan;

     WHEREAS, BTi recognizes that, with respect to the sales of BTi's
     biomagnetometers in Japan, Sumitomo has attained a certain result which is
     reasonably satisfactory to BTi under the current condition of market for
     biomagnetic imaging devices; and

     WHEREAS, BTi and Sumitomo agree to extend the term of distributorship
     granted to Sumitomo under the Original Agreement and modify some terms and
     conditions provided in the Original Agreement.

     NOW, THEREFORE, in consideration of the premises, covenants and
     undertakings herein set forth, the parties agree as follows:


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     Article 1. DEFINITION

     As used in this Agreement, the following terms have the meaning specified
     in this Article 1.

     1.1  The term "Product(s)" means any and all biomagnetometer products
     (including, without limitation, the magnetically shielded room)
     manufactured or sold by BTi. The current Products are described and listed
     on Exhibit A attached hereto. The list of the Products will be altered from
     time to time by adding or eliminating certain listed products as BTi adds
     or discontinues biomagnetometer products from its then published list of
     products and components generally available for purchase and sale.

     1.2  The term "Exclusive Territory" means, as far as an export license from
     the U.S. government or governmental authority is obtainable, Japan.

     1.3  The term "Non-Exclusive Territory" means, as far as an export license
     from the U.S. government or governmental authority is obtainable, China.

     1.4  The term "Completion Certificate" means the certificate to be executed
     and delivered to BTi by Sumitomo upon the completion of installation of a
     Product and demonstration that such Product operates in compliance with the
     Performance Test Program (defined below).

     1.5  The term "Confidential Information" means Information owned or
     controlled by BTi or Sumitomo (the "protected party") respectively, which
     is marked "confidential" or "proprietary" or which is identified by the
     protected party at the time of disclosure to be of a confidential or
     proprietary nature and confirmed in writing by the parties, other than
     Information which:


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          (a)  is or becomes publicly known through no fault of the other party
     receiving such Information (the "receiving party");

          (b) was already possessed by the receiving party, prior to disclosure
     by the protected party, without any obligation of confidentiality as
     demonstrated by the receiving party's written records; or

          (c) is or becomes known to the receiving party without any obligation
     of confidentiality from a third party who is lawfully in possession of such
     Information and is not subject to an obligation of confidentiality with the
     protected party with respect to the Information.

          Except for internal components of the Products, including their
     design, composition, engineering and function which are excepted from the
     definition of Confidential Information pursuant to (a), (b) or (c) above,
     the internal components of the Products, including their design,
     composition, engineering and function, shall be deemed to be Confidential
     Information.

     1.7  The term "Information" means all data, know-how and information
     (whether communicated orally or in writing) and physical objects, including
     without limitation, drawings, specifications, designs, computer flow
     charts, object codes, cost and price data, customer and supplier data,
     business plans, financial information, information concerning marketing,
     operations, computer programming, disclosed or furnished under this
     Agreement.

     1.8  The term "Minimum Quantity" means the number of the Products which
     Sumitomo needs to purchase from BTi during the initial term or each renewal
     term in order to receive the rights set forth in Article 2.1 during the
     subsequent term of this Agreement. The parties recognize that Sumitomo's
     failure to attain the Minimum Quantity for

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     the initial term or each renewal term shall not be construed as the breach
     of this Agreement.

     1.9  The term "Performance Test Program" means a program which includes
     performance standards and performance test procedures for each type of
     Product and shall be established and published by BTi from time to time.

     Article 2.    APPOINTMENT

     2.1  During the term of this Agreement, BTi hereby appoints Sumitomo as its
     exclusive distributor in the Exclusive Territory and its non-exclusive
     distributor in the Non-Exclusive Territory for marketing, sales and
     distribution of the Products and Sumitomo accepts such appointment and
     agrees to diligently promote the distribution and sale of Products.

     2.2  Sumitomo agrees neither to sell, directly or indirectly, inside or
     outside of the Exclusive Territory any products which directly compete with
     the Products nor to sell, directly or indirectly, the Products outside the
     Exclusive Territory and the Non-Exclusive Territory. BTi agrees not to
     directly or indirectly sell the Products in the Exclusive Territory through
     any channel other than Sumitomo and also agrees to refer to Sumitomo all
     such inquiry or quotation for the Products as originates from the Exclusive
     Territory. Sumitomo's obligation under this Article 2.2 shall survive and
     remain in full force and effect for a period of three (3) years
     immediately following the termination of this Agreement by BTi as a result
     of Sumitomo's breach hereof as set forth under Article 14.2.

     2.3  BTi shall sell its Products, and shall use its best efforts to cause
     any other distributor of its Products to sell its Products, only to
     customers who, to the best knowledge and belief of BTi or such distributor
     (as the case may be), does not intend to resell in the Exclusive Territory
     the Products purchased from BTi or such distributor. Sumitomo shall sell
     the Products only to


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     customers who, to the best knowledge and belief of Sumitomo, do not intend
     to resell outside of the Exclusive Territory and the Non-Exclusive
     Territory the Products purchased from Sumitomo.

     Article 3.     BTI'S COVENANTS

     3.1  BTi shall pay Sumitomo a fee of *************** United States dollar
     (**********) for each Product to be sold by BTi, its affiliate or its
     distributor in the countries where Sumitomo was formerly granted the
     exclusive distribution right under the Original Agreement except the
     Exclusive Territory and Non-Exclusive Territory.

     3.2  Each payment of the fee set forth in Article 3.1 above shall be made
     in United States dollars within ninety (90) days upon execution of
     certificate of completion for the relevant Product and shall be effected by
     wire transfer to the following account or such other bank account as
     Sumitomo may designate in writing.

               Bank Name:     Sumitomo Bank, Ltd., Tokyo Main office 3-2,
                              Marunouchi 1-chome, Chiyoda-ku Tokyo 100, JAPAN
               Holder:        Sumitomo Metal Industries, Ltd.
               Account No.:   ******** (current account)

     3.3  BTi shall report in writing to Sumitomo the following information with
     respect to each individual sales of the Products made by BTi, its affiliate
     or its distributor within the countries where Sumitomo was formerly granted
     the exclusive distribution right under the original Agreement except the
     Exclusive Territory and Non-Exclusive Territory.

               - Date of certificate of completion
               - Type of the Product
               - Customer's name and address

     3.4  The parties agree that the Distribution Agreement entered into on the
     lst day of July, 1995 between the parties which provides for the
     distribution right of the Products within South Korea shall be


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     terminated on the 22nd day of January, 1997.

     Article 4. PRIVITY

     It is understood that either party shall be in no way the agent or legal
     representative of the other party for any purpose whatsoever and shall have
     no right or authority to create or assume any obligation or responsibility
     of any kind, expressed or implied, in the name of or on behalf of the other
     party.

     Article 5. INDIVIDUAL CONTRACT AND FORM

     An individual sale and purchase of the Products under this Agreement shall
     be made by Sumitomo's placement of an order in such form as shall be agreed
     upon by the parties and BTi's acceptance thereof. BTi shall not
     unreasonably withhold acceptance. Unless previously rejected in writing by
     BTi, Sumitomo's order shall be deemed to have been accepted by BTi upon
     expiration of seven (7) days from the date of receipt by BTi of such order.

     Article 6. PRICE

     6.1 Price(s) applied to the sales of the Products and components and parts
     thereof between BTi and Sumitomo shall be set forth in the price list (the
     "Price List"); the latest version of the Price List effective as of the
     date hereof is attached hereto as *********. BTi shall give one month's
     prior notice to Sumitomo of any proposed changes of the Price List and
     shall discuss any suggestions that Sumitomo may have. In the event that BTi
     revises the Price List, BTi shall promptly notify and deliver to Sumitomo a
     revised Price List reflecting such revisions.

     6.2 The price(s) for the Products set forth in the Price List includes (a)
     provision of the system portion of the Products, (b) installation of the
     Products, and (c) 90-day warranty and 9-month


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     preventive and remedial maintenance services (the "Services"). Details of
     each item (a) through (c) have been specified in writing by BTi to
     Sumitomo.

          (1) Installation and Service

          If Sumitomo elects to have BTi perform the installation and/or the
          Service, the price applied for each installation and Service shall be
          the lessor of (a) the respective price for installation and Service
          specified in the Price Breakdown or (b) BTi's then existing charges
          for time and materials of each installation and Service to BTi plus an
          amount to be reasonably determined by BTi as overhead with respect
          thereto consistent with its past practice.

          (2) Site Survey

          BTi shall not separately charge Sumitomo for a site survey unless BTi
          has performed a site survey and Sumitomo fails to place an order for
          the Products for which the site survey has been conducted by BTi
          within one year from the completion of such site survey. If Sumitomo
          fails to place such order with Bti, Sumitomo shall pay to BTi the
          price for the site survey which shall be the price listed in the List
          Price effective at the time of Sumitomo's request for the said site
          survey, plus BTi's actual travel expenses incurred for conducting the
          site survey.

     6.3 Notwithstanding the provisions of Articles 6.1 and 6.2, Sumitomo may
     from time to time request BTi any discount on each sale of the Products in
     order to maintain price competitiveness of the Products in the Exclusive
     Territory and the Non-Exclusive Territory. In the event that BTi receives
     such request, BTi and Sumitomo shall in good faith discuss the discount.

     Article 7. SHIPMENT


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     7.1  Shipment of the Products shall be made on an FOB "Ex-factory" basis.
     Sumitomo shall obtain necessary import permits and license and provide to
     BTi all end-user information necessary to obtain export license. BTi shall
     obtain and provide Sumitomo with all export licenses or other official
     authorization necessary for the export of Products as well as the
     commercial invoice in proper form. BTi shall perform in-house inspection
     and testing of the Products or components thereof which it manufacturers
     and ships so as to verify that the Products operate in accordance with the
     performance test standards included as part of the Performance Test
     Program. BTi will supply Sumitomo with documentation indicating whether or
     not the Products or components thereof which BTi manufactures and ships
     have passed such in-house inspection. BTi will direct its current
     manufacturer of the shielded room to deliver to Sumitomo the test report
     which is routinely prepared by such manufacturer indicating the magnetic
     shielding factor of each panel comprising the shielded room kit prior to
     shipment of each shielded room. In the event that BTi uses a different
     manufacturer to supply the shielded room, BTi will request that
     manufacturer to supply the same or a substantially similar test report as
     provided by the current manufacturer of the shielded room.

     7.2  BTi shall give a thirty (30) day prior written notice to Sumitomo of
     the expected date of a shipment of the Products and the identity of the
     manufacturer of the shielded room. Sumitomo shall make necessary 
     arrangements with a carrier to take delivery of the Products and advise 
     BTi in writing as to the identity of the carrier at BTi's facility at 9727
     Pacific Heights Boulevard, San Diego, California or, in the case of the 
     shielded room, at the identified manufacturer's facility, the address of 
     which is set forth below, at least ten (10) day prior to the scheduled 
     shipment date (the "10-day Shipment Notice").  Following are the current 
     manufacturers of the shielded room:
          1.   Vacuumschmelze GmbH, Gruner Weg 37, D-63450 Hanau, Germany
          2.   IMEDCO AG, Industriestrasse, West 14, CH-4614, Hagendorf,
               Switzerland
          3.   Amuneal Manufacturing Corp., 4737 Darrah Street, Philadelphia,


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               PA 19124-2705, U.S.A.

     In the event that BTi or the manufacturer of the shielded room changes its
     address, BTi will give Sumitomo thirty (30) day prior written notice of
     such new address from which Sumitomo will take delivery of shipments from
     such entities.

     7.3  Immediately prior to acceptance by BTi of an order for Products
     submitted by Sumitomo, BTi will indicate in writing to Sumitomo a specific
     shipment date (which will be subject to Sumitomo's approval) for such
     ordered Products which date will be between six (6) and twelve (12) months
     after acceptance of such order. In the event that BTi and Sumitomo cannot
     agree on a shipment date for an order for Products, Sumitomo will have the
     right to withdraw such order and BTi will have the right to reject such
     order. In the event that BTi fails to ship the Products on the agreed-upon
     scheduled shipment date, BTi shall pay liquidated damages to Sumitomo in
     the amount of ************** of the purchase price payable by Sumitomo
     for such Products per week for each full week that the shipment is delayed
     beyond the scheduled shipment date.

     Article 8. PAYMENT

     8.1  All payments to be made by Sumitomo to BTi hereunder shall be effected
     by wire transfer to the account of BTi at Silicon Valley Bank, 4600 Campus
     Drive, Suite 105, Newport Beach, CA 92660, ********************, Acct. No.
     ***********, or such other bank and account as BTi may designate in writing
     and shall be made in U.S. Dollars.

     8.2  The payment terms for the Products purchased by Sumitomo from
     BTi under this Agreement shall be as follows:

     (1)  Forty percent (40%):     within seven days immediately
                              following the date of BTi's
                              acceptance of Sumitomo's order


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         (2)  Forty percent (40%):      within seven days immediately
                                    following the date of delivery of
                                    the 10-day Shipment Notice to BTi
                                    (but in any event prior to release
                                    of the Products by BTi for
                                    shipment)

         (3)  Twenty percent (20%):     within seven days immediately
                                    following the date on which the
                                    installation of the Products at the
                                    customer's facility is completed and
                                    Sumitomo executes a Completion
                                    Certificate

     Article 9. TITLE AND RISK

     Title to and all risks of loss or damages to the Products shall pass from
     BTi to Sumitomo when the Products are duly delivered to the carrier
     Ex-Factory at BTi'S facility in San Diego or, in the case of the shielded
     room, Ex-Factory at such manufacturer's facility pursuant to Article 7.1
     hereof.

     Article 10. SALES PROMOTION AND ASSISTANCE

     10.1 BTi shall keep Sumitomo provided with a reproducible copy of the same
     marketing materials and information regarding the Products as BTi provides
     to its customer prospects, in English. With respect to each type of the
     Products purchased by Sumitomo, BTi shall furnish Sumitomo with (a)
     over-all lists and specifications of all major components of such Products
     and (b) a collection of materials regarding the Products including the
     following manuals and information:

          (a)  description and explanation of the Products and each major
               component thereof;
          (b)  a manual for site installation;


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          (c)  operation manual;
          (d)  user's maintenance manual; and
          (e)  all related documentation that normally accompanies such manuals.

     10.2   With respect to the materials set forth in Article 10.1 above,
     Sumitomo may, at its discretion, designate which materials are appropriate
     for translation into Japanese for delivery to prospective customers.
     Sumitomo will translate those materials into Japanese but shall provide BTi
     with a reasonable opportunity to edit the Japanese translation before they
     are used.

     10.3   BTi shall have good faith discussion with Sumitomo regarding
     modifications to the Products and their applications requested by Sumitomo
     on a case by case basis and if BTi determines to make any such
     modifications, BTi and Sumitomo will negotiate in good faith as to which
     party will bear the cost or some portion of the cost of such
     modifications.

     10.4   Subject to reasonable notification, BTi shall use its best efforts, 
     at Sumitomo's cost, to dispatch one or more of its personnel to Japan in 
     order to make presentations at symposiums or other exhibitions.

     10.5   The parties shall regularly hold sales and promotion meetings so 
     that the parties may exchange information and have discussion about market
     conditions, needs of customers, introduction of new products and other
     marketing strategies. Each party shall bear its own costs and expenses
     incurred in connection with such sales and promotion meetings.

     10.6   In addition to the repair and replacement of defective Products or
     components thereof to be performed without separate charge pursuant to
     Article 12.5 hereof, BTi shall, at the request of Sumitomo, use its best
     efforts to dispatch its representatives to the site of Sumitomo's customer
     so as to assist Sumitomo in rendering after-sales service to


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     the customer, subject to reasonable notice by and at the cost of Sumitomo.

     10.7   With respect to each type of the Products to be released hereunder,
     Sumitomo shall diligently seek to obtain from the Ministry of Public
     Welfare of Japan ("MPW") an approval for sales of such Product as a medical
     device in Japan, subject to BTi's cooperation reasonably requested by
     Sumitomo including, without limitation, BTi's filing of 510(k) pre-market
     notification to Food and Drug Administration ("FDA") if MPW requires the
     evidence of such filing in process of the approval.

     Article 11. CONFIDENTIALITY

     11.1   Each party shall hold in confidence and, without the prior written
     consent of the other party, not disclose or authorize the disclosure of or
     communicate in any manner whatsoever to any third parties (except its
     outside counsel or consultants who are legally bound by an identical
     confidentiality obligation), nor use any Confidential Information furnished
     or disclosed to it hereunder for any other purpose than contemplated in
     this Agreement, except (a) as necessary to file an application with MPW and
     to get its approval, (b) as necessary to disclose to the Securities and
     Exchange Commission by request, or (c) as required by law or regulations;
     provided, however, that each party shall consult with each other as to how 
     to maximize confidential treatment of the Confidential Information within 
     the parameters of such laws or regulations. If a party becomes 
     legally required to disclose any Confidential Information, such party will
     give the other party prompt notice of such fact so that the other party may
     obtain a protective order or other appropriate remedy concerning any such 
     disclosure and/or waive compliance with the non-disclosure provisions of 
     this Agreement. The party required to make disclosure will fully cooperate 
     with the other party in connection with efforts to obtain any such order or
     other remedy. If any such order or other remedy does not fully preclude
     disclosure or the other party waives such compliance, the party required to
     make disclosure will make sure disclosure only to the extent that such
     disclosure is legally required


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     and will use its best efforts to have confidential treatment accorded to
     the disclosed Confidential Information.

     11.2   Any public release relating to the execution of this Agreement or
     the terms thereof shall be subject to the prior consent of the parties; 
     provided, however, that with respect to any public release to be filed 
     with the Securities and Exchange Commission the filing party need only 
     provide the non-filing party with a reasonable prior opportunity to 
     review the release.

     11.3   Without the prior written consent of the party owning the 
     Confidential Information, the other party will not disclose any 
     Confidential Information to any employees except those who need to know 
     such Confidential Information for purposes of this Agreement, and each of 
     the employees to whom any Confidential Information is revealed shall 
     previously have been informed of the confidential nature of the 
     Confidential Information and have agreed to be bound by the terms and 
     conditions of an identical confidentiality agreement. The receiving party 
     shall ensure that the Confidential Information is not used or disclosed by 
     such employees except as permitted by this Agreement and shall be 
     responsible for any breach by its employees, consultants, or agents of 
     these confidentiality obligations.

     11.4   Each party shall accord all Confidential Information at least the 
     same degree of care and confidence with which it treats its own similar
     information of like nature and make all efforts to assure the
     confidentiality of the Confidential Information by its officers and
     employees.

     Article 12. WARRANTIES AND LIABILITIES

     12.1   BTi represents and warrants that BTi has full right, power and
     authority to enter into this Agreement and to perform and discharge its
     duties and obligations under this Agreement and that the execution,
     delivery and performance of this Agreement will not violate, result in the
     breach of or cause a default under any material contract or


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     agreement to which it is a party. BTi also represents and warrants that, to
     its best knowledge, it has complied to the date of this Agreement with all
     applicable U.S. federal and state regulatory requirements with respect to
     the manufacture and sale of the Products, and that each set of the Products
     shipped by BTi to Sumitomo shall, to BTi's best knowledge, comply with all
     applicable U.S. federal and state regulatory requirements, as in effect
     at the time of the delivery, with respect to the manufacture and sale of
     such Products and BTi shall notify Sumitomo prior to shipment of any
     Products to Sumitomo of any violation thereof or noncompliance therewith.
     BTi represents that it will timely file a 510(k) pre-market notification
     with FDA for each type of Product to be marketed hereafter, and will report
     to Sumitomo of information regarding that notification.

     12.2   BTi represents and warrants that, to its best knowledge, there have
     been no product liability claims, actions, threatened litigations or
     litigations by any third party against BTi in connection with the
     manufacture, use and sale of the Products.

     12.3   BTi represents and warrants that all Products to be shipped by BTi
     to Sumitomo hereunder shall comply with specifications and performance 
     standards established and published by BTi from time to time with 
     respect to such Products and shall be free from all material defects in 
     design, material and workmanship which would adversely affect the 
     safety, utility or performance of the Products in accordance with their 
     respective specifications and performance standards. BTi shall supply 
     Sumitomo with the most current specifications and performance standards 
     for a Product at the time Sumitomo places an order for such Product.

     12.4   Should, in connection with the installation of the Products by
     Sumitomo, the Products fail to pass the performance test which shall be
     carried out in accordance with the Performance Test Program, BTi shall,
     upon request by Sumitomo, send its qualified personnel to the installation
     site to assist in the determination as to why the Products have failed to
     attain the established performance standards. If BTi

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     determines to Sumitomo's reasonable satisfaction that such failure to
     attain the performance standards resulted from Sumitomo's failure to
     properly install the Products in accordance with BTi's instruction,
     Sumitomo shall pay all expenses incurred by BTi to send its personnel to
     the installation site. If such failure resulted from any design or material
     manufacturing defects as set forth in Article 12.3 above, BTi shall, at its
     cost, cure such defects, in which case BTi shall bear all expenses to send
     its personnel. Should BTi fail to cure such defects within sixty (60) days
     from the arrival date of BTi personnel at the installation site, Sumitomo
     may reject the Product and reverse the sale, in which case BTi shall return
     all the money actually received from Sumitomo for that Product and
     reimburse all actual costs and expenses with respect to installation of
     that Product incurred by Sumitomo, including without limitation,
     transportation cost.

     12.5   In the event any Products or components or parts thereof shall be
     proved to be defective (the "defective products") within a period of
     fourteen (14) months from the shipment from BTi's facility in San Diego or
     twelve (12) months from the date of installation and execution and delivery
     of the Completion Certificate, whichever comes earlier, BTi shall, at its
     discretion and upon prompt notice to Sumitomo, perform one of the
     following free of charge:

          (1)  Provide for the replacement of the defective products. BTi shall
     be responsible for shipment thereof on an FOB Ex-factory basis at BTi's 
     facility or FOB Ex-factory at the manufacturer's facility (in case of
     the shield room) basis, as the case may be, and Sumitomo shall bear and pay
     all transportation cost (from such facility to the site of Sumitomo's
     customer) thereof;

          (2)  Provide for repair work for the defective products at
     the site. BTi will send its personnel or representative to perform
     the repair work at the site of Sumitomo's customer;

          (3)  Provide for both of the foregoing (1) and (2);

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<PAGE>

          (4)  Provide for repair work for the defective products at BTi's
     facility or other facility designated by BTi. Sumitomo shall, at BTis
     reasonable request, send the defective products to BTi's facility or other
     facility so that BTi may carry out the repair work. Sumitomo shall bear and
     pay all transportation cost thereof.

     If, upon authorization by BTi, Sumitomo provides any substantial repair
     work and/or replacement work for the defective products, BTi will reimburse
     Sumitomo for the actual costs and expenses incurred by Sumitomo with
     respect to such repair or replacement work.

     12.6  BTi shall, at the request of Sumitomo, deliver Product components or
     parts thereof (other than replacement or repaired components or parts for
     defective products which are to be replaced or repaired by BTi pursuant to
     Article 12.5 above) at a price set forth in the Price List so that Sumitomo
     may perform after sales service to its customer and Sumitomo shall bear and
     pay all transportation cost (from the said facility to the site of
     Sumitomo's customer).

     12.7  Each party shall be responsible and liable for the safety and well
     being of its own employees, including, without limitation, any injury that
     such employee may sustain in connection with the performance of this
     Agreement, and each party hereby indemnifies and agrees to hold harmless
     the other party from any and all claims, liability, damages and costs
     (including reasonable attorney's fees) that may be asserted against or
     incurred by such party with respect to injuries to, or other damages
     incurred by, an employee of the indemnifying party.

     12.8  Except with respect to the specific representations and warranties
     made by BTi hereunder, all Products shall be sold by BTi without any
     implied warranty of merchantability or fitness for a particular purpose or
     other implied warranty.

     Article 13. TRADEMARKS AND INDUSTRIAL PROPERTY RIGHTS


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<PAGE>

     13.1  BTi represents and warrants that to its best knowledge, there are no
     industrial property rights infringement claims or actions by any third
     parties as of the date of this Agreement.

     13.2  BTi warrants that to its best knowledge, the use, sale, and
     distribution of the Products by Sumitomo shall not infringe any industrial
     property rights of any third party in the Exclusive Territory and
     Non-Exclusive Territory. This provision does not require or impose any duty
     on BTi to have conducted or to conduct an investigation of registered
     industrial rights of third parties in the Exclusive Territory and
     Non-Exclusive Territory.

     13.3  If BTi files any patent for the Products in Japan, it shall promptly
     inform Sumitomo of such filing.

     13.4  BTi hereby grants Sumitomo the right during the term of this 
     Agreement to use BTi's trademarks and logos in connection with the sale,
     distribution and use of the Products in the Exclusive Territory and
     Non-Exclusive Territory (including, without limitation, the trademark
     "Magnes") .  Sumitomo shall, at BTi's request, seek to register in Japan 
     (in BTi's name and title) all such trademarks and logos to be used by 
     Sumitomo in connection with the use, sale and distribution of the Products.
     The expense incurred with respect to such registration in Japan shall be 
     borne by BTi.  Sumitomo hereby agrees to follow BTi's reasonable 
     instructions regarding the use and protection of such trademarks and logos
     and to notify BTi of any known actual or potential claims of infringement.

     13.5  If a third party brings an action, litigation, or claim against
     Sumitomo or its customers that the use, sale, or distribution of the
     Products or the Products themselves in Japan infringe any industrial
     property rights of the third party (the "Dispute"), BTi shall, with
     Sumitomo's reasonable cooperation, use its best efforts to defend or settle
     such Dispute so that Sumitomo and its customers may continue to use, sell,
     and distribute the Products in accordance with this


                                          17
<PAGE>

     Agreement. Should Sumitomo or the customer, due to BTi's failure to defend
     or settle the Dispute, be unable to use, sell, and distribute in Japan in
     accordance with this Agreement, BTi shall indemnify and hold Sumitomo
     harmless from all damages, liabilities, losses, costs and expenses
     including reasonable attorney's fee with respect to such Dispute.
     Notwithstanding the foregoing in no event shall BTi be liable for, or
     indemnify and hold Sumitomo harmless against, any actual or potential loss
     of profits or other remote damages suffered or incurred by Sumitomo as a
     result of or arising out of a Dispute.

     Article 14. TERM AND TERMINATION

     14.1  This Agreement shall continue in full force and effect initially
     for a term of three (3) years commencing on the 23th day of January, 1997.
     In the event (i) Sumitomo attains the Minimum Quantity for the then-current
     term, and (ii) the parties mutually agree in writing to the Minimum
     Quantity for the subsequent term prior to the expiration of the
     then-current term, this Agreement shall renew for a subsequent term of two
     (2) years and Sumitomo shall continue to have the rights set forth in
     Articles 2.1 and 3.1 for such renewal term. The Minimum Quantity for the
     initial term is *********.

     14.2  Either party may immediately terminate this Agreement upon giving
     notice in writing to the other on the happening of any of the following:

          (1)  If the other party has failed to comply with its material
               obligations hereunder (other than the failure to make a payment
               required under this Agreement, which shall allow the
               non-breaching party to terminate this Agreement upon giving
               notice) after having been notified in writing of such failure and
               having failed to remedy the same within forty-five (45) days from
               the date of such notice.

          (2)  (a) if the other party shall make an assignment for the


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<PAGE>

               benefit of creditors, file a petition in bankruptcy, petition or
               apply to any tribunal for the appointment of custodian, receiver
               or any trustee for it or a substantial part of its assets, or
               shall commence any proceeding under any bankruptcy,
               reorganization, arrangement, readjustment of debt, dissolution or
               liquidation law or statute of any jurisdiction, whether now or
               hereafter in effect; or (b) if there shall have been filed any
               such BONA FIDE petition or application, or any such proceeding
               shall have been commenced against it, in which an order for
               relief is entered or which remains undismissed for a period of
               forty five (45) days or more; or (c) if the other party by any
               act or omission of act shall indicate its consent to, approval of
               or acquiescence in any such petition, application, or proceeding
               or order for relief or the appointment of a custodian, receiver
               or trustee for it or any substantial part of its property, or
               shall suffer any such custodianship, receivership or trusteeship
               to continue undischarged for a period of forty five (45) days or
               more.

     14.3  Sumitomo shall have a right to terminate this Agreement upon giving
     notice in writing to BTi if Sumitomo is unable to sell or use the Products
     due to an infringement claim by a third party relating to industrial
     property rights which BTi is unable to successfully defend or settle within
     a reasonable period of time (but in any event within six (6) months) and
     which results in Sumitomo being unable to use, sell or distribute the
     Products in the Exclusive Territory or Non-Exclusive Territory.

     14.4  If, after 120 days from the scheduled shipment date for a Product, a
     customer terminates its purchase contract with Sumitomo for said Product,
     Sumitomo shall then have the right to terminate its order with BTi for such
     Product.


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<PAGE>

     14.5 Expiration or termination of this Agreement under this Article shall
     be without prejudice to the rights and remedies of the parties against each
     other already accrued as of the date of termination or expiration.

     14.6 Sumitomo may market and sell the Products that it has purchased from
     BTi prior to the termination or expiration of this Agreement.

     14.7 Promptly upon the termination of this Agreement pursuant to Article
     14.2, Sumitomo shall convey and transfer to BTi or to any other entity
     designated by BTi all import licenses and related licenses and rights
     obtained by or on behalf of Sumitomo legally required for the importation,
     use, distribution or sale of the Products by BTi or such designated entity
     in the Exclusive Territory and Non-Exclusive Territory. If such conveyance
     or transfer is not legally permissible, or if such an attempted conveyance
     or transfer would be ineffective or would adversely affect materially the
     rights of BTi so that BTi would not in fact receive substantially all such
     rights, Sumitomo will cooperate with BTi in any reasonable arrangement
     designed to provide BTi or its designee the benefits under any such
     licenses and rights as far as the laws and regulations permit conveyance
     and transfer thereof or other actions by Sumitomo so as to enable BTi or
     the designee to obtain the benefits under such licenses and rights. In the
     event this Agreement is otherwise terminated by Sumitomo for any reason not
     attributable to Sumitomo, BTi will pay all costs and expenses incurred by
     Sumitomo to transfer such licenses and rights, or otherwise give the
     benefits thereunder, to BTi or its designee.

     14.8 Expiration or termination of this Agreement shall not operate to
     terminate any covenants set forth in Articles 12.3 and 12.6 (Warranty and
     Liability), Articles 13.2 and with respect to Products distributed prior
     to the termination of this Agreement Article 13.5 (Trademarks and
     Industrial Property Rights), Article 14.6 (Term and Termination) and
     confidentiality obligation set forth in Article 11 (Confidentiality).
     Except as specifically set forth in Article 2.2 hereof, any termination of
     this Agreement shall not operate to


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<PAGE>

terminate Sumitomo's obligations under Article 2.2.

Article 15. INCENTIVE

In the event that Sumitomo places orders for ************ of the Products 
during the first *********** of the initial three (3) year term of this 
Agreement, BTi shall rebate Sumitomo an amount equal to ****************** 
of the aggregated actual prices of such ************* of the Products. The 
payment of the rebate, if any, shall be made by wire transfer to Sumitomo's 
bank account set forth in Article 3.2 in the United States dollars within 
ninety (90) days after the expiration of the first two (2) years of the 
initial term of this Agreement.

Article 16. FORCE MAJEURE

16.1  Neither party shall be liable for failure to perform part or the whole 
of this Agreement and/or each individual contract under this Agreement when 
such failure is due to fire, flood, strikes, labor troubles or other 
industrial disturbances, inevitable accidents, war (declared or undeclared), 
embargoes, blockades, legal restrictions, riots insurrections, or any other 
similar FORCE MAJEURE causes beyond the control of the parties hereto.

16.2  The party so affected shall promptly give the other party reasonable 
detailed written notice of the causes of such failure and the probable extent 
of continuation of such cause and use its best efforts to avoid or remove 
such cause. Whenever such cause is removed, such party shall resume and 
complete performance with the utmost dispatch.

Article 17. ASSIGNMENT

17.1  Neither party shall assign, transfer or otherwise dispose of this 
Agreement in whole or in part to any person, firm or corporation

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<PAGE>

without the prior written consent of the other party hereto. Notwithstanding 
the foregoing, the acquisition of either party by any third party shall not 
require the consent of the other party to this Agreement and this Agreement 
shall continue in full force and effect between the successor entity and the 
non-acquired party.

17.2  Notwithstanding the foregoing, Sumitomo may transfer its distribution 
right to any wholly-owned subsidiary of Sumitomo without prior written 
consent of BTi. Any other transfers to entities controlled by Sumitomo shall 
require the prior written consent of BTi, which consent shall not be 
unreasonably withheld.

Article 18. ARBITRATION

All disputes arising in connection with this Agreement shall be finally 
settled under the Rules of Conciliation and Arbitration of the International 
Chamber of Commerce by one or more arbitrators appointed in accordance with 
the said Rules. The place of arbitration shall be Switzerland.

Article 19. NOTICE

All notices, requests and other communications that shall or may be given 
hereunder shall be personally delivered or sent by registered air mail, telex 
or telecopy to the appropriate address indicated below or such other address 
as a party may have advised to the other party in writing.

    To BTi:     9727 Pacific Heights Blvd. 
                San Diego, CA 92121-3719 
                Telecopy: 1-619-458-5698

    To Sumitomo: Ote Center Building
                1-1-3 Otemachi Chiyoda-ku, Tokyo 100, Japan
                Attention: General Manager
                           Medical Business Department

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<PAGE>

                    Telex: 22865 SUMIMETAL
                    Telecopy: 81-3-3282-6762

All notice shall take effect upon receipt thereof by the addressee; provided 
that such notice shall PRIMA FACIE be deemed to have been received by the 
addressee:

     (1) if sent by registered air mail, upon expiration of ten 
         (10) days after the date of registration with the 
         postal authorities; or

     (2) if sent by telex or telecopy, upon the expiration of
         two (2) business days after the date of dispatch;
         provided further that, if any such notice is provided
         by telecopy, the party giving such notice shall
         immediately send by registered air mail a hard copy of the
         telecopied notice to the addressee.

Article 20. GOVERNING LAW

This Agreement shall be governed as to all matters, including validity, 
construction and performance, by and under the laws of California, without 
giving effect to the principles of the Conflicts of laws.

Article 21. PRESERVATION OF PRODUCTS

Sumitomo shall not, and shall take reasonable steps to ensure that customers 
do not, disassemble or modify any Products, other than disassembly which may 
be required as part of routine maintenance and repair of such Products.

Article 22. ENTIRE AGREEMENT

This Agreement as the same has been drafted and executed in English 
constitutes the entire and only agreement between the parties hereto

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<PAGE>

relating to the sale of Products and no modification, change and amendment of 
this Agreement shall be binding upon both BTi and Sumitomo except by mutual 
consent in writing of subsequent date signed by authorized officer or 
representative of each of the parties hereto.

Notwithstanding the foregoing, the parties hereby agree that any breach of 
the License and R&D Agreement which was entered into on the 22nd day of 
January, 1990 between the parties shall be deemed a breach of this Agreement 
and any breach of this Agreement shall be deemed to be a breach of the 
License and R&D Agreement.

The failure of either party to enforce at any time any of the provisions of 
this Agreement, or any right with respect thereto, shall not be construed as 
a waiver of such provisions or rights.

In no event shall either party be liable to the other party for actual or 
potential loss of profits or other remote damages suffered or incurred by the 
other party as a result of or arising out of this Agreement or any breach or 
termination hereof.

If any portion or provision of this Agreement shall be held by any court of 
proper jurisdiction to be illegal or void, the remaining portions and 
provisions shall notwithstanding remain in full force and effect.

Unless otherwise specifically agreed upon in this Agreement, each party shall 
bear its costs and expenses in connection with the negotiations, preparation, 
execution, delivery and performance of this Agreement.

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

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<PAGE>

IN WITNESS WHEREOF, the parties hereto have caused this Agreement in English 
and in duplicate to be executed by their duly authorized officers or 
representatives as of the day and year first above written.

                               BIOMAGNETIC TECHNOLOGIES, INC.



                                   /s/ James V. Schumachen
                               By: -------------------------------
                                      James V. Schumachen

                               SUMITOMO METAL INDUSTRIES, LTD.



                                   /s/ Kiyoshi Furukawa
                               By: -------------------------------
                                       Kiyoshi Furukawa















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