BPK RESOURCES INC
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>ex_10-2.txt
<TEXT>
                                                                    EXHIBIT 10.2

                          SECURITIES PURCHASE AGREEMENT

      This  Securities  Purchase  Agreement  (this  "Agreement")  is dated as of
January 30, 2006, by and between BPK RESOURCES,  INC., a Nevada corporation (the
"Company"), and TRIDENT GROWTH FUND, L.P., a Delaware limited partnership,  (the
"Purchaser").

      WHEREAS,  subject to the terms and  conditions set forth in this Agreement
and pursuant to an exemption from registration  contained in Section 4(2) of the
Securities  Act of  1933,  as  amended  (the  "Securities  Act")  and  Rule  506
promulgated thereunder,  the Company desires to issue and sell to Purchaser, and
Purchaser  desires to purchase  from the Company,  securities  of the Company as
more fully described in this Agreement.

      NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement,  and for  other  good and  valuable  consideration  the  receipt  and
adequacy of which are hereby  acknowledged,  the Company and Purchaser  agree as
follows:

                                   ARTICLE I.
                                   DEFINITIONS

      1.1  Definitions.  In  addition  to the terms  defined  elsewhere  in this
Agreement:  (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Debenture(s)  (as defined  herein),  and (b)
the following terms have the meanings indicated in this Section 1.1:

            "Action"  shall have the  meaning  ascribed  to such term in Section
      3.1(i).

            "Affiliate"  means any Person that,  directly or indirectly  through
      one or more  intermediaries,  controls  or is  controlled  by or is  under
      common  control  with a Person,  as such  terms are used in and  construed
      under Rule 144 under the  Securities  Act. With respect to Purchaser,  any
      investment  fund or managed  account  that is  managed on a  discretionary
      basis by the same investment  manager as Purchaser will be deemed to be an
      Affiliate of Purchaser.

            "Business  Day"  means any day except  Saturday,  Sunday and any day
      which shall be a federal  legal  holiday in the United  States or a day on
      which  banking  institutions  in the  State of  Texas  are  authorized  or
      required by law or other government action to close.

            "Change of Control  Transaction" means the occurrence after the date
      hereof of any of (i) an acquisition after the date hereof by an individual
      or legal entity or "group" (as described in Rule  13d-5(b)(1)  promulgated
      under the Exchange  Act) of effective  control  (whether  through legal or
      beneficial  ownership  (as described in Rule 13d-3 of the Exchange Act) of
      capital  stock of the Company,  by contract or  otherwise) of in excess of
      40% of the voting securities of the Company,  or (ii) a replacement at one
      time or within a one year  period of more than  one-half of the members of
      the  Company's  board of directors  which is not approved by a majority of
      those  individuals  who are members of the board of  directors on the date
      hereof (or by those individuals who are serving as members of the board of
      directors  on any date  whose  nomination  to the board of  directors  was
      approved by a majority of the  members of the board of  directors  who are
      members on the date  hereof),  or (iii) the execution by the Company of an
      agreement  to which  the  Company  is a party  or by  which  it is  bound,
      providing  for  any  of the  events  set  forth  above  in  (i)  or  (ii).
      Notwithstanding the foregoing,  the proposed merger of Graphite Technology
      Group,  Inc. with a Subsidiary of the Company under the terms  provided by
      the Company to the Purchaser in writing on or before the Closing Date (the
      "Graphite  Transaction"),  shall  not  constitute  a  "Change  of  Control
      Transaction"  for purposes of the Transaction  Documents;  provided,  such
      transaction is closed on or prior to May 20, 2006.

                                     Page 1
<PAGE>

            "Closing"  means  the  closing  of  the  purchase  and  sale  of the
      Securities pursuant to Section 2.1.

            "Closing  Date" means the Business  Day when all of the  Transaction
      Documents  have been  executed  and  delivered by the  applicable  parties
      thereto,  and all conditions  precedent to (i) Purchaser's  obligations to
      pay the Subscription Amount and (ii) the Company's  obligations to deliver
      the  Securities  have been  satisfied  or  waived.  There may be  multiple
      Closing Dates.

            "Commission" means the Securities and Exchange Commission.

            "Common  Stock"  means the common  stock of the  Company,  par value
      $.001 per share,  and any  securities  into which such common  stock shall
      hereinafter have been reclassified into.

            "Common Stock Equivalents" means any securities of the Company which
      would  entitle  the holder  thereof to acquire at any time  Common  Stock,
      including without limitation,  any debt, preferred stock, rights, options,
      warrants  or  other  instrument  that is at any time  convertible  into or
      exchangeable  for, or otherwise  entitles  the holder  thereof to receive,
      Common Stock.

            "Debenture"  means, the 12% Secured  Convertible  Debenture,  in the
      form of Exhibit A.

            "Disclosure  Schedules" shall have the meaning ascribed to such term
      in Section 3.1 hereof.

            "Effective  Date"  means  the  date  that the  initial  registration
      statement  filed by the Company for the  Registrable  Securities or Common
      Stock is first declared effective by the Commission.

            "Exchange  Act"  means  the  Securities  Exchange  Act of  1934,  as
      amended.

                                     Page 2
<PAGE>

            "Exempt  Issuance"  means the issuance of (a) options or warrants to
      employees,  officers or directors of the Company  pursuant to the 2004 BPK
      Stock  Incentive  Plan  currently in place as of the date hereof which has
      been duly adopted by the Board of  Directors of the Company,  provided the
      number of shares Common Stock or Common Stock  Equivalents into which such
      options or warrants are  exercisable  does not, in the  aggregate,  exceed
      7,500,000 shares, (b) securities upon the exercise of or conversion of any
      securities issued hereunder,  convertible securities,  options or warrants
      issued and outstanding on the date of this  Agreement,  provided that such
      securities  have not been  amended  since  the date of this  Agreement  to
      increase the number of such underlying shares in connection therewith, (c)
      securities  issued  pursuant to  acquisitions  or strategic  transactions,
      provided any such issuance shall only involve the  acquisition of a Person
      which is, itself or through its  subsidiaries,  an operating  company in a
      business  synergistic  with the  business  of the Company and in which the
      Company  receives  benefits in addition to the  investment  of funds,  but
      shall not include a transaction in which the Company is issuing securities
      primarily for the purpose of raising capital or to an entity whose primary
      business is investing in securities,  (d) shares of Common Stock or Common
      Stock Equivalents issued in connection with a Qualifying Transaction;  and
      (e) the Graphite Transaction

            "Fully  Diluted  Basis"  shall mean all Common Stock or Common Stock
      Equivalents  of the Company  including  the exercise or  conversion of all
      rights,  options,   derivative  and  convertible  securities  and  further
      including the conversion (whether  convertible or not) of all other common
      or preferred stock equivalents outstanding or required to be issued by the
      Company.

            "Fundamental  Transaction"  shall mean (A) the  Company  effects any
      merger or  consolidation  of the Company with or into another Person,  (B)
      the Company effects any sale of all or substantially  all of its assets in
      one or a series of related transactions,  (C) any tender offer or exchange
      offer (whether by the Company or another Person) is completed  pursuant to
      which  holders of Common Stock are  permitted to tender or exchange  their
      shares for other securities,  cash or property, or (D) the Company effects
      any  reclassification of the Common Stock or any compulsory share exchange
      pursuant  to which  the  Common  Stock is  effectively  converted  into or
      exchanged  for other  securities,  cash or property.  Notwithstanding  the
      foregoing,  the proposed merger of Graphite  Technology Group, Inc. with a
      Subsidiary of the Company  under the terms  provided by the Company to the
      Purchaser in writing on or before the Closing Date, shall not constitute a
      "Fundamental  Transaction"  for  purposes  of the  Transaction  Documents;
      provided, such transaction is closed on or prior to May 20, 2006.

            "Intellectual  Property  Rights" shall have the meaning  ascribed to
      such term in Section 3.1(n).

            "Legend  Removal Date" shall have the meaning  ascribed to such term
      in Section 4.1(c).

                                     Page 3
<PAGE>

            "Liens" means a lien, charge, security interest,  encumbrance, right
      of first refusal, preemptive right, or other restriction.

            "Material  Adverse  Effect" shall have the meaning  assigned to such
      term in Section 3.1(b) hereof.

            "Material  Permits" shall have the meaning  ascribed to such term in
      Section 3.1(l).

            "Maximum  Rate"  shall  have the  meaning  ascribed  to such term in
      Section 6.17.

            "Participation Maximum" shall have the meaning ascribed to such term
      in Section 4.13.

            "Person"  means an individual or  corporation,  partnership,  trust,
      incorporated  or  unincorporated   association,   joint  venture,  limited
      liability  company,  joint  stock  company,  government  (or an  agency or
      subdivision thereof) or other entity of any kind.

            "Pre-Notice" shall have the meaning ascribed to such term in Section
      4.13.

            "Proceeding"  means  an  action,   claim,  suit,   investigation  or
      proceeding  (including,  without  limitation,  an investigation or partial
      proceeding, such as a deposition), whether commenced or threatened.

            "Public Offering Date" the date that the Company first registers the
      Common Stock pursuant to Section 12 under the Exchange Act, or merges into
      a  corporation  (by or through  one or a series of  related  transactions)
      already  registered  pursuant  to Section 12 or becomes  public  under the
      Exchange Act in any other manner.

            "Purchaser  Party"  shall have the meaning  ascribed to such term in
      Section 4.11.

            "Purchaser's  Designee" shall have the meaning ascribed to such term
      in Section 4.16.

            "Qualifying  Transaction"  shall  mean (i) an equity or  debt/equity
      financing  wherein the Company  receives  gross proceeds equal to at least
      $3,000,000  from the sale of  Common  Stock or  Common  Stock  Equivalents
      issued by the Company to unaffiliated  third parties or (ii) a Fundamental
      Transaction.

            "Registrable  Securities" means (i) all Underlying Shares (exercised
      and  unexercised);  (ii) any securities issued or transferred to Purchaser
      in connection  with or arising out of any Transaction  Document;  and (iv)
      any securities issued or issuable upon any stock split,  dividend or other
      distribution  recapitalization  or  similar  event  with  respect  to  the
      foregoing.

                                     Page 4
<PAGE>

            "Registration Statement" means a registration statement covering the
      sale or resale of the Registrable Securities.

            "Required  Minimum"  means,  as of any date,  the maximum  aggregate
      number of shares of Common  Stock then issued or  potentially  issuable in
      the future pursuant to the Transaction Documents, including any Underlying
      Shares  issuable  upon  exercise  of  the  Warrant  or  conversion  of the
      Debenture, ignoring any exercise limits set forth therein.

            "Rule 144" means Rule 144 promulgated by the Commission  pursuant to
      the Securities  Act, as such Rule may be amended from time to time, or any
      similar rule or  regulation  hereafter  adopted by the  Commission  having
      substantially the same effect as such Rule.

            "SBA" shall have the meaning ascribed to such term in Section 5.1.

            "SBA  Documents"  shall have the  meaning  ascribed  to such term in
      Section 5.1(b).

            "SBIC" shall have the meaning ascribed to such term in Section 5.1.

            "SBIC Act" shall have the  meaning  ascribed to such term in Section
      5.1(a).

            "Securities"  means the Debenture,  the Warrant,  and the Underlying
      Shares.

            "Securities Act" means the Securities Act of 1933, as amended.

            "Security  Agreement" means the Security Agreement,  dated as of the
      date hereof,  between the Company and Purchaser,  in the form of Exhibit B
      attached hereto.

            "Security Documents" shall mean the Security Agreement and any other
      documents and filing  required  thereunder  in order to grant  Purchaser a
      first  priority  security  interest  in all of the assets of the  Company,
      including all UCC-1 filing receipts.

            "Subscription  Amount" means, as to Purchaser,  the aggregate amount
      to be paid  for the  Debenture  and the  Warrant  purchased  hereunder  as
      specified  in  Section  2.1  herein,  in  United  States  Dollars  and  in
      immediately available funds.

            "Subsequent  Financing" shall have the meaning ascribed to such term
      in Section 4.13.

            "Subsequent  Financing  Notice"  shall have the meaning  ascribed to
      such term in Section 4.13.

            "Subsidiary"  means any corporation or limited  liability company of
      which at least 50% of the  outstanding  securities  having ordinary voting
      powers for the election of Board of Directors (or similar  governing body)
      are at the time owned by the Company.  As used herein,  the term "Company"
      shall be deemed to include all of the Company's Subsidiaries, if any.

                                     Page 5
<PAGE>

            "Trading  Market"  means,  as applicable,  the following  markets or
      exchanges on which the Common Stock is listed or quoted for trading on the
      date  in  question:  the  American  Stock  Exchange,  the New  York  Stock
      Exchange,  the Nasdaq National Market, the Nasdaq SmallCap Market, the OTC
      Bulletin Board or the "Pink Sheets" published by the Pink Sheets LLC.

            "Transaction  Documents"  means this Agreement,  the Debenture,  the
      Security  Agreement,  the Warrant and any other  documents  or  agreements
      executed in connection with the transactions contemplated hereunder.

            "Underlying  Shares" means the shares of Common Stock  issuable upon
      exercise of the  Warrants or  conversion  of the  Debenture,  or any other
      shares of Common Stock acquired by Purchaser hereby.

            "Warrant"  means the Common Stock Purchase  Warrant,  in the form of
      Exhibit C delivered to Purchaser at the Closing in accordance with Section
      2.2  hereof,  which  Warrant  shall  be  exercisable  immediately  and  be
      exercisable until the close of business on the fifth anniversary following
      the Initial  Exercise  Date (as defined in the  Warrant).  The Company and
      Purchaser  agree that the value of the  Warrant  as of the date  hereof is
      less than $1,000.

                                  ARTICLE II.
                                PURCHASE AND SALE

      2.1  Closing.  On the  Closing  Date,  upon the terms and  subject  to the
conditions set forth herein,  concurrent with the execution and delivery of this
Agreement  by the parties  hereto,  the Company  agrees to sell,  and  Purchaser
agrees to purchase the Debenture and the Warrant for an aggregate  amount of SIX
HUNDRED THOUSAND DOLLARS ($600,000) (the "Subscription  Amount"). On the Closing
Date,  Purchaser  shall deliver to the Company via wire transfer of  immediately
available funds equal to the Subscription Amount (less all expenses and fees due
hereunder),  and the Company  shall  deliver to  Purchaser  the  Debenture,  the
Warrant,  and the other items set forth in Section 2.2  issuable at the Closing.
On the Closing Date,  contemporaneous  with the funding of the purchase made the
basis  hereof,  the  Company  shall  promptly  pay to the order of  Purchaser  a
commitment  fee  and  origination  fee  in  the  aggregate  amount  of 3% of the
Subscription Amount, such amounts to be offset from the Subscription Amount wire
transfer  described  above.  Upon  satisfaction  of the  conditions set forth in
Section 2.2, the Closing shall occur at the offices of Purchaser,  or such other
location as the parties shall mutually agree.

                                     Page 6
<PAGE>

2.2 Deliveries

            a) On the Closing  Date,  the Company  shall  execute and deliver or
      cause to be delivered to Purchaser the  following,  each fully executed by
      the appropriate authorized officer or officers of the Company:

                  (i) this Agreement (along with all Disclosure Schedules);

                  (ii) the Debenture;

                  (iii) the Warrant;

                  (iv) the Security Agreement along with all Security Documents;

                  (v) SBA  Form  480  (Size  Status  Declaration),  SBA Form 652
            (Assurance  of  Compliance)  and SBA Form  1031  (Portfolio  Finance
            Report),  Parts A and B, in the forms of  Exhibit  D,  Exhibit E and
            Exhibit F, respectively, attached hereto;

                  (vi)  Approval by the Board of Directors of the Company,  done
            in  conformance  with  all  applicable  law  and the  bylaws  of the
            Company, certified by the Secretary of the Company as of the Closing
            Date, approving or otherwise ratifying the transactions contemplated
            by this Agreement,  and approving the form of this Agreement and the
            Transaction  Documents,  and authorizing  execution,  delivery,  and
            performance thereof;

                  (vii) A copy of the Articles of  Incorporation of the Company,
            certified by an official of the Company's  jurisdiction of formation
            or incorporation  and further  certified by the Secretary of Company
            not to have been  altered or  amended  since  certification  by such
            official; a Certificate of Good Standing dated within 30 days of the
            date  first  written  above  from  the  Secretary  of  State  of the
            Company's  jurisdiction;  and a copy of the  Bylaws of the  Company,
            certified as true and correct by the Secretary of the Company;

                  (viii) Payment of the origination and commitment fees, if any,
            referenced in Section 2.1 hereof; and

                  (ix) Such other  instruments,  documents or items as Purchaser
            may reasonably request.

            b) On the  Closing  Date,  Purchaser  shall  deliver  or cause to be
      delivered to the Company the following:

                  (i) this Agreement duly executed by Purchaser;

                  (ii) Purchaser's  Subscription  Amount by wire transfer to the
            account as specified in writing by the Company; and

                                     Page 7
<PAGE>

                  (iii) the Security Agreement, duly executed by Purchaser.


2.3 Closing Conditions.

            a) The  obligations of the Company  hereunder in connection with the
      Closing are subject to the following conditions being met:

                  (i) the accuracy in all material respects when made and on the
            Closing Date of the  representations and warranties of the Purchaser
            contained herein;

                  (ii) all  obligations,  covenants and  agreements of Purchaser
            required to be  performed at or prior to the Closing Date shall have
            been performed; and

                  (iii)  the  delivery  by  Purchaser  of the items set forth in
            Section 2.2(b) of this Agreement; and

            b) The  obligations  of Purchaser  hereunder in connection  with the
      Closing are subject to the following conditions being met:

                  (i) the accuracy in all material  respects on the Closing Date
            of the  representations  and  warranties  of the  Company  contained
            herein;

                  (ii) all obligations,  covenants and agreements of the Company
            required to be  performed at or prior to the Closing Date shall have
            been performed;

                  (iii) the  delivery  by the  Company of the items set forth in
            Section 2.2(a) of this Agreement; and

                  (iv) there  shall have been no  Material  Adverse  Effect with
            respect to the Company since the date hereof;

                                  ARTICLE III.
                         REPRESENTATIONS AND WARRANTIES

      3.1  Representations  and  Warranties of the Company.  Except as set forth
under  the  corresponding  section  of the  disclosure  schedules  delivered  to
Purchaser  concurrently  herewith (the "Disclosure  Schedules") which Disclosure
Schedules shall be deemed a part hereof,  the Company makes the  representations
and warranties set forth below to Purchaser.

            a) Subsidiaries. The Company does not have any Subsidiaries.

                                     Page 8
<PAGE>

            b)  Organization  and  Qualification.  The Company is an entity duly
      incorporated,  validly existing and in good standing under the laws of the
      jurisdiction of its incorporation,  with the requisite power and authority
      to own and use its  properties  and assets and to carry on its business as
      currently conducted.  The Company is not in violation or default of any of
      the provisions of its certificate or articles of incorporation, bylaws, or
      other  organizational or charter documents.  The Company is duly qualified
      to conduct  business and is in good standing as a foreign  corporation  or
      other  entity in each  jurisdiction  in which the  nature of the  business
      conducted  or  property  owned by it makes such  qualification  necessary,
      except where the failure to be so qualified  or in good  standing,  as the
      case may be, could not have or  reasonably  be expected to result in (i) a
      material adverse effect on the legality, validity or enforceability of any
      Transaction  Documents,  (ii) a material  adverse effect on the results of
      operations,  assets,  business,  prospects or  financial  condition of the
      Company,  or (iii) a material  adverse effect on the Company's  ability to
      perform in any material  respect on a timely basis its  obligations  under
      any Transaction  Documents (any of (i), (ii) or (iii), a "Material Adverse
      Effect") and no Proceeding  has been  instituted in any such  jurisdiction
      revoking,  limiting or curtailing  or seeking to revoke,  limit or curtail
      such power and authority or qualification.

            c)  Authorization;   Enforcement.  The  Company  has  the  requisite
      corporate  power  and  authority  to  enter  into  and to  consummate  the
      transactions  contemplated  by  each  of  the  Transaction  Documents  and
      otherwise  to carry out its  obligations  thereunder.  The  execution  and
      delivery  of each of the  Transaction  Documents  by the  Company  and the
      consummation by it of the transactions contemplated thereby have been duly
      authorized  by all  necessary  action  on the  part of the  Company.  Each
      Transaction  Documents  has been (or upon  delivery  will have  been) duly
      executed by the Company and, when  delivered in accordance  with the terms
      hereof,  will  constitute the valid and binding  obligation of the Company
      enforceable against the Company in accordance with its terms except (i) as
      limited by applicable bankruptcy, insolvency,  reorganization,  moratorium
      and other laws of general application  affecting enforcement of creditors'
      rights  generally and (ii) as limited by laws relating to the availability
      of specific performance, injunctive relief or other equitable remedies.

            d) No Conflicts.  The  execution,  delivery and  performance  of the
      Transaction  Documents by the Company and the  consummation by the Company
      of the other  transactions  contemplated  thereby do not and will not: (i)
      conflict  with or violate any provision of the  Company's  certificate  or
      articles  of  incorporation,  bylaws or other  organizational  or  charter
      documents,  or (ii)  conflict  with,  or constitute a default (or an event
      that with notice or lapse of time or both would  become a default)  under,
      result in the creation of any Lien upon any of the properties or assets of
      the  Company,  or give to others  any  rights of  termination,  amendment,
      acceleration  or cancellation  (with or without  notice,  lapse of time or
      both)  of,  any  agreement,  credit  facility,  debt or  other  instrument
      (evidencing a Company debt or otherwise) or other  understanding  to which
      the Company is a party or by which any property or asset of the Company is
      bound or affected,  or (iii) conflict with or result in a violation of any
      law,  rule,  regulation,  order,  judgment,  injunction,  decree  or other
      restriction of any court or governmental authority to which the Company is
      subject (including federal and state securities laws and regulations),  or
      by which any property or asset of the Company is bound or affected; except
      in the case of each of clauses  (ii) and (iii),  such as could not have or
      reasonably be expected to result in a Material Adverse Effect.

                                     Page 9
<PAGE>

            e)  Filings,  Consents  and  Approvals.  Other  than as set forth on
      Schedule  3.1(e) and except for filing of a Form D and/or state "blue sky"
      securities  filings,  the Company is not  required to obtain any  consent,
      waiver,  authorization or order of, give any notice to, or make any filing
      or registration  with, any court or other federal,  state,  local or other
      governmental  authority or other Person in connection  with the execution,
      delivery and performance by the Company of the Transaction Documents.

            f) Issuance of the  Securities.  The Securities are duly  authorized
      and,  when  issued  and  paid  for  in  accordance   with  the  applicable
      Transaction  Documents,  will be duly and validly  issued,  fully paid and
      nonassessable,  free and clear of all Liens  imposed by the Company  other
      than restrictions on transfer  provided for in the Transaction  Documents.
      The  Underlying  Shares,  when issued in accordance  with the terms of the
      Transaction   Documents,   will  be   validly   issued,   fully  paid  and
      nonassessable,  free and clear of all Liens  imposed by the Company or any
      third party.  The Company has reserved  from its duly  authorized  capital
      stock a number of shares of Common  Stock for  issuance of the  Underlying
      Shares at least  equal to the  Required  Minimum on the date  hereof.  The
      Company has not, and to the knowledge of the Company,  no Affiliate of the
      Company has sold, offered for sale or solicited offers to buy or otherwise
      negotiated  in respect  of any  security  (as  defined in Section 2 of the
      Securities  Act) that  would be  integrated  with the offer or sale of the
      Securities  in a manner  that would  require  the  registration  under the
      Securities Act of the sale of the Securities to Purchaser.

            g) Capitalization. The capitalization of the Company is as described
      in Schedule  3.1(g).  The  Company has not issued any capital  stock other
      than as set forth on  Schedule  3.1(g).  No Person  has any right of first
      refusal, preemptive right, right of participation, or any similar right to
      participate in the transactions contemplated by the Transaction Documents.
      Except as a result of the  purchase and sale of the  Securities  or as set
      forth on Schedule  3.1(g),  there are no  outstanding  options,  warrants,
      script  rights to subscribe  to,  calls or  commitments  of any  character
      whatsoever relating to, or securities,  rights or obligations  convertible
      into or exchangeable  for, or giving any Person any right to subscribe for
      or acquire,  any shares of the  Company's  capital  stock,  or  contracts,
      commitments, understandings or arrangements by which the Company is or may
      become  bound  to  issue  additional  shares  of  its  capital  stock,  or
      securities  or  rights  convertible  or  exchangeable  into  shares of its
      capital stock.  The issuance and sale of the Securities  will not obligate
      the Company to issue  shares of Common  Stock or other  securities  to any
      Person (other than Purchaser) and will not result in a right of any holder
      of Company  securities  to adjust the  exercise,  conversion,  exchange or
      reset  price  under  such  securities.  All of the  outstanding  shares of
      capital  stock  of  the  Company  are  validly  issued,   fully  paid  and
      nonassessable,  have been issued in compliance  with all federal and state
      securities  laws,  and  none of such  outstanding  shares  was  issued  in
      violation of any  preemptive  rights or similar rights to subscribe for or
      purchase   securities.   No  further  approval  or  authorization  of  any
      stockholder,  the Board of  Directors of the Company or others is required
      for the  issuance  and sale of the  Securities.  Except  as  disclosed  in
      Schedule 3.1(g), there are no stockholders  agreements,  voting agreements
      or other similar agreements with respect to the Company's capital stock to
      which the Company is a party or, to the knowledge of the Company,  between
      or  among  any  of  the  Company's   stockholders.   A  complete  list  of
      stockholders  of the Company that are officers,  directors and individuals
      holding 5% or more of the outstanding Common Stock is included in Schedule
      3.1(g).

                                    Page 10
<PAGE>

            h) Financial Statements. Other than as set forth on Schedule 3.1(h),
      there are no audited financial statements of the Company.

            i) Litigation.  Other than as set forth on Schedule 3.1(i), there is
      no action, suit, inquiry, notice of violation, proceeding or investigation
      pending  or,  to the  knowledge  of the  Company,  threatened  against  or
      affecting the Company,  or any of its respective  properties  before or by
      any court, arbitrator, governmental or administrative agency or regulatory
      authority (federal,  state,  county, local or foreign)  (collectively,  an
      "Action") which (i) adversely affects or challenges the legality, validity
      or enforceability of any of the Transaction Documents or the Securities or
      (ii) could, if there were an unfavorable  decision,  have or reasonably be
      expected to result in a Material  Adverse Effect.  Neither the Company nor
      any director or officer thereof,  is or has been the subject of any Action
      involving a claim of  violation  of or  liability  under  federal or state
      securities  laws or a claim of breach  of  fiduciary  duty.  There has not
      been,  and to the  knowledge  of the  Company,  there  is not  pending  or
      contemplated, any investigation by the Commission involving the Company or
      any current or former director or officer of the Company.

            j) Labor  Relations.  No material  labor  dispute  exists or, to the
      knowledge of the Company, is imminent with respect to any of the employees
      of the Company which could  reasonably be expected to result in a Material
      Adverse Effect.

            k)  Compliance.  The  Company  (i)  is not in  default  under  or in
      violation  of (and no event has  occurred  that has not been waived  that,
      with  notice or lapse of time or both,  would  result in a default  by the
      Company),  nor has the  Company  received  notice of a claim that it is in
      default under or that it is in violation of, any indenture, loan or credit
      agreement or any other  agreement or  instrument to which it is a party or
      by which it or any of its properties is bound (whether or not such default
      or violation  has been  waived),  (ii) is not in violation of any order of
      any court,  arbitrator  or  governmental  body, or (iii) is not or has not
      been in violation of any statute,  rule or regulation of any  governmental
      authority,  including without limitation all foreign,  federal,  state and
      local laws  applicable  to its  business  except in each case as could not
      have a Material Adverse Effect.

                                    Page 11
<PAGE>

            l)  Regulatory  Permits.  The Company  possesses  all  certificates,
      authorizations and permits issued by the appropriate federal, state, local
      or foreign  regulatory  authorities  necessary to conduct their respective
      businesses  as described in Schedule  3.1(l),  except where the failure to
      possess such permits could not have or reasonably be expected to result in
      a Material Adverse Effect  ("Material  Permits"),  and the Company has not
      received  any  notice  of  proceedings   relating  to  the  revocation  or
      modification of any Material Permit.

            m) Title to  Assets.  Except as set forth on  Schedule  3.1(m),  the
      Company has good and  marketable  title in (or  licenses or rights to use)
      all personal property that is material to the business of the Company,  in
      each case free and clear of all Liens.  The Company  does not own any real
      property. Any real property and facilities held under lease by the Company
      are held by it under valid, subsisting and enforceable leases of which the
      Company is in compliance.  The Company has not granted, and no third party
      has obtained in any manner,  other than as contemplated by the Transaction
      Documents,  any security  interest in the assets of the Company.  Schedule
      3.1(m) sets forth and details  which,  if any, of such assets are owned by
      any Subsidiary.

            n) Intellectual Property.

                  (i)  Schedule   3.1(n)   contains  a  list  of  the  Company's
            Intellectual Property. For purposes hereof,  "Intellectual Property"
            means  any or all of the  following  and all  rights  and  goodwill,
            arising  out of or  associated  therewith:  (A) all  United  States,
            international,   and  foreign  patents  and  applications   therefor
            (including    provisional    applications)    and   all    reissues,
            reexaminations,   divisions,  renewals,  extensions,   provisionals,
            continuations and continuations-in-part  thereof; (B) all inventions
            (whether patentable or not),  invention  disclosures,  improvements,
            trade  secrets,  proprietary  information,   know-how,   technology,
            technical data and customer lists, and all documentation relating to
            any of the foregoing  throughout the world;  (C) all  international,
            U.S. and foreign registered trademarks,  trade names, service marks,
            logos,  slogans,  and designs,  applications to register trademarks,
            trade  names,   service   marks,   logos,   slogans,   and  designs,
            intent-to-use  applications,  or other registrations or applications
            related to trademarks,  service marks, common law trademarks,  trade
            names, service marks, logos, slogans, and designs and all associated
            goodwill  associated with all of the foregoing;  (D) all copyrights,
            copyright  registrations  and applications  therefor,  and all other
            rights   corresponding   thereto   throughout  the  world;  (E)  all
            industrial  designs and any registrations and applications  therefor
            throughout  the world;  (F) all URL's,  domain  names,  trade names,
            logos,  slogans,  designs,  common law trademarks and service marks,
            trademark and service mark  registrations and applications  therefor
            throughout the world; (G) all databases and data collections and all
            rights  therein  throughout  the world;  (H) all moral and  economic
            rights of authors and inventors, however denominated, throughout the
            world; and (I) any other  intellectual  property that is the subject
            of  an  application,  certificate,  filing,  registration  or  other
            document  issued,  filed with, or recorded with any federal,  state,
            local or foreign government or other public body; (J) any similar or
            equivalent rights to any of the foregoing anywhere in the world. For
            purposes hereof,  "Company Intellectual  Property" means any Company
            Intellectual Property owned or licensed by the Company, and "Company
            Registered  Intellectual  Property"  means any items of Intellectual
            Property   described  in  subsections  (A),  (C),  or  (D)  of  this
            paragraph.

                                    Page 12
<PAGE>

                  (ii) No Company Intellectual Property or product or service of
            the Company's business related to the Company Intellectual  Property
            is subject to any proceeding or outstanding decree, order, judgment,
            agreement or stipulation restricting in any manner the use, transfer
            or  licensing  thereof  by the  Company,  or which  may  affect  the
            validity,   use  or  enforceability  of  such  Company  Intellectual
            Property.  Each item of Company Registered  Intellectual Property is
            valid and subsisting.  All necessary  registration,  maintenance and
            renewal fees currently due in connection with the Company Registered
            Intellectual  Property have been made and all  necessary  documents,
            recordations  and  certifications  in  connection  with such Company
            Registered  Intellectual  Property have been filed with the relevant
            patent,  copyright,  trademark  or other  authorities  in the United
            States or foreign jurisdictions, as the case may be, for the purpose
            of maintaining such Company Registered Intellectual Property.

                  (iii) The Company owns and has good and exclusive title to, or
            has licenses (any Intellectual Property subject to any license to be
            identified as such in Schedule  3.1(n))  (sufficient for the conduct
            of the Company's  business as currently  conducted) to use each item
            of the Company's  Intellectual  Property free and clear of any Lien;
            and the Company is the exclusive owner or exclusive  licensee of all
            trademarks and service  marks,  trade names and domain names used in
            connection  with and  material  to the  operation  or conduct of the
            Company's  business,  including  the  sale  of any  products  or the
            provision of any services by same, free and clear of all Liens.  The
            Company  Intellectual  Property,  other  than  future  improvements,
            derivations, and additions to be made by the Company or on behalf of
            the Company,  constitutes all of the  Intellectual  Property used or
            contemplated  for  use in  connection  with  the  Company's  current
            business and in the performance of any contract,  proposal or letter
            of intent in connection with same.

                  (iv) To the extent that any Company Intellectual  Property has
            been  developed  or created by a third  party for the  Company,  the
            Company has a written  agreement  with such third party with respect
            thereto and the Company thereby either (A) has obtained ownership of
            and is the  exclusive  owner  of,  or (b)  has  obtained  a  license
            (sufficient  for the conduct of the Company's  business as currently
            conducted)  to all of such third  party's  Intellectual  Property in
            such work,  material or  invention  by  operation of law or by valid
            assignment,  to the fullest extent it is legally  possible to do so,
            each such agreement being listed on Schedule 3.1(n).

                  (v) The operation of the Company's business as it is currently
            conducted,  including the Company's design,  development,  marketing
            and sale of the products or services of the Company  (including with
            respect to products  currently under  development) has not, does not
            and  will  not  infringe  or   misappropriate   in  any  manner  the
            Intellectual Property of any third party or, to the knowledge of the
            Company,  constitute unfair competition or trade practices under the
            laws of any jurisdiction.

                                    Page 13
<PAGE>

                  (vi)  The  Company  has no  knowledge,  and has  not  received
            written notice or any other overt threats from any third party, that
            the  operation  of  the  Company's   business  as  it  is  currently
            conducted, or any act, product or service of the Company's business,
            infringes or misappropriates the Intellectual  Property of any third
            party or constitutes unfair competition or trade practices under the
            laws of any jurisdiction. The Company's Intellectual Property is not
            the subject of any third party  communications  relating to validity
            or enforceability, cease and desist orders, demand letters, warnings
            or prior settlement agreements.  The Company's Intellectual Property
            is  not   currently   the  subject  of  any  pending  or  threatened
            re-examinations,   oppositions,   interferences,   or   infringement
            actions.

                  (vii) To the  knowledge  of the  Company,  no Person has or is
            infringing or misappropriating any Company Intellectual Property.

                  (viii) The Company has taken  reasonable  steps to protect the
            rights of the  Company  in the  confidential  information  and trade
            secrets of the Company used in the  Company's  business or any trade
            secrets or  confidential  information of third parties used in same,
            and,  without  limiting  the  foregoing,  the Company has enforced a
            policy   requiring   each  employee  and  contractor  to  execute  a
            proprietary  information/confidentiality agreement, and except under
            confidentiality obligations or in the context of the attorney-client
            relationship,  there has not been any  disclosure  by the Company of
            any such trade secrets or confidential information.

            o)  Insurance.  The  Company is insured by  insurers  of  recognized
      financial responsibility against such losses and risks and in such amounts
      as are prudent and  customary  in the  businesses  in which the Company is
      engaged,  including directors and officers insurance at least equal to the
      aggregate  principal  amount of the  Debenture.  To the best of  Company's
      knowledge,   such  insurance  contracts  and  policies  are  accurate  and
      complete. The Company has no reason to believe that it will not be able to
      renew its existing insurance coverage as and when such coverage expires or
      to obtain  similar  coverage from similar  insurers as may be necessary to
      continue its business without a significant increase in cost.

            p) Transactions With Affiliates and Employees.  None of the officers
      or directors of the Company and, to the knowledge of the Company,  none of
      the employees of the Company is presently a party to any transaction  with
      the  Company   (other  than  for  services  as  employees,   officers  and
      directors),   including  any  contract,  agreement  or  other  arrangement
      providing for the furnishing of services to or by, providing for rental of
      real or personal property to or from, or otherwise  requiring  payments to
      or from any officer, director or such employee or, to the knowledge of the
      Company, any entity in which any officer,  director,  or any such employee
      has a substantial interest or is an officer, director, trustee or partner,
      in each case in excess of $60,000  other than (i) for payment of salary or
      consulting fees for services  rendered,  (ii)  reimbursement  for expenses
      incurred on behalf of the Company and (iii) for other  employee  benefits,
      including  stock  option  agreements  under any stock  option  plan of the
      Company.

                                    Page 14
<PAGE>

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

            r) Certain  Fees.  Other than as set forth on  Schedule  3.1(r),  no
      brokerage or finder's  fees or  commissions  are or will be payable by the
      Company to any broker, financial advisor or consultant,  finder, placement
      agent,  investment  banker,  bank or  other  Person  with  respect  to the
      transactions  contemplated  by this  Agreement.  Purchaser  shall  have no
      obligation  with respect to any fees or with respect to any claims made by
      or on  behalf of other  Persons  for fees of a type  contemplated  in this
      Section that may be due in connection with the  transactions  contemplated
      by this Agreement.

            s)  Private   Placement.   Assuming  the  accuracy  of   Purchaser's
      representations  and warranties set forth in Section 3.2, no  registration
      under  the  Securities  Act is  required  for the  offer  and  sale of the
      Securities by the Company to Purchaser as contemplated hereby.

            t) Investment  Company.  The Company is not, and is not an Affiliate
      of, and immediately after receipt of payment for the Securities,  will not
      be or be an Affiliate of, an  "investment  company"  within the meaning of
      the Investment Company Act of 1940, as amended.  The Company shall conduct
      its  business  in a  manner  so that it will  not  become  subject  to the
      Investment Company Act.

            u) Registration  Rights. Other than as set forth on Schedule 3.1(u),
      no Person has any right to cause the  Company  to effect the  registration
      under the Securities Act of any securities of the Company.

            v) Application of Takeover Protections. The Company and its Board of
      Directors  have taken all  necessary  action,  if any,  in order to render
      inapplicable any control share acquisition,  business combination,  poison
      pill  (including  any  distribution  under a  rights  agreement)  or other
      similar  anti-takeover   provision  under  the  Company's  Certificate  of
      Incorporation  (or similar charter  documents) or the laws of its state of
      incorporation  that is or could become applicable to Purchaser as a result
      of Purchaser and the Company  fulfilling  their  obligations or exercising
      their rights under the Transaction Documents, including without limitation
      as  a  result  of  the  Company's  issuance  of  the  Securities  and  the
      Purchaser's ownership of the Securities.

                                    Page 15
<PAGE>

            w) Disclosure.  Other than the information provided to the Purchaser
      by the  Company  with  respect to the  Graphite  Transaction,  the Company
      confirms  that  neither it nor any other  Person  acting on its behalf has
      provided  Purchaser  or its agents or counsel  with any  information  that
      constitutes or might constitute material, nonpublic information except for
      such information  that will be publicly  disclosed on or before the Public
      Offering  Date. The Company  understands  and confirms that Purchaser will
      rely  on  the  foregoing   representations   and  covenants  in  effecting
      transactions in securities of the Company. All written statements provided
      to  Purchaser  regarding  the Company,  its business and the  transactions
      contemplated hereby, including the Disclosure Schedules to this Agreement,
      furnished   by  or  on  behalf  of  the  Company   with   respect  to  the
      representations  and  warranties  made  herein are true and  correct  with
      respect to such  representations  and  warranties  and do not  contain any
      untrue  statement of a material  fact or omit to state any  material  fact
      necessary in order to make the  statements  made therein,  in light of the
      circumstances under which they were made, not misleading.

            x) No  Integrated  Offering.  Assuming the  accuracy of  Purchaser's
      representations  and  warranties  set forth in Section  3.2,  neither  the
      Company, nor any of its affiliates,  nor any Person acting on its or their
      behalf  has,  directly  or  indirectly,  made any  offers  or sales of any
      security or solicited any offers to buy any security,  under circumstances
      that would cause this offering of the  Securities  to be  integrated  with
      prior  offerings by the Company for purposes of the  Securities Act or any
      applicable shareholder approval provisions.

            y) Solvency.  Based on the financial  condition of the Company as of
      the Closing Date after giving  effect to the receipt by the Company of the
      proceeds from the sale of the Securities hereunder, (i) the Company's fair
      saleable  value of its assets  exceeds the amount that will be required to
      be paid  on or in  respect  of the  Company's  existing  debts  and  other
      liabilities (including known contingent  liabilities) as they mature; (ii)
      the Company's assets do not constitute unreasonably small capital to carry
      on its  business  for the  current  fiscal  year as now  conducted  and as
      proposed to be conducted  including  its capital needs taking into account
      the  particular  capital  requirements  of the  business  conducted by the
      Company,  and  projected  capital  requirements  and capital  availability
      thereof; and (iii) the current cash flow of the Company, together with the
      proceeds  the  Company  would  receive,  were it to  liquidate  all of its
      assets,  after taking into account all anticipated uses of the cash, would
      be  sufficient  to pay all  amounts on or in respect of its debt when such
      amounts  are  required to be paid.  The  Company  does not intend to incur
      debts  beyond its  ability to pay such debts as they mature  (taking  into
      account  the timing and  amounts of cash to be payable on or in respect of
      its debt).

            z) Tax Status. Except for matters that would not, individually or in
      the  aggregate,  have or  reasonably  be  expected to result in a Material
      Adverse  Effect,  the Company has filed all necessary  federal,  state and
      foreign income and franchise tax returns and has paid or accrued all taxes
      shown as due thereon, and the Company has no knowledge of a tax deficiency
      which has been asserted or threatened against the Company.

                                    Page 16
<PAGE>

            aa) No General  Solicitation.  Neither  the  Company  nor any person
      acting on behalf of the Company has offered or sold any of the  Securities
      by any form of general  solicitation or general  advertising.  The Company
      has offered the  Securities  for sale only to Purchaser  and certain other
      "accredited investors" within the meaning of Rule 501 under the Securities
      Act.

            bb)  Foreign  Corrupt  Practices.  Neither the  Company,  nor to the
      knowledge  of the Company,  any agent or other person  acting on behalf of
      the Company,  has (i) directly or  indirectly,  used any corrupt funds for
      unlawful  contributions,  gifts,  entertainment or other unlawful expenses
      related to foreign or domestic political activity,  (ii) made any unlawful
      payment to foreign or domestic government officials or employees or to any
      foreign or domestic  political  parties or campaigns from corporate funds,
      (iii) failed to disclose  fully any  contribution  made by the Company (or
      made by any  person  acting on its  behalf of which the  Company is aware)
      which is in violation of law, or (iv) violated in any material respect any
      provision of the Foreign Corrupt Practices Act of 1977, as amended

            cc) Indebtedness. Other than as set forth on Schedule 3.1(cc), as of
      the Closing Date, the Company has no indebtedness.

            dd) No  Disagreements  with  Accountants  and Lawyers.  There are no
      disagreements of any kind presently existing, or reasonably anticipated by
      the Company to arise,  between  the  accountants  and lawyers  formerly or
      presently  employed by the Company and the Company is current with respect
      to any fees owed to its accountants and lawyers.

            ee) Acknowledgment Regarding Purchaser's Purchase of Securities. The
      Company  acknowledges  and agrees that  Purchaser is acting  solely in the
      capacity of an arm's  length  purchaser  with  respect to the  Transaction
      Documents and the transactions  contemplated  hereby as they relate to the
      Company.  The Company further acknowledges that Purchaser is not acting as
      a  financial  advisor  or  fiduciary  of the  Company  (or in any  similar
      capacity) with respect to this Agreement and the transactions contemplated
      hereby  and  any  advice  given  by  Purchaser  or any  of its  respective
      representatives or agents to the Company in connection with this Agreement
      and the  transactions  contemplated  hereby  is merely  incidental  to the
      Purchaser's purchase of the Securities.

            ff) Material Liabilities.  The sole outstanding material liabilities
      of the Company are set forth on Schedule 3.1(ff) .

            gg) Material  Agreements.  Except for those  agreements set forth on
      Schedule 3.1(gg) hereof,  there are no other material  agreements to which
      the Company is a party.

                                    Page 17
<PAGE>

            hh) Board of Directors.  The Board of Directors of Company  consists
      of those persons set forth on Schedule 3.1(hh).

      3.2  Representations   and  Warranties  of  Purchaser.   Purchaser  hereby
represents  and warrants as of the date hereof and as of the Closing Date to the
Company as follows:

            (a) Organization;  Authority. Purchaser is an entity duly organized,
      validly  existing and in good standing under the laws of the  jurisdiction
      of its organization  with full right,  corporate or partnership  power and
      authority to enter into and to consummate the transactions contemplated by
      the  Transaction  Documents  and  otherwise  to carry out its  obligations
      thereunder.  The execution,  delivery and  performance by Purchaser of the
      transactions  contemplated  by this Agreement have been duly authorized by
      all necessary  corporate or similar action on the part of Purchaser.  Each
      of the Transaction Documents to which it is a party has been duly executed
      by Purchaser, and when delivered by Purchaser in accordance with the terms
      hereof,  will  constitute  the valid and  legally  binding  obligation  of
      Purchaser, enforceable against it in accordance with its terms, except (i)
      as limited by general  equitable  principles  and  applicable  bankruptcy,
      insolvency,   reorganization,   moratorium   and  other  laws  of  general
      application affecting enforcement of creditors' rights generally,  (ii) as
      limited by laws  relating to the  availability  of  specific  performance,
      injunctive  relief  or other  equitable  remedies  and  (iii)  insofar  as
      indemnification  and contribution  provisions may be limited by applicable
      law.

            (b)  Purchaser   Representation.   Purchaser  understands  that  the
      Securities are "restricted  securities" and have not been registered under
      the Securities Act or any applicable state securities law and is acquiring
      the  Securities as principal for its own account and not with a view to or
      for distributing or reselling such Securities or any part thereof,  has no
      present  intention  of  distributing  any of  such  Securities  and has no
      arrangement  or  understanding   with  any  other  persons  regarding  the
      distribution  of such  Securities  (this  representation  and warranty not
      limiting   Purchaser's  right  to  sell  the  Securities   pursuant  to  a
      Registration  Statement or otherwise in compliance with applicable federal
      and  state  securities  laws).   Purchaser  is  acquiring  the  Securities
      hereunder in the ordinary course of its business.  Purchaser does not have
      any agreement or understanding, directly or indirectly, with any Person to
      distribute any of the Securities.

            (c)  Purchaser  Status.  At  the  time  Purchaser  was  offered  the
      Securities,  it was,  and at the date  hereof  it is,  and on each date on
      which it  exercises  any  Warrants it will be either:  (i) an  "accredited
      investor" as defined in Rule 501(a)(1),  (a)(2),  (a)(3), (a)(7) or (a)(8)
      under the  Securities  Act or (ii) a  "qualified  institutional  buyer" as
      defined in Rule 144A(a) under the Securities Act.

            (d)  Experience  of Purchaser.  Purchaser,  either alone or together
      with  its   representatives,   has  such  knowledge,   sophistication  and
      experience  in  business  and  financial  matters  so as to be  capable of
      evaluating  the  merits  and risks of the  prospective  investment  in the
      Securities,  and has so evaluated the merits and risks of such investment.
      Purchaser  is able to  bear  the  economic  risk of an  investment  in the
      Securities  and, at the present time, is able to afford a complete loss of
      such investment.

                                    Page 18
<PAGE>

            (e)  Certain  Fees.  Purchaser  has not  entered  into an  agreement
      whereby  brokerage or finder's fees or commissions  are or will be payable
      by the Company to any broker,  financial  advisor or  consultant,  finder,
      placement agent,  investment banker,  bank or other Person with respect to
      the transactions contemplated by this Agreement.



            The Company  acknowledges and agrees that Purchaser does not make or
      has not  made  any  representations  or  warranties  with  respect  to the
      transactions  contemplated  hereby other than those specifically set forth
      in this Section 3.2.

                                  ARTICLE IV.
                         OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

            (a) The Securities may only be disposed of in compliance  with state
      and federal securities laws. In connection with any transfer of Securities
      other than pursuant to an effective registration statement or Rule 144, to
      the Company or to an Affiliate of Purchaser or in connection with a pledge
      as contemplated in Section 4.1(b),  the Company may require the transferor
      thereof to provide to the  Company an opinion of counsel  selected  by the
      transferor  and  reasonably  acceptable  to  the  Company,  the  form  and
      substance  of  which  opinion  shall  be  reasonably  satisfactory  to the
      Company, to the effect that such transfer does not require registration of
      such  transferred  Securities  under the  Securities Act or any applicable
      state  securities  laws. As a condition of transfer,  any such  transferee
      shall  agree in  writing  to be bound by the terms of this  Agreement  and
      shall have the rights of Purchaser under this Agreement.

            (b) Purchaser  agrees to the  imprinting,  so long as is required by
      this Section 4.1(b), of a legend on any of the Securities in substantially
      the following form:

      NEITHER THESE  SECURITIES NOR THE SECURITIES  INTO WHICH THESE  SECURITIES
      ARE  EXERCISABLE  HAVE BEEN  REGISTERED  WITH THE  SECURITIES AND EXCHANGE
      COMMISSION OR THE  SECURITIES  COMMISSION OF ANY STATE IN RELIANCE UPON AN
      EXEMPTION FROM  REGISTRATION  UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE  "SECURITIES  ACT"),  AND,  ACCORDINGLY,  MAY NOT BE  OFFERED OR SOLD
      EXCEPT  PURSUANT  TO  AN  EFFECTIVE   REGISTRATION   STATEMENT  UNDER  THE
      SECURITIES  ACT  OR  PURSUANT  TO AN  AVAILABLE  EXEMPTION  FROM,  OR IN A
      TRANSACTION  NOT  SUBJECT  TO,  THE   REGISTRATION   REQUIREMENTS  OF  THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE  STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE  TRANSFEROR TO SUCH EFFECT,
      THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

                                    Page 19
<PAGE>

            The Company  acknowledges and agrees that Purchaser may from time to
      time pledge  pursuant to a bona fide margin  agreement  with a  registered
      broker-dealer  or  grant  a  security  interest  in  some  or  all  of the
      Securities to a financial  institution that is an "accredited investor" as
      defined in Rule 501(a) under the Securities Act and who agrees to be bound
      by the  provisions of this  Agreement  and, if required under the terms of
      such arrangement,  Purchaser may transfer pledged or secured Securities to
      the pledgees or secured  parties.  Such a pledge or transfer  would not be
      subject to approval of the Company and no legal  opinion of legal  counsel
      of the pledgee,  secured  party or pledgor shall be required in connection
      therewith.  Further,  no notice shall be required of such  pledge.  At the
      Purchaser's  expense, the Company will execute and deliver such reasonable
      documentation  as a pledgee or secured party of Securities  may reasonably
      request in connection with a pledge or transfer of the Securities.

            (c) Certificates  evidencing Underlying Shares shall not contain any
      legend  (including  the legend set forth in Section  4.1(b)  hereof):  (i)
      while a  registration  statement  covering the resale of such  security is
      effective  under the  Securities  Act, or (ii)  following any sale of such
      Underlying Shares pursuant to Rule 144, or (iii) if such Underlying Shares
      are  eligible  for sale under Rule  144(k),  or (iv) if such legend is not
      required under  applicable  requirements  of the Securities Act (including
      judicial  interpretations  and  pronouncements  issued by the staff of the
      Commission);  provided,  however,  in connection  with the issuance of the
      Underlying  Shares,  Purchaser hereby agrees to adhere to and abide by all
      prospectus  delivery  requirements  under the Securities Act and rules and
      regulations  of  the  Commission  and  all  applicable  state  "blue  sky"
      securities  laws.  The  Company  shall  cause its counsel to issue a legal
      opinion to the Company's  transfer agent promptly after the Effective Date
      if required by the Company's  transfer  agent to effect the removal of the
      legend  hereunder.  If all or any portion of a Warrant is  exercised  at a
      time when there is an effective registration statement to cover the resale
      of the Underlying  Shares, or if such shares may be sold under Rule 144(k)
      or if such legend is not otherwise required under applicable  requirements
      of the Securities Act (including  judicial  interpretations  thereof) then
      such shares shall be issued free of all legends.  The Company  agrees that
      following the  Effective  Date or at such time as such legend is no longer
      required  under this Section  4.1(c),  it will, no later than two Business
      Days  following  the delivery by Purchaser to the Company or the Company's
      transfer  agent  of  a  certificate  representing  Underlying  Shares,  as
      applicable,  issued with a restrictive  legend (such second  Business Day,
      the "Legend Removal Date"),  deliver or cause to be delivered to Purchaser
      a certificate  representing  such shares that is free from all restrictive
      and other legends. The Company may not make any notation on its records or
      give  instructions  to any transfer  agent of the Company that enlarge the
      restrictions on transfer set forth in this Section.

                                    Page 20
<PAGE>

            (d) In addition to Purchaser's other available remedies, the Company
      shall pay to Purchaser,  in cash, as partial liquidated damages and not as
      a penalty,  the greater of (i) $500 for each Business Day after the Legend
      Removal  Date,  the Warrant  Share  Delivery  Date, or other such date the
      Underlying  Shares are to be delivered to the  Purchaser,  as the case may
      be, until such  certificate  is delivered  with an  appropriate  legend or
      without a restrictive  legend, as the case may be; and (ii) the difference
      in the Market  Value of the  Underlying  Shares  (based on the closing bid
      price of the Common Stock on the then principal Trading Market on the date
      such  Securities  are  submitted to the Company's  transfer  agent) on the
      delivery date and the date such shares are actually received by the Holder
      in such form as required herein and in the Transaction Documents.  Nothing
      herein  shall limit  Purchaser's  right to pursue  actual  damages for the
      Company's failure to deliver  certificates  representing any Securities as
      required by the Transaction Documents,  and Purchaser shall have the right
      to pursue  all  remedies  available  to it at law or in equity  including,
      without  limitation,  a decree of specific  performance  and/or injunctive
      relief.

            (e) Purchaser agrees that the removal of the restrictive legend from
      certificates  representing  Securities as set forth in this Section 4.1 is
      predicated  upon the  Company's  reliance  that  Purchaser  will  sell any
      Securities  pursuant  to  either  the  registration  requirements  of  the
      Securities Act, including any applicable prospectus delivery requirements,
      or an exemption therefrom.

      4.2 Acknowledgment of Dilution. The Company acknowledges that the issuance
of the  Underlying  Shares may result in dilution of the  outstanding  shares of
Common Stock, which dilution may be substantial under certain market conditions.
The Company  further  acknowledges  that its  obligations  under the Transaction
Documents,  including without  limitation its obligation to issue the Underlying
Shares pursuant to the Transaction Documents, are unconditional and absolute and
not  subject  to any  right  of  set  off,  counterclaim,  delay  or  reduction,
regardless  of the effect of any such dilution or any claim the Company may have
against  Purchaser and regardless of the dilutive  effect that such issuance may
have on the ownership of the other stockholders of the Company.

      4.3  Furnishing  of  Information.  If after the date  hereof  the  Company
becomes  subject to the rules and regulations of the Exchange Act and as long as
Purchaser owns restricted  Securities,  the Company covenants to timely file (or
obtain  extensions  in respect  thereof  and file  within the  applicable  grace
period)  all reports  required to be filed by the Company  after the date hereof
pursuant to the  Exchange  Act. As long as  Purchaser  owns  Securities,  if the
Company is not  required to file reports  pursuant to the Exchange  Act, it will
prepare and furnish to Purchaser and make publicly  available in accordance with
Rule 144(c) such information as is required for Purchaser to sell the Underlying
Shares  under Rule 144.  The Company  further  covenants  that it will take such
further action as any holder of Securities may  reasonably  request,  all to the
extent  required from time to time to enable such Person to sell such Underlying
Shares  without  registration  under the Securities Act within the limitation of
the exemptions provided by Rule 144.

                                    Page 21
<PAGE>

      4.4  Integration.  The Company  shall not sell,  offer for sale or solicit
offers to buy or  otherwise  negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the  Securities  in a manner that would  require the  registration  under the
Securities  Act of the sale of the Securities to Purchaser or, if then listed or
quoted on a Trading  Market,  that would be integrated with the offer or sale of
the Securities for purposes of the rules and regulations of any Trading Market.

      4.5 Exercise  Procedures.  The form of Notice of Exercise  (or  Conversion
Notice)  included in the Warrant (or  Debenture)  sets forth the totality of the
procedures required of Purchaser in order to exercise the Warrant or convert the
Debenture.  No additional  legal opinion or other  information  or  instructions
shall be  required  of  Purchaser  to  exercise  its  Warrants  or  convert  the
Debenture.  The Company shall honor  exercises of the Warrant and conversions of
the Debenture and shall deliver  Underlying Shares in accordance with the terms,
conditions and time periods set forth in such Transaction Documents.

      4.6 Intentionally Omitted.

      4.7  Shareholders  Rights  Plan.  No claim will be made or enforced by the
Company or, to the knowledge of the Company,  any other Person that Purchaser is
an  "Acquiring  Person"  under any  shareholders  rights plan or similar plan or
arrangement  in effect or hereafter  adopted by the Company,  or that  Purchaser
could be deemed to trigger the  provisions of any such plan or  arrangement,  by
virtue of  receiving  Securities  under the  Transaction  Documents or under any
other agreement between the Company and Purchaser.

      4.8 Non-Public Information.  If at any time the Company becomes subject to
the reporting  provisions of the Exchange Act, the Company  covenants and agrees
that neither it nor any other Person acting on its behalf will provide Purchaser
or its  agents  or  counsel  with  any  information  that the  Company  believes
constitutes  material  non-public  information,  unless prior thereto  Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information.  The Company  understands and confirms that Purchaser shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.

      4.9 Use of  Proceeds.  Except as set forth in  Schedule  4.9,  the Company
shall use the net proceeds from the sale of the Securities hereunder for working
capital  purposes and not for the  satisfaction  of any portion of the Company's
debt  (other  than  payment  of trade  payables  in the  ordinary  course of the
Company's  business and prior  practices),  to redeem any Common Stock or Common
Stock  Equivalents or to settle any outstanding  litigation.  Schedule 4.9 shall
detail the  Company's  expected  use of proceeds  received  from the sale of the
Securities hereunder.

                                    Page 22
<PAGE>

      4.10  Reimbursement.  If Purchaser becomes involved in any capacity in any
Proceeding by or against any Person who is a stockholder of the Company  (except
as a result of sales,  pledges,  margin sales or any similar  transaction(s)  by
Purchaser to or with any current stockholder), solely as a result of Purchaser's
acquisition of the Securities under this Agreement,  and Purchaser is successful
in the Proceeding the Company will reimburse  Purchaser for its reasonable legal
and other expenses  (including  the cost of any  investigation  preparation  and
travel in  connection  therewith)  incurred  in  connection  therewith,  as such
expenses are incurred.  The reimbursement  obligations of the Company under this
paragraph  shall be in addition to any liability which the Company may otherwise
have,  shall  extend upon the same terms and  conditions  to any  Affiliates  of
Purchaser who are actually  named in such action,  proceeding or  investigation,
and partners,  directors, agents, employees and controlling persons (if any), as
the case may be, of Purchaser and any such Affiliate,  and shall be binding upon
and  inure  to the  benefit  of any  successors,  assigns,  heirs  and  personal
representatives  of the Company,  Purchaser and any such  Affiliate and any such
Person.  The Company also agrees that neither Purchaser nor any such Affiliates,
partners,  directors,  agents,  employees or controlling  persons shall have any
liability to the Company or any Person asserting claims on behalf of or in right
of the  Company  solely as a result  of  acquiring  the  Securities  under  this
Agreement.

      4.11  Indemnification  of  Purchaser.  Subject to the  provisions  of this
Section  4.11,  the  Company  will  indemnify  and  hold the  Purchaser  and its
directors,  officers,  managers,  shareholders,  partners,  employees and agents
(each,  a  "Purchaser  Party")  harmless  from any and all losses,  liabilities,
obligations,  claims, contingencies,  damages, costs and expenses, including all
judgments,  amounts paid in settlements,  court costs and reasonable  attorneys'
fees and costs of  investigation  that any such  Purchaser  Party may  suffer or
incur  as  a  result  of  or   relating   to  (a)  any  breach  of  any  of  the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other  Transaction  Documents  or (b) any action  instituted
against Purchaser,  or any of its Affiliates,  by any stockholder of the Company
who is not an Affiliate of  Purchaser,  with respect to any of the  transactions
contemplated  by the Transaction  Documents  (unless such action is based upon a
breach  of  Purchaser's  representation,   warranties  or  covenants  under  the
Transaction  Documents or any  agreements or  understandings  Purchaser may have
with any such  stockholder  or any  violations  by Purchaser of state or federal
securities  laws or any conduct by  Purchaser  which  constitutes  fraud,  gross
negligence,  willful misconduct or malfeasance).  If any action shall be brought
against any Purchaser Party in respect of which indemnity may be sought pursuant
to this  Agreement,  such Purchaser  Party shall promptly  notify the Company in
writing, and the Company shall have the right to assume the defense thereof with
counsel of its own choosing.  Any Purchaser Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof,  but
the fees and expenses of such counsel shall be at the expense of such  Purchaser
Party except to the extent that (i) the employment thereof has been specifically
authorized  by the  Company in  writing,  (ii) the  Company  has failed  after a
reasonable  period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable  opinion of such separate counsel,  a
material  conflict on any material issue between the position of the Company and
the  position of such  Purchaser  Party.  The Company  will not be liable to any
Purchaser Party under this Agreement (i) for any settlement by a Purchaser Party
effected  without  the  Company's  prior  written  consent,  which  shall not be
unreasonably  withheld or delayed; or (ii) to the extent, but only to the extent
that a loss, claim, damage or liability is attributable to any Purchaser Party's
breach of any of the representations,  warranties,  covenants or agreements made
by Purchaser in this Agreement or in the other Transaction Documents.

                                    Page 23
<PAGE>

      4.12 Reservation and Listing of Securities.

            (a) The Company  shall  maintain a reserve from its duly  authorized
      shares of Common Stock for issuance pursuant to the Transaction  Documents
      in such amount as may be required to fulfill its obligations in full under
      the Transaction Documents.

            (b) If, on any date,  the number of  authorized  but  unissued  (and
      otherwise  unreserved)  shares of Common  Stock is less than the  Required
      Minimum on such date, then the Board of Directors of the Company shall use
      commercially  reasonable  efforts to amend the  Company's  certificate  or
      articles  of  incorporation  to  increase  the  number of  authorized  but
      unissued  shares of Common Stock to at least the Required  Minimum at such
      time,  as soon as  possible  and in any event not later  than the 75th day
      after such date.

            (c) The  Company  shall,  if then  applicable:  (i) in the  time and
      manner  required by the Trading Market or if the Common Stock is listed on
      another Trading Market, promptly prepare and file with such Trading Market
      an additional  shares listing  application  covering a number of shares of
      Common  Stock at least equal to the  Required  Minimum on the date of such
      application,  (ii) take all steps necessary to cause such shares of Common
      Stock to be approved for listing on the Trading Market as soon as possible
      thereafter,  (iii) provide to Purchaser evidence of such listing, and (iv)
      maintain  the listing of such  Common  Stock on any date at least equal to
      the  Required  Minimum  on such date on such  Trading  Market  or  another
      Trading Market.

      4.13 Intentionally Omitted

      4.14 Future  Priced  Securities.  From the date hereof until the date that
less  than  20%  in  principal  amount  of the  Debenture  initially  issued  is
outstanding,  the Company shall be prohibited from effecting or entering into an
agreement  to  effect  any  Subsequent  Financing  involving  a  "Variable  Rate
Transaction" (as defined below). The term "Variable Rate Transaction" shall mean
a  transaction  in which  the  Company  issues  or sells  (i) any debt or equity
securities  that are  convertible  into,  exchangeable  or  exercisable  for, or
include  the  right to  receive  additional  shares  of  Common  Stock  (A) at a
conversion,  exercise or exchange  rate or other price that is based upon and/or
varies with the trading  prices of or quotations  for the shares of Common Stock
at any time after the initial  issuance of such debt or equity  securities,  (B)
with a conversion,  exercise or exchange price that is subject to being reset at
some future date after the initial  issuance of such debt or equity  security or
upon the  occurrence  of specified or contingent  events  directly or indirectly
related to the  business of the Company or the market for the Common  Stock,  or
(C) whereby the number of underlying  shares of Common Stock to be received upon
exercise,  conversion,  or exchange thereof, is variable in any respect in which
the number of such underlying shares could be increased.

                                    Page 24
<PAGE>

      4.15 Intentionally Omitted.

      4.16 Intentionally Omitted. [Appointment of Board Member] -

      4.17 Registration Rights.

            (a) Piggyback  Registrations.  If at any time after the date hereof,
      the Company  shall file a  registration  statement  relating to any of its
      securities,  it will notify  Purchaser  in writing and,  upon  Purchaser's
      request, will include the offer and sale of Registrable Securities in such
      registration statement to the extent permitted by the underwriter, if any.
      In the event that the Company fails to include the Registrable  Securities
      in a piggy back statement as required herein,  Purchaser shall give notice
      demanding a registration,  and within 75 days after the notice the Company
      shall prepare and file a registration  statement with the SEC with respect
      to such Registrable  Securities.  If the Company fails to file within said
      time period,  then,  at the option of  Purchaser,  for each full  calendar
      month that the Registrable  Securities are not fully  registered,  Company
      shall  issue to  Purchaser  0.1 % of its common  shares  then  outstanding
      computed on a Fully Diluted Basis per day until the shares are registered.

            (b)  Whenever  required  to include  Registrable  Securities  in any
      registration or to effect the  registration of any Registrable  Securities
      pursuant  to this  Agreement,  the  Company  shall,  as  expeditiously  as
      reasonably  possible,  prepare  and  file  with  the  SEC  a  registration
      statement with respect to such Registrable Securities and use its absolute
      best  lawful  efforts  to cause  such  registration  statement  to  become
      effective,  and use its absolute  best  efforts to keep such  registration
      statement  effective  until  all such  Registrable  Securities  have  been
      distributed. In addition, the Company shall use its best lawful efforts to
      register and qualify the securities covered by such registration statement
      under  such other  securities  or Blue Sky laws of such  jurisdictions  as
      shall be  reasonably  requested by  Purchaser,  provided  that the Company
      shall not be required in connection therewith or as a condition thereto to
      qualify  as a  broker-dealer  in  any  states  or  jurisdictions  or to do
      business or to file a general consent to service of process in any of such
      states or jurisdictions.

            (c) All expenses,  other than underwriting discounts and commissions
      incurred in connection the registrations  contemplated herein,  including,
      without  limitation,  all  registration,  filing and  qualification  fees,
      printers' and accounting  fees, fees and  disbursements of counsel for the
      Company,  and the  reasonable  fees and  disbursements  of counsel for the
      selling Purchaser, shall be borne by the Company.

            (d) Subject to the terms and  conditions  of this  Agreement and the
      other  Transaction  Documents,  the right to cause the Company to register
      Registrable  Securities  pursuant  to this  Agreement  may be  assigned by
      Purchaser to any transferee or assignee of such securities;  provided that
      said  transferee  or assignee is a transferee or assignee of at least five
      percent (5%) of Purchaser's Registrable Securities.

                                    Page 25
<PAGE>

                                   ARTICLE V.

                        SMALL BUSINESS INVESTMENT COMPANY


      5.1 Small Business Investment Company Provisions. The Company acknowledges
that Purchaser,  is a small business investment company ("SBIC") licensed by the
United States Small Business Administration (the "SBA"), and makes the following
representations,  warranties  and  covenants  to  Purchaser  for so  long as the
Debenture held by Purchaser is outstanding:

            (a) Small Business Concern. The Company represents and warrants that
      it, taken  together with its  "affiliates"  (as that term is defined in 13
      C.F.R. ss.121.103), is a "Small Business Concern" within the meaning of 15
      U.S.C. ss.662(5),  that is Section 103(5) of the Small Business Investment
      Act of 1958, as amended (the "SBIC Act"), and the regulations  thereunder,
      including 13 C.F.R.  ss.107,  and meets the  applicable  size  eligibility
      criteria set forth in 13 C.F.R.  ss.121.301(c)(1) or the industry standard
      covering  the  industry in which the Company is  primarily  engaged as set
      forth in 13 C.F.R.  ss.121.301(c)(2).  Neither  the Company nor any of its
      Subsidiaries  presently  engages  in any  activities  for  which  a  small
      business investment company is prohibited from providing funds by the SBIC
      Act, including 13 C.F.R. ss.107.

            (b) Small Business  Administration  Documentation.  On or before the
      Closing  Date,  Purchaser  shall have  received  SBA Form 480 (Size Status
      Declaration)  and SBA Form 652 (Assurance of  Compliance)  which have been
      completed  and  executed  by the  Company,  and SBA Form  1031  (Portfolio
      Finance Report), Parts A and B of which have been completed by the Company
      (the "SBA Documents").

            (c)   Inspection.   The  Company   will  permit   Purchaser  or  its
      representatives,  at the  Company's  expense,  and examiners of the SBA to
      visit and inspect the properties and assets of the Company, to examine its
      books of account  and  records,  and to  discuss  the  Company's  affairs,
      finances and accounts with the Company's  officers,  senior management and
      accountants, all at such reasonable times as may be requested by Purchaser
      or the SBA.

            (d)  Informational  Covenant.  Within sixty (60) calendar days after
      the end of the Company's fiscal year, the Company will furnish or cause to
      be furnished to Purchaser  information  required by the SBA concerning the
      economic impact of Purchaser's investment,  for (or as of the end of) each
      fiscal  year,  including  but not  limited  to:  (i) board  minutes,  (ii)
      information  concerning  full-time  equivalent  employees,  (iii) federal,
      state and local  income  taxes  paid,  (iv) gross  revenue,  (v) source of
      revenue  growth,  (vi)  after-tax  profit and loss, and (vii) and federal,
      state  and  local  income  tax  withholding.  Such  information  shall  be
      forwarded by the Company on a form provided by Purchaser. The Company also
      will furnish or cause to be furnished to Purchaser such other  information
      regarding the business,  affairs and condition of the Company as Purchaser
      may from time to time reasonably request.

                                    Page 26
<PAGE>

            (e) Use of Proceeds. The Company will deliver to Purchaser from time
      to  time  promptly  following   Purchaser's  request,  a  written  report,
      certified as correct by an officer, verifying the purposes and amounts for
      which  proceeds from the Debenture have been  disbursed.  The Company will
      supply to Purchaser such additional information and documents as Purchaser
      reasonably  requests with respect to the  Company's  use of proceeds,  and
      will permit Purchaser to have access to any and all the Company's  records
      and  information  and personnel as Purchaser deems necessary to verify how
      such proceeds have been or are being used, and to assure that the proceeds
      have been used for the purposes specified on Schedule 4.9.



            (f) Activities and Proceeds.

                  (i) Neither the Company nor any of its Affiliates  will engage
            in any  activities or use directly or  indirectly  the proceeds from
            the  Debenture  for any  purpose  for which a SBIC  prohibited  from
            providing funds by the SBIC Act, including 13 C.F.R. ss.107.

                  (ii)  Without   obtaining  the  prior   written   approval  of
            Purchaser,  the Company will not change,  within one (1) year of the
            Closing Date, the Company's business activity from that described on
            Schedule  5.1(f)  to a  business  activity  which a  small  business
            investment  company is prohibited  from providing  funds by the SBIC
            Act.  The  Company  agrees  that any such  changes  in its  business
            activity  without  such  prior  written  consent of  Purchaser  will
            constitute a material breach of the obligations of the Company under
            the Transaction Documents (an "Activity Event of Default").


                                  ARTICLE VI.
                                  MISCELLANEOUS

      6.1 Confidentiality.  Purchaser  acknowledges that information  concerning
the Graphite  Transaction  and other matters that are the subject matter of this
Agreement and which have been specifically designated as such by the Company may
constitute   material   non-public   information  under  United  States  federal
securities  laws,  and that United States federal  securities  laws prohibit any
person who has received material non-public  information relating to the Company
from purchasing or selling securities of the Company, or from communicating such
information  to  any  person  under  circumstances  in  which  it is  reasonably
foreseeable  that such person is likely to purchase  or sell  securities  of the
Company.  Accordingly,  until such time as any such  non-public  information has
been  adequately  disseminated  to the public,  Purchaser  shall not directly or
indirectly,  make any  statements,  public  announcements  or  release  to trade
publications  or the press with respect to the subject matter of this Agreement,
purchase or sell any securities of the Company,  or communicate such information
to any other person..

                                    Page 27
<PAGE>

      6.2 Fees  and  Expenses.  At the  closing,  the  Company  shall  reimburse
Purchaser  for its legal fees and  expenses in the amount of $20,000.  Except as
expressly set forth above and in the Transaction Documents to the contrary, each
party shall pay the fees and expenses of its advisers, counsel,  accountants and
other experts, if any, and all other expenses incurred by such party incident to
the  negotiation,  preparation,  execution,  delivery  and  performance  of this
Agreement.  The Company shall pay all transfer agent fees, stamp taxes and other
taxes and duties levied in connection with the issuance of any Securities.

      6.3  Entire  Agreement.  The  Transaction  Documents,  together  with  the
exhibits and schedules thereto,  contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

      6.4 Notices.  Any and all notices or other  communications  or  deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of  transmission,  if
such notice or  communication is delivered via facsimile at the facsimile number
set forth on the signature  pages  attached  hereto prior to 5:30 p.m.  (Dallas,
Texas  time) on a  Business  Day,  (b) the next  Business  Day after the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  number set forth on the signature pages attached hereto on a day that
is not a  Business  Day or later  than 5:30  p.m.  (Dallas,  Texas  time) on any
Business Day, (c) the second Business Day following the date of mailing, if sent
by U.S.  nationally  recognized  overnight  courier service,  or (d) upon actual
receipt by the party to whom such notice is  required  to be given.  The address
for such notices and communications shall be as set forth on the signature pages
attached hereto.

      6.5 Amendments;  Waivers.  No provision of this Agreement may be waived or
amended except in a written instrument  signed, in the case of an amendment,  by
the Company and Purchaser or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought.  No waiver of any default with respect
to any provision,  condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent  default or a
waiver of any other provision,  condition or requirement  hereof,  nor shall any
delay or omission of either party to exercise any right  hereunder in any manner
impair the exercise of any such right.

      6.6  Construction.  The headings herein are for  convenience  only, do not
constitute a part of this  Agreement  and shall not be deemed to limit or affect
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent,  and no
rules of strict construction will be applied against any party.

                                    Page 28
<PAGE>

      6.7 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their  successors and permitted  assigns.  The
Company may not assign this  Agreement  or any rights or  obligations  hereunder
without the prior written consent of Purchaser.  Purchaser may assign any or all
of its rights under this  Agreement to any Person to whom  Purchaser  assigns or
transfers  any  Securities,  provided  such  transferee  agrees in writing to be
bound, with respect to the transferred Securities, by the provisions hereof that
apply to the Purchaser.

      6.8 No  Third-Party  Beneficiaries.  This  Agreement  is intended  for the
benefit of the parties  hereto and their  respective  successors  and  permitted
assigns and is not for the benefit of, nor may any provision  hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.10.

      6.9 Governing Law. All questions  concerning the  construction,  validity,
enforcement and interpretation of the Transaction Documents shall be governed by
and construed and enforced in accordance  with the internal laws of the State of
Texas, without regard to the principles of conflicts of law thereof.  Each party
agrees that all legal proceedings  concerning the  interpretations,  enforcement
and defense of the  transactions  contemplated  by this  Agreement and any other
Transaction  Documents (whether brought against a party hereto or its respective
affiliates,  directors,  officers,  shareholders,  employees or agents) shall be
commenced  exclusively  in the state and federal  courts  sitting in the City of
Dallas,   Texas.  Each  party  hereby  irrevocably   submits  to  the  exclusive
jurisdiction  of the state and  federal  courts  sitting  in the City of Dallas,
Texas for the adjudication of any dispute hereunder or in connection herewith or
with any transaction  contemplated  hereby or discussed  herein  (including with
respect to the  enforcement  of any of the  Transaction  Documents),  and hereby
irrevocably  waives, and agrees not to assert in any suit, action or proceeding,
any claim  that it is not  personally  subject to the  jurisdiction  of any such
court,  that such suit,  action or proceeding is improper or inconvenient  venue
for such proceeding.  THE PARTIES HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY. If
either party shall commence an action or proceeding to enforce any provisions of
the  Transaction  Documents,  then  the  prevailing  party  in  such  action  or
proceeding  shall be reimbursed by the other party for its  attorneys'  fees and
other  costs and  expenses  incurred  with the  investigation,  preparation  and
prosecution of such action or proceeding.

      6.10 Survival.  The representations and warranties  contained herein shall
survive the Closing and the delivery of the Securities until the satisfaction or
complete conversion of the Debenture.

      6.11   Execution.   This   Agreement  may  be  executed  in  two  or  more
counterparts,  all of which when taken  together shall be considered one and the
same agreement and shall become effective when  counterparts have been signed by
each party and  delivered  to the other  party,  it being  understood  that both
parties need not sign the same  counterpart.  In the event that any signature is
delivered by facsimile  transmission,  such  signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed)  with the same force and effect as if such  facsimile  signature  page
were an original thereof.

                                    Page 29
<PAGE>

      6.12  Severability.  If any  provision  of  this  Agreement  is held to be
invalid or unenforceable in any respect,  the validity and enforceability of the
remaining  terms  and  provisions  of  this  Agreement  shall  not in any way be
affected or impaired  thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor,  and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

      6.13  Rescission and  Withdrawal  Right.  Notwithstanding  anything to the
contrary  contained in (and  without  limiting  any similar  provisions  of) the
Transaction Documents, whenever Purchaser exercises a right, election, demand or
option under a Transaction  Document and the Company does not timely perform its
related  obligations  within the periods  therein  provided,  then Purchaser may
rescind  or  withdraw,  in its sole  discretion  from time to time upon  written
notice to the Company,  any relevant  notice,  demand or election in whole or in
part without prejudice to its future actions and rights;  provided,  however, in
the  case of a  rescission  of an  exercise  of a  Warrant,  Purchaser  shall be
required  to return any  shares of Common  Stock  subject to any such  rescinded
exercise notice.

      6.14   Replacement  of  Securities.   If  any  certificate  or  instrument
evidencing any Securities is mutilated,  lost, stolen or destroyed,  the Company
shall  issue or cause to be issued in  exchange  and  substitution  for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument,  but only upon receipt of evidence reasonably satisfactory to the
Company  of such  loss,  theft  or  destruction  and  customary  and  reasonable
indemnity,  if requested.  The  applicants  for a new  certificate or instrument
under  such  circumstances  shall  also  pay any  reasonable  third-party  costs
associated with the issuance of such replacement Securities.

      6.15  Remedies.  In  addition to being  entitled  to  exercise  all rights
provided herein or granted by law, including recovery of damages,  Purchaser and
the  Company  will be entitled to  specific  performance  under the  Transaction
Documents.  The  parties  agree  that  monetary  damages  may  not  be  adequate
compensation  for any loss  incurred  by  reason of any  breach  of  obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific  performance  of any such  obligation  the defense that a remedy at law
would be adequate.

      6.16 Payment Set Aside.  To the extent that the Company makes a payment or
payments  to  Purchaser  pursuant  to any  Transaction  Documents  or  Purchaser
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such  enforcement  or exercise or any part thereof are  subsequently
invalidated,  declared to be fraudulent or  preferential,  set aside,  recovered
from, disgorged by or are required to be refunded,  repaid or otherwise restored
to the  Company,  a  trustee,  receiver  or  any  other  person  under  any  law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable  cause of action),  then to the extent of any such  restoration
the  obligation  or part thereof  originally  intended to be satisfied  shall be
revived and  continued  in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.

                                    Page 30
<PAGE>

      6.17 Usury. To the extent it may lawfully do so, the Company hereby agrees
not to insist upon or plead or in any manner  whatsoever  claim, and will resist
any and all efforts to be compelled  to take the benefit or advantage  of, usury
laws wherever enacted, now or at any time hereafter in force, in connection with
any claim,  action or  proceeding  that may be brought by  Purchaser in order to
enforce any right or remedy under any Transaction Documents. Notwithstanding any
provision  to  the  contrary  contained  in  any  Transaction  Documents,  it is
expressly  agreed and provided that the total liability of the Company under the
Transaction  Documents  for payments in the nature of interest  shall not exceed
the maximum lawful rate authorized  under  applicable law (the "Maximum  Rate"),
and, without  limiting the foregoing,  in no event shall any rate of interest or
default  interest,  or both of them,  when aggregated with any other sums in the
nature  of  interest  that  the  Company  may  be  obligated  to pay  under  the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract  rate of  interest  allowed by law and  applicable  to the  Transaction
Documents is  increased  or  decreased  by statute or any official  governmental
action subsequent to the date hereof,  the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction  Documents
from the  effective  date  forward,  unless such  application  is  precluded  by
applicable law. If under any circumstances whatsoever, interest in excess of the
Maximum  Rate is paid by the Company to Purchaser  with respect to  indebtedness
evidenced  by the  Transaction  Documents,  such  excess  shall  be  applied  by
Purchaser  to the  unpaid  principal  balance  of any  such  indebtedness  or be
refunded to the Company, the manner of handling such excess to be at Purchaser's
election.

      6.18 Intentionally Omitted.

      6.19  Liquidated  Damages.  The Company's  obligations  to pay any partial
liquidated  damages or other amounts owing under the Transaction  Documents is a
continuing  obligation of the Company and shall not  terminate  until all unpaid
partial liquidated damages and other amounts have been paid  notwithstanding the
fact that the instrument or security  pursuant to which such partial  liquidated
damages or other amounts are due and payable shall have been canceled.

                            (Signature Page Follows)


                                    Page 31
<PAGE>

      IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Securities
Purchase   Agreement  to  be  duly  executed  by  their  respective   authorized
signatories as of the date first indicated above.

COMPANY

BPK RESOURCES, INC.                          Address for Notice and Delivery:
                                             --------------------------------
                                             264 Union Boulevard, First Floor
                                             Totowa, New Jersey 07512
                                             Attn: Christopher H. Giordano, CEO

By: /s/ Christopher H. Giordano
   --------------------------------
     Name:  Christopher H. Giordano
     Title:    Chief Executive Officer



PURCHASER

TRIDENT GROWTH FUND, L.P.                    Address for Notice and Delivery:
                                             --------------------------------
                                             700 Gemini
By: TRIDENT MANAGEMENT, LLC, its             Houston, TX 77058
      GENERAL PARTNER                        Attn: Larry St. Martin



By: /s/ Scott Cook
   --------------------------------
     Name:Scott Cook
     Title:  Authorized Member


<PAGE>


                                   ATTACHMENTS

Exhibit A             Form of Debenture
Exhibit B             Form of Security Agreement
Exhibit C             Form of Warrant
Exhibit D             SBA Form 480
Exhibit E             SBA Form 652
Exhibit F             SBA Form 1031


Schedule 3.1(a)       Subsidiaries
Schedule 3.1(e)       Filings, Consents and Approvals
Schedule 3.1(g)       Capitalization
Schedule 3.1(h)       Financial Statements
Schedule 3.1(i)       Litigation
Schedule 3.1(l)       Regulatory Permits
Schedule 3.1(m)       Title to Assets (Outstanding liens)
Schedule 3.1(n)       Intellectual Property
Schedule 3.1(r)       Certain Fees (Broker Fees)
Schedule 3.1(u)       Registration Rights
Schedule 3.1(cc)      Indebtedness
Schedule 3.1(ff)      Material Liabilities
Schedule 3.1(gg)      Material Agreements
Schedule 3.1(hh)      Board of Directors
Schedule 4.9          Use of Proceeds
Schedule 5.1(f)       Business Activity


<PAGE>

                               DISCLOSURE SCHEDULE

</TEXT>
</DOCUMENT>
