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                 CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT

                                     Between


                                   AMNEX, INC.

                                       and


                   SOUTHBROOK INTERNATIONAL INVESTMENTS, LTD.

                         ------------------------------




                         Dated as of September 19, 1996


                         ------------------------------





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                                       -1-

<PAGE>




                                TABLE OF CONTENTS

                                                                            PAGE


ARTICLE I    PURCHASE AND SALE OF PREFERRED SHARES.........................-1-
       1.1   Purchase and Sale.............................................-1-
       1.2   Purchase Price................................................-2-
       1.3   The Closings..................................................-2-
             (a)     The Series G Closings.................................-2-
             (b)     The Series H Closing..................................-3-
             (c)     The Series I Closing..................................-4-
             (d)     The Series J Closing..................................-4-

ARTICLE II   REPRESENTATIONS AND WARRANTIES................................-5-
       2.1   Representations, Warranties and Agreements of the
             Company.......................................................-5-
             (a)     Organization and Qualification........................-5-
             (b)     Authorization; Enforcement............................-5-
             (c)     Capitalization........................................-6-
             (d)     Issuance of Shares....................................-6-
             (e)     No Conflicts..........................................-6-
             (f)     Consents and Approvals................................-7-
             (g)     Litigation; Proceedings...............................-7-
             (h)     No Default or Violation...............................-8-
             (i)     Intentionally Omitted.................................-8-
             (j)     Disclosure Materials..................................-8-
             (k)     Private Offering......................................-8-
             (l)     SEC Documents.........................................-8-
             (m)     Seniority.............................................-9-
       2.2   Representations and Warranties of the Purchaser...............-9-
             (a)     Organization; Authority...............................-9-
             (b)     Investment Intent.....................................-9-
             (c)     Purchaser Status......................................-9-
             (d)     Experience of Purchaser...............................-9-
             (e)     Ability of Purchaser to Bear Risk of
                     Investment............................................-10-
             (f)     Prohibited Transactions...............................-10-
             (g)     Access to Information.................................-10-
             (h)     Non-Broker-Dealer Status..............................-10-
             (i)     Reliance..............................................-10-

ARTICLE III  OTHER AGREEMENTS OF THE PARTIES...............................-10-
       3.1           Transfer Restrictions.................................-10-


                                       -i-

<PAGE>




       3.2           Stop Transfer Instruction.............................-11-
       3.3           Furnishing of Information.............................-11-
       3.4           Notice of Certain Events..............................-12-
       3.5           Copies and Use of Disclosure Materials................-12-
       3.6           Blue Sky Laws.........................................-12-
       3.7           Solicitation Materials................................-12-
       3.8           Subsequent Financial Statements.......................-12-
       3.9           Certain Agreements....................................-13-
       3.10          Purchaser Ownership of Common Stock...................-14-
       3.11          Listing of Underlying Shares..........................-14-
       3.12          Conversion Procedures.................................-15-
       3.13          Purchaser's Rights if Trading in Common Stock is
                     Suspended.............................................-15-
       3.14          No Violation of Applicable Law........................-15-
       3.15          Repurchase or Redemption Restrictions.................-15-
       3.16          Piggyback Registration Rights.........................-15-
       3.17          Notice of Breaches....................................-16-
       3.18          Confidentiality.......................................-16-

ARTICLE IV  CONDITIONS.....................................................-17-
       4.1(a)        Conditions Precedent to the Obligation of the
                     Company to Sell the Series G Shares...................-17-
                     (i)     Accuracy of the Purchaser's Representations
                             and Warranties................................-17-
                     (ii)    Performance by the Purchaser..................-17-
                     (iii)   No Injunction.................................-17-
                     (iv)    Required Approvals............................-17-
       (b)           Conditions Precedent to the Obligation of the
                     Purchaser to Purchase the Series G Shares.............-17-
                     (i)     Accuracy of the Company's Representations
                             and Warranties................................-17-
                     (ii)    Performance by the Company....................-17-
                     (iii)   No Injunction.................................-18-
                     (iv)    Adverse Changes...............................-18-
                     (v)     No Suspensions of Trading in Common Stock.....-18-
                     (vi)    Listing of Common Stock.......................-18-
                     (vii)   Legal Opinions................................-18-
                     (viii)  Required Approvals............................-18-
                     (ix)    Shares of Common Stock........................-18-
                     (x)     Delivery of Stock Certificates................-18-
                     (xi)    Registration Rights Agreement.................-18-
                     (xii)   Warrant.......................................-19-

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                                      -ii-

<PAGE>




                     (xiii)  Underlying Shares Registration Statement......-19-
                     (xiv)   Certificate of Amendment......................-19-
                     (xv)    Company Certificates..........................-19-
       4.2(a)        Conditions Precedent to the Obligation of the
                     Company to Sell the Series H Shares, the Series I
                     Shares or the Series J Shares.........................-19-
                     (i)     Series G Closing..............................-19-
                     (ii)    Accuracy of the Purchaser's Representations
                             and Warranties................................-19-
                     (iii)   Performance by the Purchaser..................-20-
                     (iv)    No Injunction.................................-20-
                     (v)     Required Approvals............................-20-
       (b)           Conditions Precedent to the Obligation of the
                     Purchaser to Purchase the Series H Shares, the
                     Series I Shares or the Series J Shares................-20-
                     (i)     Series G Closing..............................-20-
                     (ii)    Accuracy of the Company's Representations
                             and Warranties................................-20-
                     (iii)   Performance by the Company....................-20-
                     (iv)    Underlying Shares Registration Statements.....-20-
                     (v)     No Injunction.................................-21-
                     (vi)    Adverse Changes...............................-21-
                     (vii)   Trading Volume................................-21-
                     (viii)  Litigation....................................-21-
                     (ix)    Management....................................-21-
                     (x)     No Suspensions of Trading in Common Stock.....-21-
                     (xi)    Listing of Common Stock.......................-22-
                     (xii)   Legal Opinions................................-22-
                     (xiii)  Required Approvals............................-22-
                     (xiv)   Shares of Common Stock........................-22-
                     (xv)    Delivery of Stock Certificates................-22-

ARTICLE V   TERMINATION....................................................-22-
       5.1           Termination by Mutual Consent.........................-22-
       5.2           Termination by the Company............................-23-
       5.3           Termination by the Purchaser..........................-23-

ARTICLE VI  MISCELLANEOUS..................................................-24-
       6.1           Fees and Expenses.....................................-24-
       6.2           Entire Agreement; Amendments..........................-25-
       6.3           Notices...............................................-25-
       6.4           Amendments; Waivers...................................-26-

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                                      -iii-

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       6.5           Headings..............................................-26-
       6.6           Successors and Assigns................................-26-
       6.7           No Third-Party Beneficiaries..........................-26-
       6.8           Governing Law.........................................-27-
       6.9           Survival..............................................-27-
       6.10          Execution.............................................-27-
       6.11          Publicity.............................................-27-
       6.12          Severability..........................................-27-
       6.13          Delivery of W-8.......................................-27-


Exhibit A            -      Series G Terms
Exhibit B            -      Registration Rights Agreement
Exhibit C            -      Conversion Procedures
Exhibit D(1)         -      Form of Outside Counsel Legal Opinion
Exhibit D(2)         -      Form of Inhouse Counsel Legal Opinion
Exhibit E(1)         -      Form of Warrant
Exhibit E(2)         -      Form of Warrant



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                                      -iv-

<PAGE>




       CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"),  dated
as of September 19, 1996, between Southbrook International Investments,  Ltd., a
corporation  organized and existing under the laws of the British Virgin Islands
(the "Purchaser"),  and Amnex, Inc., a corporation  organized and existing under
the laws of New York (the "Company").

       WHEREAS,  the Company  desires to issue and sell to the Purchaser and the
Purchaser  desires  to  acquire  shares of the  Company's  Series G  Convertible
Preferred  Stock,  par value  $.001 per share (the  "Series G  Preferred"),  the
Company's  Series H Convertible  Preferred Stock, par value $.001 per share (the
"Series H Preferred"),  the Company's Series I Convertible  Preferred Stock, par
value $.001 per share (the  "Series I  Preferred")  and the  Company's  Series J
Convertible   Preferred  Stock,  par  value  $.001  per  share  (the  "Series  J
Preferred").

       IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:


                                    ARTICLE I

                      PURCHASE AND SALE OF PREFERRED SHARES

       1.1 Purchase and Sale.  (a) Subject to the terms and conditions set forth
herein,  the Company  shall issue and sell to the  Purchaser,  and the Purchaser
shall  purchase (a) an  aggregate of up to 125,000  shares of Series G Preferred
(collectively,  the "Series G Shares"); (b) an aggregate of up to 125,000 shares
of Series H Preferred (collectively,  the "Series H Shares"; (c) an aggregate of
up to  125,000  shares  of  Series I  Preferred  (collectively,  the  "Series  I
Shares"); and (d) an aggregate of up to 125,000 shares of the Series J Preferred
(collectively, the "Series J Shares"). The Series G Shares, the Series H Shares,
the Series I Shares, and the Series J Shares are collectively referred to as the
"Shares."  Notwithstanding anything to the contrary set forth in this Agreement,
the Company  shall have no  obligation  to sell  Series G Shares,  other than in
accordance  with Section  1.3(a),  Series H Shares,  Series I Shares or Series J
Shares.


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<PAGE>




                 (b) The Series G Preferred  shall have the  respective  rights,
preferences and privileges set forth in Exhibit A attached hereto (the "Series G
Terms"),  which shall be  incorporated  into a  Certificate  of  Amendment to be
approved by the  Purchaser  and filed by the Company with the Secretary of State
of New York (the "Series G  Amendment").  The Series H  Preferred,  the Series I
Preferred and the Series J Preferred shall have respective  rights,  preferences
and  privileges  identical  to the  Series G Terms as set  forth in  Exhibit  A,
mutatis mutandis, except that the Conversion Price for conversion of such Shares
shall be the  lesser of the  Market  Price at the  Original  Issue  Date of such
Shares or the  percentage  of the Market  Price at the  Conversion  Date of such
Shares determined by reference to the following schedule:


       Market Capitalization                       Percentage of Market Price


       $40,000,000 - $89,329,999                              80%
       $89,330,000 - $95,142,999                              82.5%
       $95,143,000 - $134,329,999                             84%
       $134,330,000 or more                                   85%


       The Series H Shares, the Series I Shares and the Series J Shares shall be
authorized  pursuant to one or more  certificates  of amendment to the Company's
Certificate  of  Incorporation  to be  prepared by the  Company,  subject to the
approval of the Purchaser, and filed by the Secretary of State of New York (such
certificates of amendment, together with the Series G Amendment, are referred to
as the "Certificates of Amendment").

       For  purposes of this  Agreement,  "Conversion  Price,"  "Original  Issue
Date,"  "Conversion  Date" "Trading Day" and "Per Share Market Value" shall have
the meanings set forth in the Series G Terms; "Market Capitalization" shall mean
the  product  of the  Outstanding  Shares  at the  Original  Issue  Date  of the
particular  series  of  Shares  being  issued  and with  respect  to  which  the
computation is being made, multiplied by the average Per Share

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                                       -2-

<PAGE>




Market Value for the twenty (20) Trading Days immediately preceding the Original
Issue Date of the particular series of Shares being issued; "Outstanding Shares"
shall  mean  24,000,000  plus the  number of shares of common  stock,  $.001 par
value, of the Company  ("Common Stock")  theretofore  issued to the Purchaser or
into which Shares theretofore issued to the Purchaser may then be converted; and
"Market  Price" as at any date shall mean the average Per Share Market Value for
the five (5) Trading Days immediately preceding such date.

       1.2       Purchase Price.  The purchase price for the Shares shall be
$20.00 per share.

       1.3       The Closings.

                 (a) The  Series G  Closings.  (i) The  initial  closing  of the
purchase and sale of Series G Shares (the "Initial Series G Closing") shall take
place at the  offices  of  Robinson  Silverman  Pearce  Aronsohn  &  Berman  LLP
("Robinson  Silverman"),  1290 Avenue of the Americas, New York, New York 10104,
immediately  following  the  execution  hereof or upon the  satisfaction  of the
conditions set forth in Section 4.1. The date of the Initial Series G Closing is
hereinafter  referred to as the "Initial  Series G Closing Date". At the Initial
Series G Closing,  the Company  shall sell and issue to the  Purchaser,  and the
Purchaser  shall  purchase,  100,000  shares of Series G Preferred (the "Initial
Series G Shares"), for an aggregate purchase price of $2,000,000.

                     (ii)            At the election of the Company, a second
closing  of the  purchase  and sale of  Series G Shares  (the  "Second  Series G
Closing")  shall take place at the offices of Robinson  Silverman  at such time,
which  may  not  be  later  than  the  30th  day  after  the  Underlying  Shares
Registration  Statement  (hereinafter defined) relating to the Common Stock into
which the Initial  Series G Shares may be converted  has been filed and has been
declared  effective by the Securities and Exchange  Commission (the "SEC" or the
"Commission") in accordance with the Registration  Rights  Agreement,  as may be
designated  by the  Company  upon not less  than ten  (10)  days  notice  to the
Purchaser  given  on or after  the  date  such  Underlying  Shares  Registration
Statement is declared effective by the Commission; provided that the Second

10306-00006/387702.5
                                       -3-

<PAGE>




Series G Closing may take place only upon  satisfaction  of the  conditions  set
forth  in  Section  4.1(a)  and  4.1(b)  and  only  if  the  Underlying   Shares
Registration  Statement  relating  to the Common  Stock  into which the  Initial
Series G Shares may be converted has been filed and has been declared  effective
by the SEC in accordance with the Registration Rights Agreement. The date of the
Second Series G Closing is referred to as the "Second Series G Closing Date." At
the Second Series G Closing,  the Company shall sell and issue to the Purchaser,
and the Purchaser shall purchase, such number (but in no event more than 25,000)
of Series G Shares as may be  designated  by the  Company  in its  notice of the
Second Series G Closing.

                     (iii)           At each Series G Closing, (a) the Company
shall deliver to the Purchaser (1) one or more stock  certificates  representing
the Series G Shares being  issued and sold at such  closing,  registered  in the
name of the Purchaser and (2) all documents,  instruments and writings  required
to have  been  delivered  at or prior to the  Series G  Closing  by the  Company
pursuant to this  Agreement;  and (b) the Purchaser shall deliver to the Company
(1) the  purchase  price for the  number of shares of Series G  Preferred  being
purchased  at such  closing as  determined  pursuant to this Article I in United
States  dollars in  immediately  available  funds by wire transfer to an account
designated  in writing by the Company prior to the  particular  Series G Closing
Date and (2) all  documents,  instruments  and  writings  required  to have been
delivered at or prior to such Series G Closing by the Purchaser pursuant to this
Agreement and the Registration Rights Agreement.

                 (b) The Series H Closing.  (i) At the  election of the Company,
the  closing  of the  purchase  and sale of the Series H Shares  (the  "Series H
Closing") shall take place at the offices of Robinson  Silverman at such time as
the  Company may  designate,  provided,  however,  in no case shall the Series H
Closing  take place  until the  conditions  set forth in  Section  4.2 have been
satisfied  and (A) earlier than the later of December 1, 1996, or ten days after
notice  from  the  Company  to the  Purchaser  of its  election  to  sell to the
Purchaser Series H Shares given on or after the date that the Underlying  Shares
Registration  Statements  relating to the Initial Series G Shares, and, if there
has occurred a Second Series G Closing, the Series G Shares sold

10306-00006/387702.5
                                       -4-

<PAGE>




thereat have been declared effective by the Commission,  or (B) later than March
31,  1997 (the  "Series H Closing  Expiration  Date").  The date of the Series H
Closing is hereinafter referred to as the "Series H Closing Date".

                     (ii)            At the Series H Closing, (a) the
Company shall sell and issue to the Purchaser,  and the Purchaser shall purchase
from the  Company,  such number (up to 125,000)  shares of Series H Preferred as
the Company may elect to issue and sell to the Purchaser,  (b) the Company shall
deliver to the Purchaser  (1) one or more stock  certificates  representing  the
Series H Shares,  registered in the name of the Purchaser and (2) all documents,
instruments  and  writings  required to have been  delivered  at or prior to the
Series H Closing by the Company  pursuant to this Agreement and the Registration
Rights  Agreement  and (c) the  Purchaser  shall  deliver to the Company (1) the
purchase price for the Series H Shares being purchased as determined pursuant to
this Article I in  immediately  available  funds by wire  transfer to an account
designated  in writing by the Company prior to the Series H Closing Date and (2)
all documents,  instruments  and writings  required to have been delivered at or
prior to Series H Closing by the  Purchaser  pursuant to this  Agreement and the
Registration Rights Agreement.

                 (c) The Series I Closing.  (i) At the  election of the Company,
the closing of the purchase and sale of Series I Shares (the "Series I Closing")
shall  take  place at the  offices  of  Robinson  Silverman  at such time as the
Company may designate,  provided, however, in no case shall the Series I Closing
take place until the conditions set forth in Section 4.2 have been satisfied and
(A) earlier  than the later of April 1, 1997,  or ten days after notice from the
Company to the  Purchaser  of its  election  to sell to the  Purchaser  Series I
Shares  given on or after  the date  that  the  Underlying  Shares  Registration
Statement  covering  Shares issued at the last prior Closing  hereunder has been
declared  effective,  or (B) later than June 30, 1997 (the  "Series I Expiration
Date"). The date of the Series I Closing is referred to as the "Series I Closing
Date."

                     (ii)            At the Series I Closing, (a) the Company
shall sell and issue to the Purchaser, and the Purchaser shall
purchase from the Company, such number (up to 125,000) shares of

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                                       -5-

<PAGE>




Series I Preferred as the Company may elect to issue and sell to the  Purchaser,
(b)  the  Company  shall  deliver  to  the  Purchaser  (1)  one  or  more  stock
certificates  representing  the  Series  I  Shares  being  sold at the  Series I
Closing,  registered  in the  name  of the  Purchaser  and  (2)  all  documents,
instruments  and  writings  required to have been  delivered  at or prior to the
Series I Closing by the Company  pursuant to this Agreement and the Registration
Rights  Agreement,  and (c) the  Purchaser  shall deliver to the Company (1) the
purchase price for the Series I Shares being purchased,  as determined  pursuant
to this Article I, in immediately available funds by wire transfer to an account
designated in writing by the Company prior to the Series I Closing Date, and (2)
all documents,  instruments  and writings  required to have been delivered at or
prior to the Series I Closing by the  Purchaser  pursuant to this  Agreement and
the Registration Rights Agreement.

                 (d) The Series J Closing.  (i) At the  election of the Company,
the closing of the purchase and sale of Series J Shares (the "Series J Closing")
shall  take  place at the  offices  of  Robinson  Silverman  at such time as the
Company may designate,  provided, however, in no case shall the Series J Closing
take place until the conditions set forth in Section 4.2 have been satisfied and
(A) earlier  than the later of July 1, 1997,  or ten days after  notice from the
Company to the  Purchaser  of its  election  to sell to the  Purchaser  Series J
Shares  given on or after  the date  that  the  Underlying  Shares  Registration
Statement  covering  Shares issued at the last prior Closing  hereunder has been
declared  effective,  or (B)  later  than  September  30,  1997  (the  "Series J
Expiration  Date").  The date of the  Series J  Closing  is  referred  to as the
"Series J Closing Date."

                     (ii)            At the Series J Closing, (a) the Company
shall sell and issue to the Purchaser, and the Purchaser shall purchase from the
Company, such number (up to 125,000) shares of Series J Preferred as the Company
may elect to issue and sell to the  Purchaser,  (b) the Company shall deliver to
the  Purchaser  (1) one or more  stock  certificates  representing  the Series J
Shares  being  sold at the  Series  J  Closing,  registered  in the  name of the
Purchaser and (2) all documents,  instruments and writings required to have been
delivered  at or prior to the Series J Closing by the  Company  pursuant to this
Agreement and the

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                                       -6-

<PAGE>




Registration  Rights  Agreement,  and (c) the  Purchaser  shall  deliver  to the
Company  (1) the  purchase  price for the Series J Shares  being  purchased,  as
determined  pursuant to this Article I, in immediately  available  funds by wire
transfer to an account  designated in writing by the Company prior to the Series
J Closing Date, and (2) all documents, instruments and writings required to have
been delivered at or prior to the Series J Closing by the Purchaser  pursuant to
this Agreement and the Registration Rights Agreement.



                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

       2.1       Representations, Warranties and Agreements of the
Company.  The Company hereby makes the following representations
and warranties to the Purchaser:

                 (a)   Organization   and   Qualification.   The  Company  is  a
corporation, duly incorporated,  validly existing and in good standing under the
laws of the State of New York, with the requisite  corporate power and authority
to own and use its  properties  and  assets  and to  carry  on its  business  as
currently conducted.  The Company has no subsidiaries other than as set forth in
the Schedule 2.1(a) attached hereto (collectively, the "Subsidiaries").  Each of
the Subsidiaries is a corporation,  duly  incorporated,  validly existing and in
good standing under the laws of the jurisdiction of its incorporation,  with the
full corporate  power and authority to own and use its properties and assets and
to carry on its  business as  currently  conducted.  Each of the Company and the
Subsidiaries  is duly  qualified  to do  business  and is in good  standing as a
foreign  corporation  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,
would not,  individually or in the aggregate,  have a material adverse effect on
the results of  operations,  assets,  prospects,  or financial  condition of the
Company and the Subsidiaries, taken as a whole (a "Material Adverse Effect").


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                                       -7-

<PAGE>




                 (b) Authorization;  Enforcement.  The Company has the requisite
corporate  power and authority to enter into and to consummate the  transactions
contemplated  hereby and by the Registration  Rights  Agreement,  dated the date
hereof,  between the Company  and the  Purchaser,  in the form of Exhibit B (the
"Registration  Rights  Agreement")  and  otherwise to carry out its  obligations
hereunder and  thereunder.  The execution  and delivery of this  Agreement,  the
Warrants  (hereinafter  defined) and the  Registration  Rights  Agreement by the
Company and the consummation by it of the transactions  contemplated  hereby and
thereby have been duly  authorized  by all  necessary  action on the part of the
Company.  Each of this Agreement and the Registration  Rights Agreement has been
duly executed and delivered by the Company and constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms,  except as such  enforceability may be limited by applicable  bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting  generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.

                 (c)  Capitalization.  The  authorized,  issued and  outstanding
capital  stock of the  Company  is set forth in  Schedule  2.1(c).  No shares of
Common Stock are entitled to preemptive or similar  rights.  Except as disclosed
in Schedule 2.1(c), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character  whatsoever relating to, or,
except as a result of the purchase and sale of the Shares hereunder, securities,
rights or obligations convertible into or exchangeable for, or giving any person
any right to subscribe for or acquire any shares of Common Stock,  or contracts,
commitments,  understandings,  or  arrangements  by  which  the  Company  or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights  convertible or  exchangeable  into shares of Common Stock.
Neither the Company nor any  Subsidiary is in violation of any of the provisions
of  its  respective  certificate  of  incorporation,  bylaws  or  other  charter
documents, except that annual meetings of shareholders have not always been held
in accordance with the respective bylaws.

                 (d)  Issuance of Shares.  The Shares are duly
authorized, and when paid for in accordance with the terms hereof

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                                       -8-

<PAGE>




shall be validly issued,  fully paid and  nonassessable.  The Company has and at
all times while the Shares and the Warrants  are  outstanding  will  maintain an
adequate  reserve  of duly  authorized  shares of  Common  Stock to enable it to
perform its obligations under this Agreement,  the Warrants and the Certificates
of Amendment and in no circumstances shall such reserved and available shares of
Common Stock be less than twice the number of shares of Common Stock which would
be issuable upon  conversion  of the Shares issued  pursuant to the terms hereof
were such  conversion  effectuated  on the Original  Issue Date for such Shares.
When  issued  in  accordance  with the  terms  hereof  and the  Certificates  of
Amendment,  the shares of Common  Stock  into which the Shares may be  converted
(the "Underlying  Shares") will be duly authorized,  validly issued,  fully paid
and  nonassessable;  and when issued upon exercise of the Warrants in accordance
with their  respective  terms,  the Common  Stock  issuable  on  exercise of the
Warrants (the "Warrant Shares") will be duly authorized,  validly issued,  fully
paid and nonassessable.

                 (e) No Conflicts.  The execution,  delivery and  performance of
this  Agreement  and the  Registration  Rights  Agreement by the Company and the
consummation by the Company of the transactions  contemplated hereby and thereby
do not  and  will  not  (i)  conflict  with  or  violate  any  provision  of its
certificate of incorporation or bylaws (each as amended through the date hereof)
or (ii)  subject to  obtaining  the  consents  referred  to in  Section  2.1(f),
conflict  with,  or constitute a default (or an event which with notice or lapse
of time or both would become a default)  under,  or give to others any rights of
termination,   amendment,   acceleration  or  cancellation  of,  any  agreement,
indenture  or  instrument  to which  the  Company  is a  party,  or (iii) to the
knowledge  of the Company  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,   subject  to  the  accuracy  of  the
Purchaser's  representations  herein),  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  conflicts,  defaults,  terminations,   amendments,  accelerations,
cancellations  and  violations as would not,  individually  or in the aggregate,
have a  Material  Adverse  Effect.  The  business  of the  Company  is not being
conducted in

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                                       -9-

<PAGE>




violation of any law,  ordinance or  regulation of any  governmental  authority,
except for violations  which,  individually  or in the aggregate,  do not have a
Material Adverse Effect.

                 (f) Consents and Approvals. Except as specifically set forth in
Schedule  2.1(f),  neither the Company nor any  Subsidiary is required to obtain
any  consent,  waiver,  authorization  or  order  of,  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 this  Agreement or the  Registration
Rights  Agreement,  except for (i) the filings of the  Certificates of Amendment
with  respect  to the  Shares  with the  Secretary  of State of New York,  which
filings shall be effected prior to the Initial Series G Closing Date, the Series
H  Closing  Date,  the  Series I Closing  Date and  Series J  Closing  Date,  as
appropriate,  (ii) the filing of the registration statements contemplated by the
Registration Rights Agreement (the "Underlying Shares Registration  Statements")
with  the SEC,  which  shall be  filed  in the  time  periods  set  forth in the
Registration  Rights  Agreement,  (iii)  applications  for  the  listing  of the
Underlying  Shares and the Warrant Shares with the Nasdaq Small Cap Market,  and
(iv) other than,  in all other cases,  where the failure to obtain such consent,
waiver,  authorization or order, or to give or make such notice or filing, would
not materially impair or delay the ability of the Company to effect the Series G
Closings, the Series H Closing, the Series I Closing or the Series J Closing and
to deliver to the Purchaser the Shares (and, upon conversion of the Shares,  the
Underlying  Shares) or the Warrants  (and,  upon exercise of the  Warrants,  the
Warrant Shares) in the manner  contemplated  hereby and the Registration  Rights
Agreement free and clear of all liens and

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                                      -10-

<PAGE>




encumbrances  of any nature  whatsoever  (together  with the consents,  waivers,
authorizations,  orders,  notices and filings  referred to in Section 2.1(f) and
Schedule 2.1(f), the "Required Approvals").

                 (g) Litigation;  Proceedings. Except as specifically dis closed
in the Disclosure  Materials (as defined below) or in Schedule 2.1(g),  there is
no action,  suit,  notice of violation,  proceeding or, to the best knowledge of
the  Company,  investigation  pending or, to the best  knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
their   respective   properties   before  or  by  any  court,   governmental  or
administrative agency or regulatory authority (Federal,  State, county, local or
foreign)  which  (i)  relates  to  or  challenges  the  legality,   validity  or
enforceability  of  this  Agreement,  the  Registration  Rights  Agreement,  the
Warrants or the Shares,  (ii) could,  individually  or in the aggregate,  have a
Material  Adverse  Effect  or (iii)  could,  individually  or in the  aggregate,
materially  impair the ability of the Company to perform fully on a timely basis
its obligations  under this Agreement,  the Warrants or the Registration  Rights
Agreement.

                 (h) No  Default  or  Violation.  Neither  the  Company  nor any
Subsidiary  (i) is in default  under or 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, except such conflicts or defaults
as do not have a Material  Adverse Effect,  (ii) is in violation of any order of
any court, arbitrator or governmental body, except for such violations as do not
have a Material Adverse Effect, or (iii) is in violation of any statute, rule or
regulation of any  governmental  authority which could  (individually  or in the
aggregate) (x) adversely affect the legality, validity or enforceability of this
Agreement or the  Registration  Rights  Agreement,  (y) have a Material  Adverse
Effect or (z) adversely  impair the  Company's  ability or obligation to perform
fully on a timely basis its obligations under this Agreement or the Registration
Rights Agreement.

                 (i)  Intentionally Omitted.

                 (j)  Disclosure  Materials.   The  SEC  Documents  (hereinafter
defined) and the  Schedules to this  Agreement  furnished by or on behalf of the
Company  (collectively,  the  "Disclosure  Materials") 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.

                 (k) Private  Offering.  The offer and sale of the  Shares,  the
Warrants,  the  Underlying  Shares  and  the  Warrant  Shares  are  exempt  from
registration  under  Section 5 of the  Securities  Act of 1933,  as amended (the
"Securities Act").

                 (l) SEC Documents.  The Company has filed all reports  required
to be filed by it under the  Securities  Exchange  Act of 1934,  as amended (the
"Exchange Act"),  including pursuant to Section 13(a) or 15(d) thereof,  for the
two years preceding the date hereof (or such shorter period

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                                      -11-
<PAGE>




as the  Company  was  required  by law to file  such  material)  (the  foregoing
materials  being  collectively  referred to herein as the "SEC  Documents") on a
timely basis,  or has received a valid  extension of such time of filing.  As of
their respective dates, the SEC Documents complied in all material respects with
the  requirements  of the  Securities Act and the Exchange Act and the rules and
regulations  of the  Commission  promulgated  thereunder,  and  none  of the SEC
Documents,  when filed,  contained  any untrue  statement of a material  fact or
omitted to state a material fact  required to be stated  therein or necessary in
order to make the statements  therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material  respects with applicable
accounting   requirements  and  the  published  rules  and  regulations  of  the
Commission with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved,  except as may be otherwise indicated in such
financial  statements or the notes  thereto,  and fairly present in all material
respects the  financial  position of the Company as of and for the dates thereof
and the  results  of  operations  and cash  flows for the  periods  then  ended,
subject,  in  the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments.  Since  the  date  of  the  financial  statements  included  in the
Company's  last filed  Quarterly  Report on Form 10-Q,  there has been no event,
occurrence or  development  that has had a Material  Adverse Effect which is not
specifically disclosed in any of the Disclosure Materials.

                 (m) Seniority.  No class of equity securities of the Company is
senior to the Shares in right of payment, whether upon liquidation,  dissolution
or otherwise.  The Shares will be pari passu in all respects as to dividends and
liquidation  distributions  with the Company's  outstanding  Series B, Series D,
Series E and Series F Convertible Preferred Stock.

       2.2       Representations and Warranties of the Purchaser.  The Purchaser
hereby represents and warrants to the Company as follows:

                 (a)  Organization;  Authority.  The  Purchaser is a corporation
duly  and  validly  existing  and  in  good  standing  under  the  laws  of  the
jurisdiction  of its  incorporation.  The Purchaser has the requisite  power and
authority to enter into and to consummate the transactions  contemplated  hereby
and by the  Registration  Rights  Agreement  and  otherwise  to  carry  out  its
obligations  hereunder  and  thereunder.  The  purchase  of  the  Shares  by the
Purchaser hereunder has been duly authorized by all necessary action on the part
of the Purchaser.  Each of this Agreement and the Registration  Rights Agreement
has been duly  executed  and  delivered  by the  Purchaser  or on its behalf and
constitutes  the  valid  and  legally  binding   obligation  of  the  Purchaser,
enforceable  against the  Purchaser  in  accordance  with its terms,  subject to
bankruptcy,  insolvency,  fraudulent  transfer,  reorganization,  moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.

                 (b)  Investment Intent.  The Purchaser is acquiring the
Shares, the Warrants to be issued to it hereunder, the Underlying Shares and
the Warrant Shares issuable upon exercise of such Warrants for its own account

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                                      -12-

<PAGE>




for  investment  purposes  only  and not with a view to or for  distributing  or
reselling such Shares, Warrants, Warrant Shares or Underlying Shares or any part
thereof or interest  therein,  without  prejudice,  however,  to the Purchaser's
right,  subject to the provisions of this Agreement and the Registration  Rights
Agreement,  at all times to sell or otherwise dispose of all or any part of such
Shares,  Warrants,  Warrant  Shares  or  Underlying  Shares  under an  effective
registration   statement  under  the  Securities  Act  and  in  compliance  with
applicable State securities laws or under an exemption from such registration.

                 (c) Purchaser Status. At the time the Purchaser was offered the
Shares and the  Warrants to be issued to it  hereunder,  it was, and at the date
hereof,  it is, at each Closing Date and each date of exercise of such  Warrants
and the Underlying  Shares,  it will be, an "accredited  investor" as defined in
Rule 501(a) under the Securities Act.

                 (d)  Experience of Purchaser.  The  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 Shares, Warrants to be
issued to it hereunder,  Warrant Shares relating  thereto and Underlying  Shares
and has so evaluated the merits and risks of such investment.

                 (e)  Ability  of  Purchaser  to Bear  Risk of  Investment.  The
Purchaser  is able to bear the  economic  risk of an  investment  in the Shares,
Warrants  to be issued to it  hereunder,  Warrant  Shares  relating  thereto and
Underlying Shares and, at the present time, is able to afford a complete loss of
such investment.

                 (f) Prohibited Transactions.  The Shares, Warrants to be issued
to it hereunder,  Warrant Shares relating to such Warrants and Underlying Shares
to be purchased by the Purchaser are not being acquired, directly or indirectly,
with the assets of any "employee  benefit  plan",  within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended.

                 (g) Access to Information.  The Purchaser  acknowledges receipt
of the Disclosure  Materials and further  acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed  necessary of, and to
receive answers from,  representatives  of the Company  concerning the terms and
conditions of the offering of the Shares,  the Warrants,  the Warrant Shares and
the Underlying  Shares and the merits and risks of investing in such securities;
(ii)  access  to  information  about the  Company  and the  Company's  financial
condition, results of operations, business, properties, management and prospects
sufficient to enable it to evaluate its investment; and (iii) the opportunity to
obtain such additional  information  which the Company  possesses or can acquire
without  unreasonable  effort or expense  that is  necessary to make an informed
investment  decision with respect to the  investment  and to verify the accuracy
and completeness of the information contained in the Disclosure Materials.


10306-00006/387702.5
                                      -13-

<PAGE>




                 (h) Non-Broker-Dealer Status.  The Purchaser is not a
broker-dealer and is not affiliated or associated with any broker-dealer.

                 (i) Reliance.  The Purchaser  understands and acknowledges that
(i) the Shares and Warrants to be issued to it hereunder  are being  offered and
sold, and the Underlying Shares and the Warrant Shares relating to such Warrants
are being  offered,  to it without  registration  under the  Securities Act in a
private  placement  that is  exempt  from  the  registration  provisions  of the
Securities Act and (ii) the availability of such exemption,  depends in part on,
and that the  Company  will rely upon the  accuracy  and  truthfulness  of,  the
foregoing representations and the Purchaser hereby consents to such reliance.


                                   ARTICLE III

                         OTHER AGREEMENTS OF THE PARTIES

       3.1 Transfer  Restrictions.  If the Purchaser should decide to dispose of
any of  the  Shares  or  Warrant  to be  purchased  by it  hereunder  (and  upon
conversion or exercise thereof,  any Underlying  Shares or Warrant Shares),  the
Purchaser  understands  and  agrees  that it may do so only (i)  pursuant  to an
effective registration statement under the Securities Act or (ii) pursuant to an
available  exemption from  registration  under the Securities Act. In connection
with any  transfer  of any Shares,  the  Warrant,  Underlying  Shares or Warrant
Shares other than pursuant to an effective registration  statement,  the Company
may  require  that the  transferor  provide to the Company an opinion of counsel
experienced  in the  area of  United  States  securities  laws  selected  by the
transferor,  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 Shares, Warrant,  Underlying Shares or Warrant Shares under
the Securities Act or any State securities laws.

       The Purchaser  agrees to the imprinting,  so long as appropriate,  of the
following  legend on  certificates  representing  the Shares and the  Underlying
Shares:

                 NEITHER THESE  SECURITIES NOR THE  SECURITIES  INTO WHICH THESE
       SECURITIES ARE  CONVERTIBLE  HAVE BEEN REGISTERED WITH THE SECURITIES AND
       EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
       UPON AN EXEMPTION FROM REGISTRATION  UNDER REGULATION D PROMULGATED 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 THE REGISTRATION REQUIREMENTS THEREUNDER.

       The  legend  set  forth  above  shall be  removed  following  a resale of
Underlying  Shares  or  Warrant  Shares,  as the  case  may be,  pursuant  to an
effective  registration  statement  under the Securities Act or sooner if in the
opinion of  counsel  to the  Company  experienced  in the area of United  States
securities laws such legend is no longer required under applicable

10306-00006/387702.5
                                      -14-

<PAGE>




requirements of the Securities Act. The certificates representing the Shares and
the  Underlying  Shares and  Warrant  Shares  shall also bear any other  legends
required by applicable  Federal or state  securities  laws, which legends may be
removed  when,  in the  opinion  of counsel to the  Company  experienced  in the
applicable  securities  laws,  such  legends  are no longer  required  under the
applicable requirements of such securities laws. The Company agrees that it will
provide  the  Purchaser,   upon  request,  with  a  substitute   certificate  or
certificates,  free  from such  legend at such time as such  legend is no longer
applicable.  The  Purchaser  agrees  that,  in  connection  with any transfer of
Shares,  Underlying  Shares or Warrant  Shares by it  pursuant  to an  effective
registration  statement under the Securities Act, the Purchaser will comply with
all prospectus delivery requirements of the Securities Act. The Company makes no
representation,  warranty or agreement as to the  availability  of any exemption
from registration under the Securities Act with respect to any resale of Shares,
Underlying Shares or Warrant Shares.

       3.2 Stop  Transfer  Instruction.  The  Purchaser  agrees that the Company
shall be entitled to make a notation on its records and give instructions to any
transfer agent of the Company in order to implement the restrictions on transfer
set forth in this Agreement.

       3.3  Furnishing of  Information.  As long as the Purchaser owns Shares or
Underlying  Shares, the Company will promptly furnish to it all reports filed by
the Company  pursuant to Section  13(a) or 15(d) of the  Exchange Act (or if the
Company is not at the time required to file reports  pursuant to such  sections,
annual and quarterly  reports  comparable to those  required by Section 13(a) or
15(d) of the Exchange Act).

       3.4 Notice of Certain Events.  The Company shall (i) advise the Purchaser
promptly after obtaining knowledge thereof,  and, if requested by the Purchaser,
confirm  such advice in  writing,  of (A) the  issuance by any state  securities
commission of any stop order  suspending  the  qualification  or exemption  from
qualification  of the Shares or the  Common  Stock for  offering  or sale in any
jurisdiction,  or the initiation of any proceeding for such purpose by any state
securities commission or other regulatory authority, or (B) any event that makes
any statement of a material fact made in the Disclosure Materials untrue or that
requires the making of any additions to or changes in the  Disclosure  Materials
in order to make the statements therein, in the light of the circumstances under
which they are made,  not  misleading,  (ii) use its best efforts to prevent the
issuance of any stop order or order  suspending the  qualification  or exemption
from  qualification  of the  Shares  or the  Underlying  Shares  under any state
securities  or Blue Sky  laws,  and  (iii) if at any time any  state  securities
commission or other  regulatory  authority  shall issue an order  suspending the
qualification  or exemption from  qualification  of the Shares or the Underlying
Shares  under any such laws,  use its best efforts to obtain the  withdrawal  or
lifting of such order at the earliest possible time.

       3.5 Copies and Use of Disclosure Materials.  The Company shall furnish
the Purchaser, without charge, as many copies of the Disclosure Materials, and
any amendments or supplements thereto, as the Purchaser may reasonably
request.  The Company consents to the use of the Disclosure Materials, and any

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                                      -15-

<PAGE>




amendments and supplements  thereto, by the Purchaser in connection with resales
of the Shares or the  Underlying  Shares  other than  pursuant  to an  effective
registration statement.

       3.6 Blue Sky Laws. In accordance with the Registration  Rights Agreement,
the Company  shall  qualify the Shares,  the  Underlying  Shares and the Warrant
Shares  under  the  securities  or Blue  Sky laws of such  jurisdictions  as the
Purchaser may reasonably  request and shall continue such  qualification  at all
times through the third anniversary of the last Closing Date; provided, however,
that neither the Company nor its  Subsidiaries  shall be required in  connection
therewith  to  qualify  as a  foreign  corporation  where  they  are  not now so
qualified or take any action that would  subject the Company to general  service
in any such jurisdiction  where it is not then so subject or subject the Company
to any material tax in any such jurisdiction where it is not then so subject.

       3.7  Solicitation  Materials.  The Company shall not (i)  distribute  any
offering  materials in connection with the offering and sale of the Shares,  the
Underlying Shares or the Warrant Shares other than the Disclosure  Materials and
any amendments and supplements  thereto prepared in compliance  herewith or (ii)
solicit  any  offer to buy or sell the  Shares,  the  Underlying  Shares  or the
Warrant Shares by means of any form of general solicitation or advertising.

       3.8 Subsequent Financial Statements. As long as the Purchaser owns Shares
or Underlying Shares, the Company shall furnish to the Purchaser, promptly after
they are filed with the Commission,  a copy of all financial  statements for any
period subsequent to the period covered by the financial  statements included in
the Disclosure Materials.

       3.9  Certain  Agreements.  (a) The Company  covenants  and agrees that it
shall not directly or  indirectly,  without the prior consent of the  Purchaser,
offer, sell, grant any option to purchase, or otherwise dispose (or announce any
offer, sale, grant or any option to purchase or other disposition) of any of its
or its Affiliates equity or equity-equivalent securities to a third party (other
than in connection  with a financing of an  acquisition  of assets or securities
and other than in connection with payment of services rendered to the Company by
such third party and other than securities issued upon exercise of any currently
outstanding options or warrants or upon conversion of any currently  outstanding
convertible  debt or preferred  stock  disclosed in Schedule 2.1(c) or shares of
Common Stock issuable upon  conversion of Shares or upon exercise of the Warrant
in  accordance  herewith  and  the  Warrant  issued  to  Brown  Simpson,  LLC in
connection with the sale of the Shares) at a price which is, on the face thereof
or implied  therein,  less than the market  price or fair market  value for such
securities (a "Subsequent  Discounted Financing") for a period of 120 days after
the date of this Agreement  without first offering the Purchaser the opportunity
(which  shall remain open for a period of five  business  days from the date the
Purchaser receives notice thereof) to purchase all but not less than all of such
additional  equity or equity-  equivalent  securities,  unless  (A) the  Company
provides the Purchaser a written notice (the "Subsequent  Financing  Notice") of
its intention to effect such Subsequent Discounted  Financing,  which Subsequent
Financing Notice shall

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                                      -16-

<PAGE>




describe in reasonable  detail the proposed terms of such Subsequent  Discounted
Financing and the amount of proceeds  intended to be raised  thereunder  and (B)
(i) the Purchaser  shall not have notified the Company within five business days
of its receipt of the Subsequent  Financing  Notice of its  willingness to enter
into good  faith  negotiations  to  provide  (or to cause its sole  designee  to
provide)  financing to the Company on  substantially  the terms set forth in the
Subsequent Financing Notice or (ii) if the Purchaser notifies the Company of its
willingness  to provide such financing in accordance  with  paragraph  (B)(i) of
this  Section,  the  Purchaser  does not provide such  financing in a commercial
reasonably  and  expeditious  period of time,  provided that such failure is not
attributable  to a failure by the Company to act  reasonably  and  expeditiously
with respect to such  negotiations.  If the  Purchaser  shall fail to notify the
Company of its intention to enter into such negotiations  within the time period
contemplated by paragraph (B)(i) of this Section or does not provide the funding
in accordance with paragraph (B)(ii) of this Section, the Company may effect the
Subsequent  Discounted  Financing  substantially upon the terms set forth in the
Subsequent Financing Notice (to persons, or their Affiliates,  specified in such
Subsequent  Financing  Notice);  provided,  that the Company  shall  provide the
Purchaser with a second  Subsequent  Financing  Notice,  and the Purchaser shall
again have the right of first refusal set forth above in this Section 3.9(a), if
the Subsequent  Discounted Financing subject to the initial Subsequent Financing
Notice shall not for any reason have been consummated substantially on the terms
set forth in such Subsequent  Financing  Notice (or with persons  different than
those  specified  in such  Subsequent  Financing  Notice  unless such  different
persons are Affiliates of those persons specified) within 60 days after the date
of the initial Subsequent Financing Notice and the Company desires to consummate
such Subsequent Discounted Financing.

                 (b) The Company covenants and agrees that it shall not directly
or indirectly,  without the prior consent of the Purchaser,  offer,  sell, grant
any option to purchase, or otherwise dispose (or announce any offer, sale, grant
or any option to purchase or other  disposition) of any of its or its Affiliates
equity or  equity-equivalent  securities  to a third party,  at a price which is
equal  to or  greater  than  (both  on the  face  thereof  and  implied  in such
transaction),  the market  price or fair  market  value for such  securities  (a
"Subsequent  Non-Discounted  Financing") for a period of 120 days after the date
of this  Agreement  without  providing  the  Purchaser  a notice  thereof  which
describes the material terms of such Subsequent Non-Discounted Financing..

                 (c) From the date hereof  through the final Closing  Date,  the
Company shall not and shall cause the  Subsidiaries  not to, without the consent
of the Purchaser,  (i) amend its certificate of  incorporation,  bylaws or other
charter  documents  so as to  adversely  affect  any  rights  of  the  Purchaser
(provided,  that amendments to the Company's certificate of incorporation solely
to increase the  authorized  capitalization  of the  Company,  or subject to the
other terms hereof, to effect stock splits or reverse stock splits of the Common
Stock, shall not require the consent of the Purchaser); (ii) declare, authorize,
set aside or pay any dividend or other  distribution  with respect to the Common
Stock; (iii) repay, repurchase or offer to repay,

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                                      -17-

<PAGE>




repurchase or otherwise  acquire shares of its Common Stock;  or (iv) enter into
any agreement with respect to any of the foregoing.

       3.10 Purchaser  Ownership of Common Stock.  The Purchaser may not use its
ability to convert Shares  hereunder or under the terms of the  Certificates  of
Amendment or to exercise  its rights under the Warrant,  to the extent that such
conversion or exercise  would result in the  Purchaser  owning more than 4.9% of
the outstanding shares of the Common Stock; provided, however, that this Section
3.10 shall not affect the  Company's  right  under  Section  5(b) of each of the
Certificates  of  Amendment to force the  Purchaser to convert  Shares under the
circumstances  set forth in such section.  The Company shall,  promptly upon its
receipt  of a  Holder  Conversion  Notice  tendered  by the  Purchaser  (or  its
designee) under the  Certificate of Amendment,  and upon its receipt of a notice
of exercise  under the terms of the Warrant,  notify the Purchaser of the number
of shares of Common Stock  outstanding on such date and the number of Underlying
Shares and Warrant  Shares  which would be  issuable  to the  Purchaser  (or its
designee,  as the case may be) if the  conversion  requested in such  Conversion
Notice or exercise  requested  in such  exercise  notice were  effected in full,
whereupon,   notwithstanding   anything  to  the   contrary  set  forth  in  the
Certificates  of  Amendment  or the  Warrant,  the  Purchaser  may  revoke  such
conversion or exercise to the extent that it determines  that such conversion or
exercise  would  result  in the  Purchaser  owning  in  excess  of  4.9% of such
outstanding shares of Common Stock.

       3.11  Listing of  Underlying  Shares.  The  Company  shall take all steps
necessary to cause the  Underlying  Shares and Warrant Shares to be approved for
listing in the Nasdaq Small Cap Market (or other national securities exchange or
market on which the Common  Stock is  listed)  no later  than the date  required
thereby,  and shall provide to the Purchaser evidence of such listing, and shall
maintain the listing of its Common Stock on such exchange.

       3.12  Conversion  Procedures.  Exhibit C attached  hereto  sets forth the
procedures with respect to the conversion of the Shares,  including the forms of
conversion  notice  to be  provided  upon  conversion,  instructions  as to  the
procedures for conversion,  the form of legal opinion, if necessary,  that shall
be rendered  to the  Company's  transfer  agent and such other  information  and
instructions as may be reasonably  necessary to enable the Purchaser to exercise
its right of conversion smoothly and expeditiously.

       3.13 Purchaser's  Rights if Trading in Common Stock is Suspended.  In the
event that at any time within the  two-year  period  after the last Closing Date
trading  in the  shares  of the  Common  Stock is  suspended  for  three or more
consecutive days on the principal market or exchange for such shares (other than
as a result  of the  suspension  of  trading  in  securities  on such  market or
exchange  generally  or  temporary  suspensions  pending the release of material
information),  at  Purchaser's  option  exercisable  by  written  notice  to the
Company,  the Company shall repurchase all Shares and all Underlying Shares then
held by such Purchaser,  at an aggregate purchase price equal to (A) the product
of the Market Price as of the Trading Day immediately  preceding the day of such
notice  multiplied by the number of shares of Common Stock into which the Shares
to be purchased are then convertible (or in the case of

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<PAGE>




Underlying  Shares,  the number of Underlying Shares to be purchased),  plus (B)
interest  on such  amount  accruing  from the 7th day to the 21st day after such
notice at the rate of 5% per annum,  from the 21st day to the 60th day at 8% per
annum,  from the 60th day to the 90th day at the rate of 12% per  annum and from
the 90th day until paid at the rate of 24% per annum.

       3.14 No Violation of  Applicable  Law.  Notwithstanding  any provision of
this  Agreement to the  contrary,  if any  repurchase  or  redemption  of shares
otherwise  required under this Agreement or the  Registration  Rights  Agreement
would  be  prohibited  by the  relevant  provisions  of the  New  York  Business
Corporation  Law, such repurchase or redemption  shall be effected as soon as it
is permitted under such law; provided,  however,  that,  interest payable by the
Company with respect to any such  redemption  or  repurchase  shall  continue to
accrue in accordance with Section 3.13 during any such period.

       3.15 Repurchase or Redemption Restrictions. Notwithstanding any provision
of this  Agreement to the  contrary,  if any  repurchase or redemption of shares
otherwise  required under this  Agreement  would be prohibited in the absence of
consent from any lender of the Company or the Subsidiaries, or by the holders of
any class of securities  of the Company,  the Company shall use its best efforts
to obtain such  consent as  promptly  as  practicable  after the  repurchase  or
redemption is required. Interest payable by the Company with respect to any such
redemption or  repurchase  shall  continue to accrue in accordance  with Section
3.13 until such  consent is  obtained.  Nothing  contained  in this Section 3.15
shall be  construed  as a waiver by the  Purchaser  of any rights it may have by
virtue of any breach of any  representation or warranty of the Company herein as
to the absence of any requirement to obtain any such consent.

       3.16 Piggyback  Registration  Rights. For each of the Series G Preferred,
Series H Preferred,  Series I Preferred and Series J Preferred,  as  applicable,
which are issued  pursuant to this Agreement,  during the period  commencing the
date hereof and ending on the earlier to occur of (i) the  two-year  anniversary
of such applicable  Closing and (ii) the date the applicable  Underlying  Shares
Registration Statement required to be filed by the Company is declared effective
under the Securities  Act by the SEC, the Company may not file any  registration
statement  that  provides for the  registration  of shares of Common Stock to be
sold by other  shareholders  of the  Company  unless the  Company  provides  the
Purchaser  with not less than seven (7) Trading Days' notice of its intention to
file such  registration  statement  and  provides  the  Purchaser  the option to
include  any or all of the  applicable  Underlying  Shares  and  Warrant  Shares
therein.  Such  registration  rights shall not apply to registration  statements
relating solely to (i) employee benefit plans notwithstanding the inclusion of a
resale  prospectus for securities  received under such employee benefit plan, or
(ii)  business  combinations  unless  the  registration   statement  relates  to
securities  to be received by the  holders of the Common  Stock of the  Company.
Prior to the Initial  Series G Closing  Date,  the Company  shall  withdraw  its
pending registration statement on Form S-3, Registration Statement No. 333-5657.


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<PAGE>




       3.17 Notice of Breaches. Each of the Company and the Purchaser shall give
prompt written notice to the other of any breach of any representation, warranty
or other  agreement  contained in this Agreement or in the  Registration  Rights
Agreement,  as well as any events or  occurrences  arising after the date hereof
and prior to, with respect to a Series G Closing, the Initial or Second Series G
Closing  Date or,  with  respect to the  Series H Closing,  the Series H Closing
Date,  or, with  respect to the Series I Closing,  the Series I Closing Date or,
with  respect to the Series J Closing,  the Series J Closing  Date,  which would
reasonably be likely to cause any  representation or warranty or other agreement
of such  party,  as the case may be,  contained  herein  or in the  Registration
Rights  Agreement to be incorrect or breached as of such Closing Date.  However,
no disclosure  by either party  pursuant to this Section 3.18 shall be deemed to
cure any breach of any  representation,  warranty or other  agreement  contained
herein  or in the  Registration  Rights  Agreement.  Neither  the  Company,  any
Subsidiary  nor the Purchaser  will take, or agree to commit to take, any action
that is  intended to make any  representation  or warranty of the Company or the
Purchaser,  as the case may be, contained  herein or in the Registration  Rights
Agreement  inaccurate  in any  respect  at the Series G Closing  Date,  Series H
Closing Date, Series I Closing Date or Series J Closing Date, as applicable.

       Notwithstanding  the  generality  of the  foregoing,  the  Company  shall
promptly  notify the Purchaser of any notice or claim  (written or oral) that it
receives from any lender of the Company to the effect that the  consummation  of
the transactions  contemplated  hereby or by the  Registration  Rights Agreement
violates or would violate any written  agreement or  understanding  between such
lender and the Company,  and the Company shall promptly  furnish by facsimile to
the Purchaser a copy of any written  statement in support of or relating to such
claim or notice.

       3.18  Confidentiality.  The  Purchaser  agrees to keep  confidential  any
acquisition  agreement  or term sheet  relating  thereto  delivered to it by the
Company until such documents shall hereafter  become publicly or generally known
through no action of Purchaser.


                                   ARTICLE IV

                                   CONDITIONS

       4.1(a) Conditions  Precedent to the Obligation of the Company to Sell the
Series G Shares.  The  obligation  of the Company to sell the Series G Shares to
the  Purchaser is subject to the  satisfaction  or waiver by the Company,  at or
before the  Initial or Second  Series G Closing,  as the case may be, of each of
the following conditions:

                     (i)      Accuracy of the Purchaser's Representations and
Warranties.  The  representations  and warranties of the Purchaser shall be true
and  correct  in all  material  respects  as of the date when made and as of the
Initial  Series  G  Closing  Date  or the  Second  Series  G  Closing  Date,  as
applicable, as though made on and as of such date (except that representations

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                                      -20-

<PAGE>




and warranties that are made as of a specific date need be true in all
material respects only as of such date);

                     (ii)     Performance by the Purchaser.  The Purchaser shall
have  performed,  satisfied  and  complied  in all  material  respects  with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied  or  complied  with by the  Purchaser  at or  prior  to such  Series G
Closing;

                     (iii)    No Injunction.  No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,  entered,
or promulgated by any court or governmental  authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by this
Agreement; and

                     (iv)     Required Approvals.  All Required Approvals shall
have been  obtained  other  than those  relating  solely to the Series H Shares,
Series I Shares or Series J Shares.

                 (b) Conditions  Precedent to the Obligation of the Purchaser to
Purchase  the Series G Shares.  The  obligation  of the  Purchaser  hereunder to
acquire and pay for the Series G Shares is subject to the satisfaction or waiver
by the  Purchaser,  at or before the Initial or Second Series G Closing,  as the
case may be, of each of the following conditions:

                     (i)      Accuracy of the Company's Representations and
Warranties.  The representations and warranties of the Company shall be true and
correct in all material  respects as of the date when made and as of the Initial
Series G Closing Date (or the Second Series G Closing Date,  as  applicable)  as
though made on and as of such date (except that  representations  and warranties
that are made as of a specific  date need be true in all material  respects only
as of such date);

                     (ii)    Performance by the Company.  The Company shall have
performed,  satisfied and complied in all material  respects with all covenants,
agreements and conditions required by this Agreement to be performed,  satisfied
or complied with by the Company at or prior to such Series G Closing;

                     (iii)   No Injunction.  No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,  entered,
or promulgated by any court of governmental  authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by this
Agreement;

                     (iv)    Adverse Changes.  Since the date of the financial
statements  included in the Company's  Quarterly  Report on Form 10-Q last filed
prior  to the date of this  Agreement,  no event  which in the  judgment  of the
Purchaser  had a  Material  Adverse  Effect  shall  have  occurred  which is not
disclosed in the  Disclosure  Materials  (for  purposes  hereof,  changes in the
market price of the Common Stock after the Initial Series G Closing Date may

10306-00006/387702.5
                                      -21-

<PAGE>




be considered in determining whether a material adverse change has occurred, and
a market price of $2.00 or less shall be a material adverse change);

                     (v)   No Suspensions of Trading in Common Stock.  The
trading  in the Common  Stock  shall not have been  suspended  by the SEC or the
National  Association of Securities Dealers,  Inc. (except for any suspension of
trading  of  limited  duration  solely  to  permit   dissemination  of  material
information regarding the Company);

                     (vi)  Listing of Common Stock.  The Common Stock shall have
at all times between the date hereof and such Series G Closing Date been, and on
such Series G Closing Date be, listed for trading on the Nasdaq Small Cap Market
or Nasdaq National Market;

                     (vii) Legal Opinions.  The Company shall have delivered to
the Purchaser the opinion of Certilman Balin Adler & Hyman, LLP, outside counsel
to the  Company,  and the opinion of its  inhouse  counsel  (together  with such
forementioned  outside counsel,  the "Company  Counsel"),  in substantially  the
forms set forth in Exhibit D(1) and D(2) (the "Legal Opinions");

                     (viii) Required Approvals.  All Required Approvals shall
have been obtained other than those relating solely to the Series H Shares,  the
Series I Shares or the Series J Shares;

                     (ix)   Shares of Common Stock.  On such Closing Date the
Company  shall have duly  reserved for issuance on conversion of Series G Shares
sufficient Underlying Shares;

                     (x)    Delivery of Stock Certificates.  The Company shall
have  delivered  to the  Purchaser  or its  designee  the  stock  certificate(s)
representing  the  Series  G  Shares  to be  issued  and  sold at such  closing,
registered in the name of the Purchaser,  each in form  satisfactory to Robinson
Silverman;

                     (xi)   Registration Rights Agreement.  The Company shall
have  executed and delivered the  Registration  Rights  Agreement and shall have
complied in all material respects with its obligations thereunder;

                     (xii)  Warrants.  With respect to the Initial Series G
Closing,  the Company shall have executed and delivered to the Purchaser  common
stock purchase  warrants (the  "Warrants"),  substantially in the forms attached
hereto as Exhibit  E(1) and (E)(2),  pursuant to which (a) the  Purchaser  shall
have the right,  at any time from the Initial  Series G Closing Date through the
fifth anniversary of such date, to purchase up to

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                                      -22-

<PAGE>




225,000  shares of Common Stock at an exercise  price of $5.29 per share and (b)
Brown Simpson,  LLC shall have the right,  at any time from the Initial Series G
Closing  Date  through  the fifth  anniversary  of such date,  to purchase up to
50,000 shares of Common Stock at an exercise price of $3.53 per share.

                     (xiii)  Underlying Shares Registration Statement.  With
respect  to the Second  Series G Closing,  the  Underlying  Shares  Registration
Statement  with respect to the Underlying  Shares  issuable on conversion of the
Initial  Series G Shares and with respect to the Warrant  Shares shall have been
filed with and declared  effective by the SEC, and there shall be outstanding no
stop order  suspending such  effectiveness  issued,  pending or threatened to be
issued (it being  agreed that the number of  Underlying  Shares to be  initially
registered  shall  be  determined  in  accordance  with  the  provisions  of the
Registration Rights Agreement);

                     (xiv)  Certificate of Amendment.  With respect to the
Initial Series G Closing,  the Series G Amendment  shall have been duly filed by
the Secretary of State of New York,  and the Company shall have delivered a copy
thereof to the Purchaser certified by the Secretary of State of New York; and

                     (xv)   Company Certificates.  The Purchaser shall have
received  a  certificate,  dated the  appropriate  Closing  Date,  signed by the
Secretary  or an  Assistant  Secretary  of the Company and  certifying  (A) that
attached  thereto is a true,  correct  and  complete  copy of (I) the  Company's
Certificate of Incorporation,  as amended to the date thereof, (B) the Company's
By-Laws, as amended to the date thereof, and (C) resolutions duly adopted by the
Board of Directors of the Company authorizing the execution and delivery of this
Agreement,  the Warrant and the  Registration  Rights Agreement and the issuance
and sale of the Series G Shares,  the Warrant and the Underlying  Shares and the
Warrant  Shares,  and  (ii)  the  incumbency  of  the  officers  executing  this
Agreement, the Registration Rights Agreement and the Warrant.

       4.2(a) Conditions  Precedent to the Obligation of the Company to Sell the
Series H Shares,  the Series I Shares or the Series J Shares.  The obligation of
the  Company  to sell the  Series H Shares,  the Series I Shares or the Series J
Shares to the Purchaser is subject to the satisfaction or waiver by the Company,
at or before the Series H Closing, the Series I Closing or the Series J Closing,
as applicable, of each of the following conditions:

                     (i)   Series G Closing.  The Initial Series G Closing shall
have occurred.

                     (ii)  Accuracy of the Purchaser's Representations and
Warranties.  The  representations  and warranties of the Purchaser shall be true
and  correct  in all  material  respects  as of the date when made and as of the
Series H Closing Date,  the Series I Closing Date and the Series J Closing Date,
as   applicable,   as  though  made  on  and  as  of  such  date   (except  that
representations  and warranties that are made as of a specific date need be true
in all material respects only as of such date);

                     (iii) Performance by the Purchaser.  The Purchaser shall
have  performed,  satisfied  and  complied  in all  material  respects  with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Purchaser at or prior to the Series H Closing,
the Series I Closing Date and the Series J Closing Date, as applicable;

                     (iv)  No Injunction.  No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,  entered,
or promulgated by any court or governmental  authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by this
Agreement  relating to the issuance or  conversion  of the Series H Shares,  the
Series I Shares or the Series J Shares, as applicable; and

                     (v)   Required Approvals.  All Required Approvals shall
have been obtained.


10306-00006/387702.5
                                      -23-

<PAGE>




                 (b) Conditions  Precedent to the Obligation of the Purchaser to
Purchase  the Series H Shares,  the Series I Shares or the Series J Shares.  The
obligation  of the  Purchaser  hereunder  to  acquire  and pay for the  Series H
Shares,  the  Series  I  Shares  and the  Series  J  Shares  is  subject  to the
satisfaction or waiver by the Purchaser,  at or before the Series H Closing, the
Series  I  Closing  and the  Series J  Closing,  as  applicable,  of each of the
following conditions:

                     (i)   Series G Closing.  The Initial Series G Closing shall
have occurred.

                     (ii)  Accuracy of the Company's Representations and
Warranties.  The  representations and warranties of the Company contained herein
and in the  Registration  Rights  Agreement  shall  be true and  correct  in all
material  respects as of the date when made and as of the Series H Closing Date,
the  Series I Closing  Date and the Series J Closing  Date,  as  applicable,  as
though made on and as of such date (except that  representations  and warranties
that are made as of a specific  date need be true in all material  respects only
as of such date);

                     (iii) Performance by the Company.  The Company shall have
performed,  satisfied and complied in all material  respects with all covenants,
agreements and conditions required by this Agreement and the Registration Rights
Agreement to be performed, satisfied or complied with by the Company at or prior
to the  Series H Closing,  the  Series I Closing  or the  Series J  Closing,  as
applicable;

                     (iv)  Underlying Shares Registration Statements.  With
respect to the Series H Closing,  the Underlying Shares  Registration  Statement
with respect to the Underlying  Shares issuable on conversion of all outstanding
Series G Shares and with respect to the Warrant  Shares shall have been declared
effective  under the  Securities  Act by the SEC;  with  respect to the Series I
Closing,  the  Underlying  Shares  Registration  Statement  with  respect to the
Underlying  Shares  issuable on  conversion of all  outstanding  Series H Shares
shall have been declared effective under the Securities Act by the SEC; and with
respect to the Series J Closing,  the Underlying Shares  Registration  Statement
with respect to the Underlying  Shares issuable on conversion of all outstanding
Series I Shares shall have been declared  effective by the SEC; and in each such
case such Underlying Registration Statement shall remain effective and shall not
be subject to any stop  order and no stop order  shall be pending or  threatened
(it being agreed that the number of Underlying Shares to be initially registered
shall be determined in accordance with the provisions of the Registration Rights
Agreement); and

                     (v)  No Injunction.  No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,  entered,
or promulgated by any court of governmental  authority of competent jurisdiction
which prohibits the consummation of any of the transactions contemplated by this
Agreement relating to the issuance or conversion of any of the Shares;

                     (vi) Adverse Changes.  Since the date of the financial
statements  included in the Company's last filed  Quarterly  Report on Form 10-Q
last filed prior to the date of this  Agreement,  no event which in the judgment
of the Purchaser had a Material  Adverse Effect shall have occurred which is not
disclosed in the SEC Documents (for purposes hereof, changes in the market price
of the Common Stock after the Initial Series G Closing Date may be considered in
determining  whether a material adverse change has occurred,  and a market price
of $2.00 per share or less shall be deemed to be material adverse change);

                     (vii) Trading Volume.  For the period from the date hereof
through the  applicable  Closing Date,  the average 30-day trading volume of the
Common Stock shall have been 50,000 or higher;

                     (viii) Litigation.  No material litigation shall have been
instituted or threatened against the Company;


10306-00006/387702.5
                                      -24-

<PAGE>




                     (ix)  Management.  Peter Izzo, Jr. and Kenneth G. Baritz
shall at all times remain substantially in their current function  substantially
under their  current  managerial  positions  in the  Company  without a material
diminution of managerial  responsibilities and without a material diminution, as
measured  from the  date  hereof,  in  their  respective  current  Common  Stock
ownership positions.

                     (x)   No Suspensions of Trading in Common Stock.  The
trading  in the Common  Stock  shall not have been  suspended  by the SEC or the
National  Association of Securities Dealers,  Inc. (except for any suspension of
trading  of  limited  duration  solely  to  permit   dissemination  of  material
information regarding the Company);

                     (xi)  Listing of Common Stock.  The Common Stock shall have
been at all times  between  the  Series G Closing  Date and the Series H Closing
Date,  the Series I Closing Date and the Series J Closing Date,  as  applicable,
and on the  applicable  Closing Date be,  listed for trading on the Nasdaq Small
Cap Market or Nasdaq National Market;

                     (xii) Legal Opinions.  The Company shall have delivered to
the Purchaser the opinions of Company Counsel in form and substance reasonably
satisfactory to the Purchaser, dated the applicable Closing Date;

                     (xiii) Required Approvals.  All Required Approvals shall
have been obtained;

                     (xiv)  Shares of Common Stock.  On each of the Series H
Closing  Date,  the  Series I Closing  Date and the  Series J Closing  Date,  as
applicable,  the Company  shall have  reserved  for  issuance  to the  Purchaser
sufficient  Underlying  Shares for issuance on conversion of the Series H Shares
issued,  sufficient Underlying Shares for issuance on conversion of the Series I
Shares issued,  and sufficient  Underlying  Shares for issuance on conversion of
the Series J Shares issued; and

                     (xv)   Delivery of Stock Certificates.  The Company shall
have  delivered  to the  Purchaser  or its  designee  the  stock  certificate(s)
representing the Shares, being purchased at such Closing, registered in the name
of the Purchaser, each in form satisfactory to Robinson Silverman.


                                    ARTICLE V

                                   TERMINATION

                 5.1  Termination by Mutual  Consent.  (a) This Agreement may be
terminated with respect to the transactions contemplated herein relating to both
the Shares and the  Underlying  Shares at any time prior to the Initial Series G
Closing by the mutual consent of the Company and the Purchaser.

                     (b)  This Agreement may be terminated with respect to the
transactions  contemplated  herein relating solely to the Series H Shares at any
time prior to the Series H Closing by the mutual written  consent of the Company
and the Purchaser.

                     (c)  This Agreement may be terminated with respect to the
transactions  contemplated  herein relating solely to the Series I Shares at any
time prior to the Series I Closing by the mutual written  consent of the Company
and the Purchaser.

                     (d)  This Agreement may be terminated with respect to the
transactions  contemplated  herein relating solely to the Series J Shares at any
time prior to the Series J Closing by the mutual written  consent of the Company
and the Purchaser.

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                                      -25-

<PAGE>




                 5.2  Termination  by the  Company.  (a) This  Agreement  may be
terminated with respect to the transactions contemplated herein relating to both
the Shares and the Underlying Shares prior to the Second Series G Closing by the
Company, by giving notice of such termination to the Purchaser.

                 (b)  This  Agreement  may be  terminated  with  respect  to the
transactions contemplated herein relating solely to the Series H Shares prior to
the Series H Closing by the Company, by giving notice of such termination to the
Purchaser.

                 (c)  This  Agreement  may be  terminated  with  respect  to the
transactions contemplated herein relating solely to the Series I Shares prior to
the Series I Closing by the Company, by giving notice of such termination to the
Purchaser.

                 (d)  This  Agreement  may be  terminated  with  respect  to the
transactions contemplated herein relating solely to the Series J Shares prior to
the Series J Closing by the Company, by giving notice of such termination to the
Purchaser.

                 5.3  Termination  by the  Purchaser.  (a) This Agreement may be
terminated prior to the Second Series G Closing with respect to the transactions
contemplated herein relating to both the Shares and the Underlying Shares by the
Purchaser, by giving notice of such termination to the Company, if:

                     (i) the Company has breached any representation,  warranty,
       covenant or agreement  contained in this Agreement and such breach is not
       cured  within  five  business  days  following  receipt by the Company of
       notice of such breach;

                     (ii)  there  has  occurred  an event  since the date of the
       financial  statements  included in the Company's Quarterly Report on Form
       10-Q  last  filed  prior  to the  date  of  this  Agreement  which  could
       reasonably be expected to have a Material Adverse Effect and which is not
       disclosed in the Disclosure Materials;

                     (iii)  trading  in the  Company's  Common  Stock  has  been
       suspended by the SEC or the Nasdaq  (except for any suspension of trading
       of limited duration soley to permit dissemination of material information
       regarding the Company); or

                     (iv) the  Company's  Common  Stock  shall have failed to be
       listed for trading on the Nasdaq Small Cap Market and the Purchaser shall
       have exercised its  termination  right herein provided within 10 business
       days of obtaining knowledge of such delisting.

                 (b) This Agreement may be terminated by the Purchaser  prior to
the  Series H Closing  with  respect  to the  transactions  contemplated  herein
relating  solely to the Series H Shares,  or prior to the Series I Closing  with
respect to the transactions  contemplated herein relating solely to the Series I
Shares,  or prior to the  Series J  Closing  with  respect  to the  transactions
contemplated  herein relating solely to the Series J Shares, by giving notice of
such termination to the Company, if:

                     (i) after the Initial  Series G Closing  Date,  the Company
       has  breached  any  representation,   warranty,   covenant  or  agreement
       contained in this Agreement or in the  Registration  Rights Agreement and
       such breach is not cured within five business days  following  receipt by
       the Company of notice of such breach;

                     (ii)  there  has  occurred  an event  since the date of the
       financial  statements  included in the Company's Quarterly Report on Form
       10-Q last filed prior to the date of this Agreement which in

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<PAGE>




       the Purchaser's judgment has had a Material Adverse Effect and which is
       not disclosed in the Disclosure Materials;

                     (iii)  trading  in the  Company's  Common  Stock  has  been
       suspended by the SEC or the Nasdaq  (except for any suspension of trading
       of  limited   duration  solely  to  permit   dissemination   of  material
       information regarding the Company;

                     (iv) the  Company's  Common  Stock  shall have failed to be
       listed  for  trading on the  Nasdaq  Small Cap Market or Nasdaq  National
       Market at any time  after the  Initial  Series G  Closing  Date,  and the
       Purchaser  shall have  exercised its  termination  right herein  provided
       within 10 Trading Days of obtaining knowledge of such delisting.

                     (v)  the  Underlying  Shares  Registration  Statement  with
       respect to the  Underlying  Shares into which the Initial Series G Shares
       may be converted  and with respect to the Warrant  Shares is not declared
       effective under the Securities Act by the SEC prior to the 90th day after
       the Initial Series G Closing Date; or the Underlying Shares  Registration
       Statement with respect to the  Underlying  Shares into which the Series G
       Shares  issued at the Second  Series G Closing may be  converted  has not
       been declared  effective under the Securities Act by the SEC prior to the
       90th day after the Second Series G Closing Date; or the Underlying Shares
       Registration  Statement with respect to the Underlying  Shares into which
       the  Series H Shares may be  converted  has not been  declared  effective
       under  the  Securities  Act by the SEC  prior to the 90th day  after  the
       Series H Closing Date; or the Underlying  Shares  Registration  Statement
       with respect to the Underlying  Shares into which the Series I Shares may
       be converted has not been declared  effective under the Securities Act by
       the SEC prior to the 90th day after the  Series I Closing  Date (it being
       agreed that, in each case, the initial number of Underlying  Shares to be
       registered shall be as determined in the Registration Rights Agreement).


                                   ARTICLE VI

                                  MISCELLANEOUS

                 6.1  Fees  and  Expenses.  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,  except as
set forth in the Registration Rights Agreement.  The Company shall pay all stamp
and other taxes and duties levied in connection  with the issuance of the Shares
pursuant hereto.  The Purchaser shall be responsible for the Purchaser's own tax
liability  that  may  arise  as a  result  of the  investment  hereunder  or the
transactions contemplated by this Agreement.

                 6.2 Entire Agreement; Amendments. This Agreement, together with
the Exhibits and Schedules hereto, and the Registration Rights Agreement 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.

                 6.3  Notices.  Any notice or other  communication  required  or
permitted to be given  hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received),  telecopy or facsimile  (with  transmission
confirmation  report) at the address or number designated below (if delivered on
a  business  day  during  normal  business  hours  where  such  notice  is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal  business  hours where such notice is to be
received)  or (b) on the second  business day  following  the date of mailing by
express  courier  service,  fully  prepaid,  addressed to such address,  or upon
actual receipt of such mailing,  whichever shall first occur.  The addresses for
such communications shall be:

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                                      -27-

<PAGE>





     If to the Company:             AMNEX, INC.
                                    101 Park Avenue
                                    New York, NY  10178
                                    Attn:  Kenneth G. Baritz
                                    Fax:  (212) 867-0092

     With copies to:                Fred S. Skolnik, Esq.
                                    Certilman Balin Adler & Hyman, LLP
                                    90 Merrick Avenue
                                    East Meadow, NY  11554
                                    Fax:  (516) 296-7111

     If to the Purchaser:           Southbrook International
                                    Investments, Ltd.
                                    c/o Trippoak Advisors, Inc.
                                    630 Fifth Avenue, Suite 2000
                                    New York, NY  10111
                                    Attn:  Robert L. Miller
                                    Fax:  (212) 332-3256

     With copies to                 Brown Simpson, LLC
                                    Carnegie Hall Tower
                                    152 West 57th Street, 40th Floor
                                    New York, NY  10019
                                    Attn:  James Simpson
                                    Fax:  (212) 243-1329

                                     - and -

                                    Robinson Silverman Pearce
                                      Aronsohn & Berman LLP
                                    1290 Avenue of the Americas
                                    New York, NY 10104
                                    Attn: Kenneth L. Henderson, Esq.
                                          and Eric L. Cohen, Esq.
                                    Fax:  (212) 541-1357


or such other  address as may be designated  in writing  hereafter,  in the same
manner, by such person.

                  6.4 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 both the Company and the 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 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 accruing to it thereafter.

                  6.5 Headings. 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.

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                                      -28-

<PAGE>




                  6.6  Successors and Assigns.  This Agreement  shall be binding
upon and inure to the benefit of the parties and their  successors and permitted
assigns.  Neither the Company nor the Purchaser may assign this Agreement or any
rights or obligations  hereunder without the prior written consent of the other.
The  assignment by a party of this Agreement or any rights  hereunder  shall not
affect the obligations of such party under this Agreement.

                  6.7  No Third-Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

                  6.8  Governing  Law. This  Agreement  shall be governed by and
construed and enforced in accordance  with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.

                  6.9  Survival.  The  agreements  and  covenants  contained  in
Article III and this Article VI shall survive the delivery and conversion of the
Shares pursuant to this  Agreement.  The  representations  and warranties of the
Company and the  Purchaser  contained in Article II shall  survive  until a date
that is one year after the Closing.

                  6.10 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) the same with the same force and effect as if such facsimile signature
page were an original thereof.

                  6.11  Publicity.  The Company and the Purchaser  shall consult
with each  other in  issuing  any press  releases  or  otherwise  making  public
statements  with  respect to the  transactions  contemplated  hereby and neither
party  shall  issue any such press  release or  otherwise  make any such  public
statement  without the prior written  consent of the other,  which consent shall
not be unreasonably withheld or delayed.

                  6.12  Severability.  In case any one or more of the provisions
of this Agreement shall 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  which  shall  be a  reasonable
substitute  therefor,  and upon so agreeing,  shall  incorporate such substitute
provision in this Agreement.

                  6.13  Delivery of W-8.  The Purchaser shall deliver to the
Company a completed and executed Form W-8.


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                                      -29-

<PAGE>





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


                               Company:

                               AMNEX, INC.



                               By:__________________________________________
                                  Name:_____________________________________
                                  Title:____________________________________


                               Purchaser:

                               SOUTHBROOK INTERNATIONAL
                                INVESTMENTS, LTD.



                               By:__________________________________________
                                  Name:_____________________________________
                                  Title:____________________________________


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                                      -30-