Exhibit 10.5 AMNEX, Inc.

Exhibit 10.5

AMNEX, Inc.

STOCK PURCHASE AGREEMENT

dated as of January __, 1998

by and among

AMNEX, Inc.

(the "Company"), and

the Investor named therein (the "Investor")

AGREEMENT dated January __, 1998, between AMNEX, Inc., a New York
corporation (the "Company") and __________________ (the "Investor")

PREAMBLE

The Company wishes to obtain equity financing. The Investor is willing,
on the terms contained in this Agreement, to purchase Common Stock of the
Company. Capitalized terms are defined in the first Article. Exhibits are
incorporated by reference into this Agreement as though such exhibits were set
forth at the point of such reference.

ARTICLE I

DEFINED TERMS

The following terms, when used in this Agreement, have the following
meanings, unless the context otherwise indicates:

"Acceptable Currency" shall mean and include cash and any other method
of payment which will result in such payment being credited to the account of
the Company at the bank previously designated to the Investor no later than the
day immediately following the day of the Closing.

"33 Act" means the Securities Act of 1933, as amended, or any similar
federal law then in force.

"34 Act" means the Securities Exchange Act of 1934, as amended, or any
similar federal law then in force.

"Affiliate" means, with respect to any specified Person, (1) any other
Person who, directly or indirectly, owns or controls, is under common ownership
or control with, or is owned or controlled by, such specified Person, (2) any
other Person who is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, of the specified Person or a Person described in clause (1) of this
paragraph, (3) another Person of whom the specified Person is a director,
officer or partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, (4) another Person in whom
the specified Person has a substantial beneficial interest or as to whom the
specified Person serves as trustee or in a similar capacity, or (5) any relative
or spouse of the specified Person or any of the foregoing Persons, any relative
of such spouse or any spouse of any such relative; provided, however, that at
any time after the Closing Date, the Company and the Subsidiaries on the one
hand and Seller and its Affiliates (other than the Company and the Subsidiaries)
shall not be deemed to be Affiliates of each other.

"Best Knowledge" shall mean and include (a) actual knowledge of the
Person, including, the actual knowledge of any of the officers or directors of

the Company and the administrators of any of the facilities operated by the
Company or any of its subsidiaries and (b) that knowledge

which a prudent businessperson could have obtained in the management of his
business after making due inquiry, and after exercising due diligence, with
respect thereto.

"Bylaws" means the bylaws of AMNEX, Inc., as amended.

"Certificate of Incorporation" means the certificate of incorporation
of AMNEX, Inc., as originally filed with the New York Secretary of State
together with all amendments thereto.

"Closing" and "Closing Date" mean the consummation of the Company's
sale and the Investor's purchase of the Common Stock, and the date on which the
same occurs or occurred.

"Commission" means the United States Securities and Exchange
Commission.

"Common Stock" means the $.001 par value common stock, of AMNEX, Inc.

"Current Financing Period" means the period from the date hereof
through, and including, January 29, 1998.

"Employee Benefit Plan" means any plan regulated under the Employees
Retirement and Income Supplement Act ("ERISA").

"Financial Statements" means any financial statements (including the
notes thereto) of AMNEX, Inc. certified by the Company's independent public
accountants and any such statements not so certified but containing
substantially all the information covered in such certified statements,
including a balance sheet as of the end of a fiscal period and statements of
income and retained earnings and of sources and applications of funds for such
fiscal period, together with all notes thereto.

"Holder" means the Investor (or its successors or assigns) so long as
it continues to hold Common Stock.

"Galesi" shall mean Xxxxxxxxx Xxxxxx and any designee thereof.

"Independent Public Accountants" means that firm of independent
certified public accountants selected by the Company's Board of Directors.

"Material Subsidiaries" means Crescent Public Communications, Inc., Sun
Tel North America, Inc., National Billing Exchange, Inc., American Network
Exchange, Inc. and Capital Network System, Inc.

"Notes" means the 8 1/2% Convertible Subordinated Notes due 2002 issued
by the Company on September 29, 1997.

"Offering Documents" means the Company's offering memorandum dated
September 22 (as supplemented on September 29, 1997 (plus attached exhibits) in
connection with the placement by the Company of the Notes, as amended,
supplemented and updated by the Company's public filings under the `34 Act,
including the most recent Quarterly Report on Form

10-Q, the draft Registration Statement and Exhibits on Form S-3 attached hereto
and the Disclosure Schedules.

"Qualified Holder" means the Investor, so long as it holds more than
250,000 Shares, or a transferee of the Investor or another Qualified Holder
(assuming all such transfers were made in accordance with this Agreement) who
holds more than 250,000 Shares, provided that (i) a transferee of the Investor
who, in the reasonable judgment of Company, is an actual competitor of the
Company, or a person or entity controlled by, or who controls, a competitor of
the Company may be deemed by the Company not to be a Qualified Holder; (ii) if
the Investor notifies the Company that it is a Venture Capital Operating Company
within the meaning of the Department of Labor's Final Plan Asset Regulation, 29
C.F.R. Part 2510 (Mar. 13, 1987) it shall be a Qualified Holder; and (iii) the
general and limited partners, members, officers or Affiliates of the Investor,
so long as it is a Qualified Holder, shall be Qualified Holders.

"Shares" means any shares of the Company's Common Stock.

"Subsidiary" or "Subsidiaries" of any Person means any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other Persons
performing similar functions are at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person.

Additional defined terms are found in the body of the following text:

The masculine form of words includes the feminine and the neuter and
vice versa, and, unless the context otherwise requires, the singular form of
words includes the plural and vice versa. The words "herein," "hereof,"
"hereunder," and other words of similar import when used in this Agreement refer
to this Agreement as a whole, and not to any particular section or subsection.

ARTICLE II

PURCHASE AND SALE TERMS

Section 2.1. Purchase and Sale. Subject to the terms of this Agreement,
the Company shall issue and sell to the Investor and the Investor shall purchase
from the Company at the Closing the number of shares of Common Stock at the
aggregate purchase price set forth opposite its name in Exhibit 2.1.

Section 2.2. Payment. The Investor shall pay the purchase price of the
Common Stock purchased by it in full at the Closing in Acceptable Currency.

Section 2.3. Transfer Legends and Restrictions. The transfer of the
Shares will be restricted in accordance with the terms hereof. Each certificate
evidencing the Shares, including any certificate issued to any transferee
thereof, shall be imprinted with legends in substantially the following form
(unless otherwise permitted under this Section or unless such

Shares shall have been effectively registered and sold under the `33 Act and the
applicable state securities laws):

"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE `SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS,
AND MAY NOT BE OFFERED OR TRANSFERRED BY SALE, ASSIGNMENT, PLEDGE OR
OTHERWISE UNLESS (i) A REGISTRATION STATEMENT FOR THE SHARES UNDER THE
SECURITIES ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO
SUCH SHARES IS IN EFFECT OR (ii) THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL, WHICH OPINION IS SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND
OTHER APPLICABLE SECURITIES LAWS. TRANSFER OF THESE SHARES IS FURTHER
RESTRICTED AS PROVIDED IN THE STOCK PURCHASE AGREEMENT DATED AS OF
JANUARY __, 1998, A COPY OF WHICH IS AVAILABLE AT THE COMPANY'S
OFFICES."

The Holder of any Shares by acceptance thereof agrees, so long as any
legend described in this Section shall remain on the certificates evidencing
the Shares, prior to any transfer of any of the same (except for a transfer
effected pursuant to an effective registration statement under the `33 Act or
in compliance with Rule 144 or Rule 144A thereunder), to give written notice
to the Company of such Holder's intention to effect such transfer and agrees
to comply in all material respects with the provisions of this Section. Such
notice, if required, shall describe the proposed method of transfer of the
Shares in question. Upon receipt by the Company of such notice, if required,
and if in the opinion of counsel to such Holder, which opinion shall be
reasonably satisfactory to the Company, the proposed transfer may be effected
without registration under the `33 Act in compliance with Sections 4(1), 4(2)
or Rules 144 or 144A or other exemptions available thereunder and under
applicable state securities laws, then the proposed transfer may be effected;
provided, however, that in the case of any Holder which is a partnership or a
limited liability company, no such opinion of counsel shall be necessary for a
transfer by such partnership or limited liability company to a partner or
member of such partnership or limited liability company, as the case may be,
or a retired partner of such partnership who retires after the date such
partnership became a Holder, or the estate of any such partner or retired
partner, if the transferee agrees in writing to be subject to the terms of
this Section to the same extent as if such transferee were originally a
signatory to this Agreement. Upon receipt by the Company of such opinion and
of such agreement by the transferee to be bound by this Section, the Holder of
such Shares shall thereupon be entitled to transfer the same in accordance
with the terms of the notice (if any) delivered by such Holder to the Company.

Each certificate evidencing the Shares issued upon any such transfer shall
bear the legend set forth in this Section. Upon the written request of a
Holder of the Shares, the Company shall remove the foregoing legend from the
certificates evidencing such Shares and issue to such Holder new certificates
therefor, free of any transfer legend if, with such request, the Company shall
have received an opinion of counsel selected by the Holder, such opinion to be
reasonably satisfactory to the Company, to the effect that any transfers by
said Holder of such Shares may be made to the public without compliance with
either Section 5 of the '33 Act or Rule 144

thereunder and applicable state securities laws. In no event will such legend be
removed if such opinion is based upon the "private offering" exemption of
Section 4(2) of the 33 Act.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the Offering Documents furnished pursuant to
this Agreement, the Company represents and warrants to the Investors, at and as
of the Closing that:

Section 3.1. Corporate Existence. The Company is a corporation
duly incorporated, validly existing and in good standing under New York law and
has unconditional power and authority to conduct its business and own its
properties as now conducted and owned. The Company is qualified as a foreign
corporation to do business in all jurisdictions in which the nature of their
properties and business requires such qualification and in which noncompliance
with such qualification would materially affect the Company's business.

Section 3.2. Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of (i) 70,000,000 shares of
Common Stock, of which 37,583,689 shares are issued and outstanding (other than
the 2,758,620 shares Common Stock to be issued to Galesi on the date hereof in
consideration for retirement of $3,200,000 of Company indebtedness held by
Galesi), approximately 3,872,382 shares are reserved for issuance pursuant to
the Company's stock option and grant plans, and 13,693,772 shares (which
includes the warrants to purchase 750,000 shares of Common Stock issued to
Galesi in consideration of prior financings provided by Galesi to the Company
and 1,600,000 shares of Common Stock reserved for issuance upon conversion of
the 750 shares of Series M Preferred Stock and the exercise of warrants to
purchase 45,000 shares of Common Stock being issued on the date hereof) are
reserved for issuance pursuant to securities exercisable with respect to
convertible into or exchangeable for shares of Common Stock; and (ii) 5,000,000
shares of preferred stock, 1,000 of which shares are issued and outstanding (and
an additional 750 shares will be issued upon execution of a Securities Purchase
Agreement of even date herewith). All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly issued, fully paid

and nonassessable. Except as set forth in Schedule 3.2, no shares of capital
stock of the Company are subject to preemptive rights or any other similar
rights of the stockholders of the Company or any liens or encumbrances imposed
through the actions or failure to act of the Company. Except as disclosed on
Schedule 3.2, as of the effective date of this Agreement, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever related to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company
or any of its Subsidiaries, or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, and (ii) there are no understandings
or agreements under which the Company or any of its Subsidiaries is obligated to
register the sale of any of its or their securities under the 1933 Act except
pursuant to the Incorporated Sections (as defined herein) of the Registration
Rights Agreement (the "Registration Rights Agreement") dated December 24, 1997

by and between the Company and Pangaea Fund, Ltd. and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company. The Company has furnished to the Buyer true and correct copies of
the Company's Certificate of Incorporation as in effect on the date hereof
("Certificate of Incorporation"), the Company's By-laws, as in effect on the
date hereof (the "By-laws"), and the terms of all securities convertible into or
exercisable for Common Stock of the company.

Section 3.3. Issuance of Shares. The Shares are duly
authorized and, upon issuance in accordance with the respective terms of this
Agreement will be validly issued, fully paid and non-assessable.

Section 3.4. Reporting Status; Eligibility to Use Form S-3.
Certain shares of the Company's Common Stock are registered under Section 12(g)
of the '34 Act. So long as the Investor or any Qualified Holder beneficially
owns any of the Shares, the Company shall timely file all reports required to be
filed with the Commission pursuant to the '34 Act, and the Company shall not
terminate its status as an issuer required to file reports under the '34 Act
even if the '34 Act or the rules and regulations thereunder would permit such
termination. The Company currently meets, and will take all necessary action to
continue to meet, the "registrant eligibility" requirements set forth in the
general instructions to Form S-3.

Section 3.5. Registration Rights and Listing. The Company
shall include the Shares purchased herewith in the registration statement to be
filed under Commission Rule 415 on Form S-3 on behalf of the holders of the
Notes and the Shares on or about January 29, 1998, shall pursue and maintain the
effectiveness of such statement as provided in the Purchase Agreement respecting
the Notes and this Agreement and shall secure the listing of such Shares upon
each national securities exchange or automated quotation system, if any, upon
which shares of Common Stock are then listed (subject to official notice of
issuance) and shall maintain, so long as any other shares of Common Stock shall
be so listed, such listing of all such Shares. The Company will obtain and

maintain the listing and trading of its Common Stock on the Nasdaq SmallCap
Market ("SmallCap"), the Nasdaq National Market ("Nasdaq"), the New York Stock
Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and will comply in
all respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the National Association of Securities Dealers ("NASD")
and such exchanges, as applicable. The Company shall promptly provide to the
Investor copies of any notices it receives from Nasdaq regarding the continued
eligibility of the Common Stock for listing on SmallCap or any other exchange or
quotation system on which the Common Stock is then listed. The Company
represents and warrants that it is eligible to register the Shares on Form S-3

Section 3.6. Power and Authority. The Company has
unconditional power and authority, and has taken all required corporate and
other action necessary (including stockholder approval, if necessary) to permit
it to own and hold properties to carry on its current business, to execute and
deliver this Agreement, to issue and sell the Common Stock as herein provided
and otherwise to carry out the terms of this Agreement and all other documents,
instruments, or transactions required by this Agreement, and none of such
actions will violate any provision of the Company's Bylaws or Certificate of
Incorporation, or result in the breach of or constitute a

default under any agreement or instrument to which the Company is a party or by
which it is bound or result in the creation or imposition of any material lien,
claim or encumbrance on any Company asset. This Agreement has been duly executed
and delivered by the Company and (assuming the due authorization, execution and
delivery hereof by the Investor) constitutes the valid and binding obligation of
the Company enforceable against the Company in accordance with its terms. No
event has occurred and no condition exists which would constitute a violation of
this Agreement. Neither this Agreement nor any other gives any person rights to
terminate any agreements with the Company or otherwise to exercise rights
against the Company.

Section 3.7. SEC Documents, Financial Statements. Since
December 31, 1994, the Company has timely (i.e., within the time periods
prescribed under the federal securities laws, including all permissible
extension periods) filed all reports, schedules, forms, statements and other
documents requirement to be filed by it with the Commission pursuant to the
reporting requirements of the `34 Act (all of the foregoing and all exhibits
included therein and financial statements and schedules thereto and documents
(other than exhibits) incorporated by reference therein, being hereinafter
referred to herein as the "SEC Documents"). As of their respective dates, the
SEC Documents complied in all material respects with the requirements of the `34
Act and the rules and regulations of the Commission promulgated thereunder
applicable to the SEC Documents, and none of the SEC Documents, at the time they
were filed with the Commission, 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. At their respective dates, the
financial statements of the Company included in the SEC Documents complied 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, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereof, or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes or my be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth in the financial statements of the Company
included in the SEC Documents, each of the Company and its Subsidiaries has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business subsequent to December 31, 1996 and (ii) obligations
under contracts and commitments incurred in the ordinary course of business and
not required under generally accepted accounting principles to be reflected in
such financial statements, which, individually or in the aggregate, would not be
reasonably likely to have a material adverse effect. Since the date of the most
recent audited balance sheet, each of the Company and its Subsidiaries has
operated in the ordinary course of business, consistent with past practices. No
stop order suspending the effectiveness of any registration statement of filed
by the Company has been issued by Commission.

Section 3.8. Patents, Copyrights, etc. The Company and each of
its Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent rights,

inventions, know-how, trade secrets, trademarks, services marks, service names,
tradenames and copyrights ("Intellectual Property") necessary to enable it to
conduct its business as now operated (and, except as set forth in Schedule 3.8
hereof, to the best of the Company's knowledge, as presently contemplated to be
operated in the future); there is no claim or action by any person pertaining
to, or proceeding pending, or the Company's knowledge threatened which
challenges the right of the Company or any of its Subsidiaries with respect to
any Intellectual Property necessary to enable it to conduct its business as now
operated (and, except as set forth in Schedule 3.8 hereof, to the best of the
Company's knowledge, as presently contemplated to be operated in the future; to
the best of the company's knowledge, neither the Company nor any of its
Subsidiaries infringe any Intellectual Property or other rights held by any
person; and the Company is unaware of any facts or circumstances which might
give rise to any of the foregoing. The Company and each of its Subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of the Intellectual Property.]

Section 3.9. Financial Condition. The Company has previously
furnished to the Investor its Financial Statements, which, together with the
footnotes thereto, are complete and substantially correct, have been prepared in
accordance with generally accepted accounting principles consistently applied,
and fairly present the consolidated financial condition of the Company and its
consolidated Subsidiaries as of the dates specified. The Financial Statements

are in accordance with the books and records of the Company as of the dates and
for the periods indicated, present fairly the financial position, results of
operations, shareholders' equity and changes in financial position of such
corporations as of the respective dates and for the respective periods
indicated, and have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as
described in such statements, notes thereto and auditor reports).

Section 3.9.1. Absence of Undisclosed Liabilities. Except as
set forth on Schedule 3.9.1, as of the date on which the most recent Financial
Statement Date have been filed with the Commission (the "Financial Statements"),
neither the Company nor any of its Subsidiaries had (and on the date hereof
neither the Company nor any of its Subsidiaries has) any material liabilities
(matured or unmatured, fixed or contingent, which are not fully reflected or
provided for on the balance sheet of the Company as at the Financial Statement
Date), or any material loss contingency (as defined in Statement of Financial
Accounting Standards No. 5) whether or not required by GAAP to be shown on the
Balance Sheets, except obligations to perform under commitments incurred in the
ordinary course of business after the Financial Statement Date.

Section 3.9.2. Taxes. Except as set forth on Schedule 3.9.2,
the Company and each of its Subsidiaries has accurately, completed and filed or
will file within the time prescribed by law (including extensions of time
approved by the appropriate taxing authority) all tax returns and reports
required to be filed with the Internal Revenue Service, the State of New York,
any other states or governmental subdivisions and all foreign countries and has
paid, or made adequate provision in the Financial Statements dated the Financial
Statement Date for the payment of, all taxes, interest, penalties, assessments
or deficiencies shown to be due (or, to the knowledge of the Company, claimed by
such authority or jurisdiction to be due) on or in respect

of such tax returns and reports. The Company knows of (a) no other federal, New
York, state, county, municipal or foreign taxes which are due and payable by the
Company which have not been so paid; (b) no other federal, New York, state,
county, municipal or foreign tax returns or reports which are required to be
filed which have not been so filed; and (c) no unpaid assessment for additional
taxes for any fiscal period or any basis thereof. Proper and accurate amounts
have been withheld by the Company from its employees for all periods in
compliance with the tax, social security and any employment withholding
provisions of applicable federal and state law. Proper and accurate, in all
material respects, federal and state returns have been filed by the Company for
all periods for which returns were due with respect to employee income tax
withholding, social security and unemployment taxes, and the amounts shown
thereon to be due and payable have been paid in full or provision therefor
included on the books of the Company in accordance with and to the extent
required by GAAP. The Company has not made any election under Section 341(f) of
the Internal Revenue Code of 1986, as amended (the "Code").

Section 3.9.3. Material Subsidiaries. Each Material Subsidiary is a
corporation duly organized, validly existing and in good standing under the

laws of its jurisdiction of incorporation; has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified as a foreign
corporation in all jurisdictions in which it is required to be so qualified.

Section 3.10. No Material Adverse Change. Except as set forth on Schedule
3.10, since the Financial Statement Date, there has been no material adverse
change in the financial or other condition, properties or business operations
of the Company or any of its Material Subsidiaries.

Section 3.11. Reporting. The Company is subject to and in compliance in all
material respects with the reporting requirements of Section 13 or Section
15(d) of the Exchange Act and the Company has timely filed all reports
required to be filed thereunder within the last 12 months. All information
relating to or concerning the Company or any of its Subsidiaries set forth in
this Agreement and provided to the Buyers pursuant to this Agreement and
otherwise in connection with the transactions contemplated hereby is true and
correct in all material respects and the Company has not omitted to state any
material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading. No event or circumstance has occurred or exists with respect to
the Company or any of its Subsidiaries or its or their business, properties,
prospects, operations or financial conditions, which, under applicable law,
rule or regulation, requires public disclosure or announcement by the Company
but which has not been so publicly announced or disclosed (assuming for this
purposes that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company
under the 1933 Act).

Section 3.12. Litigation. Except as set forth on Schedule
3.12, there are no suits, proceedings or investigations pending or threatened
against or affecting the Company, its Subsidiaries or an officer of the Company
which could have a material adverse effect on the business, assets, or financial
condition of the Company or its Subsidiaries or the ability of any officer to
participate in the affairs of the Company, or which concern in any material way
the

transactions contemplated by the Agreement. The foregoing includes, without
limiting its generality, actions pending or threatened (or any basis therefor
known to the Company or its Subsidiaries) involving the prior employment of any
employees or currently contemplated prospective employees of the Company or its
Subsidiaries or their use, in connection with the business of the Company or its
Subsidiaries, of any information or techniques which might be alleged to be
proprietary to their former employer(s).

Section 3.13. Licenses; Compliance with Laws, Other
Agreements, etc. The Company and each of its Subsidiaries has obtained or
applied for all franchises, permits, licenses, and other rights which it deems
necessary for the conduct of its business and it knows of no basis for the
denial of such rights in the future. Neither the Company nor its Subsidiaries is

in material violation of any order or decree of any court, or of the provisions
of any contract or agreement to which it is a party or by which it may be bound,
or, to its knowledge, of any law, order, or regulation of any governmental
authority, and neither this Agreement nor the transactions contemplated hereby
will result in any such violation.

Section 3.13.1. Government Approvals. No authorization,
consent, approval, license, qualification or formal exemption from, nor any
filing, declaration or registration with, any court, governmental agency,
regulatory authority or political subdivision thereof, any securities exchange
or any other person is required in connection with the execution, delivery or
performance by the Company of this Agreement or the business of the Company or
any of its Subsidiaries in order to consummate the transactions contemplated in
this Agreement. Except as set forth on Schedule 3.13.1, all such material
authorizations, consents, approvals, licenses, qualifications, exemptions,
filings, declarations and registrations have been obtained or made, as the case
may be, and are in full force and effect and are not the subject of any pending
or, to the knowledge of the Company, threatened attack by appeal or direct
proceeding or otherwise.

Section 3.13.2. Investment Company Act. The Company is
not, and immediately after the Closing will not be, an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act.

Section 3.14. Brokers, etc. The Company has not dealt with any
broker, finder, or other similar person in connection with the offer or sale of
the Common Stock and the transactions contemplated by this Agreement, and the
Company is not under any obligation to pay any broker's fee, finder's fee or
commission in connection with such transactions.

Section 3.15. Private Sale. The Company has not, either
directly or through any agent, offered any securities to or solicited any offers
to acquire any securities from, or otherwise approached, negotiated, or
communicated in respect of any securities with, any person in such a manner as
to require that the offer or sale of such securities (including but not limited
to the Common Stock) be registered pursuant to the provisions of Section 5 of
the `33 Act and the rules and regulations of the Commission thereunder or the
securities laws of any state and neither the Company nor anyone acting on its
behalf will take any action prior to the Closing that would cause any such
registration to be required (including, without limitation, any offer, issuance
or

sale of any security of the Company under circumstances which might require
the integration of such security with the Common Stock under the '33 Act or the
rules and regulations of the Commission thereunder) which might subject the
offering, issuance or sale of the Common Stock to the registration provisions of
the '33 Act. The issuance of Shares of Common Stock issuable pursuant to this
Agreement are exempt from registration under the '33 Act. The Company has
complied with all federal and state securities and blue sky laws in all

issuances and purchases of its capital stock prior to and including the date
hereof and has not violated any applicable law in making such issuances and
purchases of its capital stock prior to the date hereof. Any notices required to
be filed under federal and state securities and blue sky laws prior to or
subsequent to the Closing shall be filed on a timely basis prior to or as so
required.

Section 3.16. Offering Documents. The Offering Documents, read
together and in connection with materials made available to the Investor by the
Company (whether prepared by the Company or a third party), do not contain any
untrue statement of a material fact nor do they in the aggregate omit to state
any material fact necessary to make the statement therein not misleading. The
information contained in the Offering Documents has been material to the
Investor in its decision to invest.

Section 3.16.1. Projections; Material Facts. In
connection with the transactions contemplated by this Agreement, the Company has
furnished to the Investor in certain projected budgets, financial statements and
forecasts ("Projections"). Except as limited by the next sentence, all
statements contained in the Projections are true, correct and complete in all
material respects. The Company does not represent or warrant that any
occurrences, developments or facts including, without limitation, projections,
which the Projections says will occur or eventuate after its date (or which were
otherwise furnished in writing to the Investor), will in fact occur or eventuate
after such date, but the Company represents and warrants that such occurrences,
developments or facts, including such projections, presented therein were
prepared by the Company in good faith based on its best knowledge, information
and belief. No representation or warranty by the Company contained in the
Projections (other than the projections), this Agreement or any other written
statement, information, material or certificate furnished or to be furnished to
the Investor pursuant hereto or in connection with the transactions contemplated
hereby by the Company contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained therein or
herein not misleading, when all are taken together as a whole (it being
understood that, in the event of any inconsistency between this Agreement and
any other writings, this Agreement shall control). The Company knows of no
information or fact which has or would have a material adverse effect on the
financial condition, business or business prospects of the Company which has not
been disclosed to the Investor. Since the respective dates as of which
information is given in the Projections, the Company knows of no material
adverse change in the business, business prospects, property, condition or
results of operations of the Company.

Section 3.17. Investigation. It shall be no defense to an
action for breach of this Agreement that the Investor or its agents have (or
have not) made investigations into the affairs of the Company or that the
Company could not have known of the misrepresentation or breach of warranty.
Damages for breach of a representation or warranty or other provision of

this Agreement shall not be diminished by alleged tax savings resulting to the

complaining party as a result of the loss complained of.

Section 3.18. Minute Books. The minute books of the Company
contain a complete summary of all meetings of directors and stockholders since
the time of incorporation and reflect all transactions referred to in such
minutes accurately in all material respects.

Section 3.19. Environmental Matters.

Section 3.19.1. Except as set forth in Schedule 3.19, there
are, to the Company's knowledge, with respect to the Company or any of its
Subsidiaries or any predecessor of the Company, no past or present violations of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability or any liability under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 or similar federal, state, local and
foreign laws and neither the Company nor any of its Subsidiaries has received
any notice with respect to any of the foregoing, nor is any action pending or,
to the Company's knowledge, threatened in connection with any of the foregoing.
The term "Environmental Laws" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases, removal, remediation or
abatement of chemicals, pollutants, contaminants, or toxic or hazardous
substances or wastes (collectively, "Hazardous Materials") into the environment,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials, as
well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.

Section 3.19.2. Other than those that are or were stored, used
or disposed of in compliance with applicable law, no Hazardous Materials are
contained on or about any real property currently owned, leased or used by the
Company or any of its Subsidiaries, and no Hazardous Materials were released or
discharged on or about any real property previously owned, leased or used by the
Company or any of its subsidiaries during the period the property was owned,
leased or used by the Company or any of its subsidiaries, except in the normal
course of the Company's or any of its Subsidiaries' business.

Section 3.19.3. Except as set forth in Schedule 3.19, there
are no underground storage tanks, asbestos-containing materials, polychlorinated
biphenyls or urea formaldehyde insulation at any real property owned, leased or
used by the Company or any of its Subsidiaries in violation of any Environmental
Law.

Section 3.20. Title to Property. The Company and its
Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them, in each
case fee and clear of all liens, encumbrances and

defects except such as are described in Schedule 3.20 or such as would not have
a Material Adverse Effect. Any real property and facilities held under lese by
the Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as would not have a Material Adverse
Effect.

Section 3.21. Insurance. The Company and each of its
Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the company and
its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.

Section 3.22. Employee Relations. Neither the Company nor any
of its subsidiaries is involved in any union labor dispute nor, to the knowledge
of the Company or any of its subsidiaries, is any such dispute threatened.
Neither the Company nor any of its subsidiaries is a party to a collective
bargaining agreement, and the Company and its subsidiaries believe that
relations with their employees are good. Each of the Company and its
subsidiaries is in compliance in all material respects with the applicable
provisions of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and the regulations and published interpretations thereunder. None of
the following events has occurred or is reasonably expected to occur that when
taken together with all other such events could reasonably be expected to result
in a Material Adverse Effect: (i) any "reportable event," as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to any
"employee pension benefit plan" as such term is defined in Section 3 of ERISA
(other than a Multiemployer Plan (as defined below)) subject to the provision of
the Title IV or ERISA or Section 412 of the Internal Revenue Code of 1986, as
amended (the "Code"), or Section 302 of ERISA (a "Plan"); (ii) the adoption of
any amendment to a Plan that would require the provision of security pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA; (ii) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (iv)
the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of
an application for a waiver of the minimum funding standard with respect to any
Plan; (v) the incurrence of any liability under Title IV of ERISA with respect
to the termination of any Plan or the withdrawal or partial withdrawal of the
Company or any of its subsidiaries from any Plan or "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA ("Multiemployer Plan"); (vi) the receipt
by the Company or any of its subsidiaries from the Pension Benefit Buaranty
Corporation or a plan administrator of any notice relating to the intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan;
(vii) the receopt by the Company or any of its subsidiaries of any notice
concerning the imposition of liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA or of a determination that
a Multiemployer Plan is, or is expected to be, insolvent or in reorganization,

within the meaning of Title IV of ERISA; and (viii) the occurrence of a
"prohibited transaction" with respect to whicht the Company or any of its
subsidiaries is a "disqualified person" (within

the meaning of Section 4975 of the Code) and with respect to which the Company
or such subsidiary would be liable for the payment of an excise tax.

ARTICLE IV

COVENANTS OF THE COMPANY

Section 4.1. Use of Proceeds. The Company shall use the
proceeds of the sale of the Common Stock for working capital.

Section 4.2. Rule 144. The Company covenants that at all times
it will comply with the current public information requirements of Rule
144(c)(1) under the `33 Act; and at all such times as Rule 144 is available for
use by the Investor, the Company will furnish the Investor upon request with all
information within the possession of the Company required for the preparation
and filing of Form 144.

Section 4.3. Maintenance of Corporate Existence. Unless
otherwise determined by the Board of Directors of the Company with respect to
its Material Subsidiaries, each of the Material Subsidiaries and the Company and
its will preserve, renew and keep in full force and effect, its corporate
existence, qualification in requisite jurisdictions and rights and privileges
necessary or desirable in the normal conduct of its business.

Section 4.4. Governmental Consents. The Company will obtain
all consents, approvals, licenses and permits required by federal, state, local
and foreign law to carry on its business.

Section 4.5. Further Assurances. The Company will cure
promptly any defects in the creation and issuance of the Shares, and in the
execution and delivery of this Agreement. The Company, at its expense, will
promptly execute and deliver promptly to the Investor upon request all such
other and further documents, agreements and instruments in compliance with or
pursuant to its covenants and agreements herein, and will make any recordings,
file any notices, and obtain any consents as may be necessary or appropriate in
connection therewith.

Section 4.6. Preemptive Rights.

(a) The Company hereby grants to each Qualified
Holder a right of first refusal to purchase, on a pro rata basis together with
any other holder of the Company's securities with similar preemptive rights
(based on the number of shares of Common Stock (or Common Stock equivalent) then
held by each such holder and each Qualified Holder), all or any part of New

Securities (as defined below) which the Company may, from time to time, propose
to sell and issue subject to the terms and conditions set forth below. A
Qualified Holder's pro rata share, for purposes of this subsection 4.6, shall
equal a fraction, the numerator of which is the number of shares of Common Stock
then held by such Qualified Holder or issuable upon

conversion or exercise of any Shares, convertible securities, options, rights,
or warrants then held by such Qualified Holder, and the denominator of which is
the total number of shares of Common Stock outstanding plus the number of shares
of Common Stock issuable upon conversion or exercise of then outstanding Shares,
convertible securities, options, rights or warrants.

(b) "New Securities" shall mean any capital stock of
the Company whether now authorized or not and rights, options or warrants to
purchase capital stock, and securities of any type whatsoever which are, or may
become, convertible into capital stock; provided, however, that the term "New
Securities" does not include (i) the Shares issuable pursuant to the exercise or
conversion rights enjoyed by holders of existing derivative securities or
pursuant to existing contracts, including warrants issuable to Galesi as
indicated in the resolutions adopted by the Company's Board of Directors on
January 6, 1998 (the "Board Resolutions"), and the warrant shares pertaining
thereto; (ii) securities offered to the public pursuant to a public offering;
(iii) securities issued for the acquisition of another corporation by the
Company by merger, purchase of substantially all the assets of such corporation
or other reorganization resulting in the ownership by the Company of not less
than 51% of the voting power of such corporation; (iv) shares of Common Stock or
options issued to employees or consultants of the Company pursuant to a stock
option plan, employee stock purchase plan, restricted stock plan or other
employee stock plan or agreement; (v) securities issued as a result of any stock
split, stock dividend or reclassification of Common Stock, distributable on a
pro rata basis to all holders of Common Stock; (vi) securities issued in
connection with existing or future debt financings or other borrowings,
including securities issued in exchange for, or in connection with the repayment
of, debt, including common stock or warrants issued in connection with debt owed
to Galesi (the "Galesi Securities") as indicated in the Board Resolutions,
provided however that such Galesi Securities issued will not exceed (upon
issuance or conversion of warrants)1,000,000 shares of Common Stock and will not
be offered at a purchase price below $1.20 per share of Common Stock and (vii)
any Common Stock or securities convertible into or exchangeable for Common Stock
issued during the Current Financing Period.

(c) If the Company intends to issue New Securities,
it shall give each Qualified Holder written notice of such intention, describing
the type of New Securities to be issued, the price thereof and the general terms
upon which the Company proposes to effect such issuance. Each Qualified Holder
shall have fifteen (15) days from the date of any such notice to agree to
purchase all or part of its or his pro rata share of such New Securities for the
price and upon the general terms and conditions specified in the Company's
notice by giving written notice to the Company stating the quantity of New
Securities to be so purchased. Each Qualified Holder shall have a right of

overallotment such that if any Qualified Holder fails to exercise his or its
right hereunder to purchase his or its total pro rata portion of New Securities,
the other Qualified Holders may purchase such portion on a pro rata basis, by
giving written notice to the Company within five days from the date that the
Company provides written notice to the other Qualified Holders of the amount of
New Securities with respect to which such nonpurchasing Qualified Holder has
failed to exercise its or his right hereunder.

(d) If any Qualified Holder or Qualified Holders fail
to exercise the foregoing right of first refusal with respect to any New
Securities within such 15-day period (or the additional five-day period provided
for overallotments), the Company may within 120 days thereafter sell any or all
of such New Securities not agreed to be purchased by the Qualified Holders, at a
price and upon general terms no more favorable to the purchasers thereof than
specified in the notice given to each Qualified Holder pursuant to paragraph (c)
above. In the event the Company has not sold such New Securities within such
120-day period, the Company shall not thereafter issue or sell any New
Securities without first offering such New Securities to the Qualified Holders
in the manner provided above.

Section 4.7. Financial Information. The Company agrees to send
the following reports to the Investor and/or any Qualified Holder until the
Investor and/or such Qualified Holder transfers, assigns, or sells all of the
Securities: (i) within three (3) days after the filing with the SEC, a copy of
its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any
Current Reports on Form 8-K; (ii) within one (1) day after release, copies of
all press releases issued by the Company or any of its Subsidiaries, and (iii)
contemporaneously with the making available or giving to the stockholders of the
Company, copies of any notices or other information the Company makes available
or gives to such stockholders

Section 4.8. Issuance of Additional Common Stock.

(a) In the event that during the Current Financing
Period, the Company issues any shares of Common Stock (in addition to those
being issued pursuant hereto) or securities of any type whatsoever which are, or
may become, convertible into or exchangeable for Common Stock (other than the
750 additional shares of the Company's Series M Preferred Stock issued during
the Current Financing Period), the Company agrees that it will provide notice of
such issuance to the Investor and that:

(i) any such shares or securities shall be
issued for a purchase price per Common Stock equivalent, equal to or greater
than the price per share paid by the Investor under this Agreement; and

(ii) to the extent that any such convertible
or exchangeable securities are issued, each of the Investors shall have the
right, exercisable within five days of receipt of the notice of such issuance
from the Company, to exchange all, but not less than all, of the shares of
Common Stock purchased by such Investor pursuant hereto for the number of such
securities as may be obtained by dividing the aggregate purchase price paid by

such Investor pursuant hereto by the price per security paid by the other
purchasers thereof.

(b) In the event that at any time during the one year
period following the Closing the Company issues any shares of Common Stock (in
addition to those being issued pursuant hereto) or securities of any type
whatsoever which are, or may become convertible into or exchangeable for Common
Stock, the Company agrees that it will provide notice of such issuance to the
Investor of such issuance and that

(i) to the extent that such shares or
securities (other than the 750 shares of the Company's Series M Preferred Stock
issued during the Current Financing Period) are issued pursuant to agreements
which contain terms that are more favorable to the purchasers of such shares
than the terms hereof, the Investor shall be entitled to the benefit of such
terms as if a party to such agreements and, to the extent inconsistent, such
terms shall be deemed to replace the terms hereof, provided that this provision
shall not entitle the Investor to designate a member of the Board of Directors
of the Company even if such right is granted to another purchaser of Common
Stock; and

(ii) to the extent that such shares or
securities are issued for a purchase price per Common Stock equivalent, less
than the price per share paid by the Investors under this Agreement, the
Investor shall have the right, exercisable within five days of receipt of the
notice of such issuance from the Company, to receive an additional number of
Shares as may be obtained by dividing the aggregate purchase price paid by the
Investor pursuant hereto by the price per security paid by the other purchasers
thereof less the number of Shares received pursuant to this Agreement, subject
to the requirements set forth in Section 4460 of the NASD Manual,

provided that the foregoing will not apply to the following securities and
transactions: (a) securities, including but not limited to warrants and options,
issued to employees, directors, consultants, agents, pursuant to employment
contracts or employee benefit programs or plans (including stock option and
restricted stock plans) and other compensatory transactions not in connection
with capital raising; (b) securities issued in connection with a stock split,
stock dividend or other similar recapitalization; (c) securities issued as a
result of the exercise of conversion rights of existing and outstanding
derivative securities, including but not limited to adjustments of such rights
by reason of anti-dilution protections; and (d) securities issued in connection
with a corporate reorganization, including a reorganization in which the Company
does not survive.

Section 4.9. Registration of Shares.

(a) The Company agrees to include the shares of
Common Stock sold to the Investor pursuant to this Agreement (i) on the Form S-3
to be filed by the Company with the Commission during the Current Financing

Period or (ii) on a separate Form S-3 to be filed by the Company with the
Commission within 30 days after the Closing Date.

(b) The Company and the Investor hereby agree that
the terms of Sections 2(d), 3, 4 , 5, 6, 7, 8 and 9 (the "Incorporated
Sections") set forth in the Registration Rights Agreement, a copy of which is
attached hereto as Exhibit 4.9 are made a part of this Agreement as if set forth
in their entirety herein and subtitling them "Investor" (as defined herein) for
the term "Initial Investor" each place it appears in the Incorporated Sections.

Section 4.10. Auditor. The Company shall retain a firm of
certified public accountants of established national reputation to audit its
books and records at least annually.

Section 4.11. Termination of Covenants. The covenants of the
Company contained in this Section shall terminate, and be of no further force or
effect, at such time where an Investor holds less than 15% of the Shares issued
to such Investor on the Closing Date. Notwithstanding the foregoing, the
provisions of Section 4.09 shall remain in effect until such time as an
Investor, together with its Qualified Holder transferee(s) holds less than 15%
of the Shares issued to such Investor on the Closing Date.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE INVESTOR

Each Investor represents and warrants to the Company, at and as of
the Closing that:

Section 5.1. Power and Authority. The Investor has full power
and authority and, if not an individual Investor, has taken all required
corporate (or trust or partnership, as the case may be) and other action
necessary to permit it to execute and deliver this Agreement, and all other
documents or instruments required by this Agreement, and to carry out the terms
of this Agreement and of all such other documents or instruments.

Section 5.2. Purchase for Investment. The Investor is
purchasing the Common Stock for investment, for its own account and not for the
account of any Employee Benefit Plan (or if such Common Stock is being acquired
for the account of any such Plan, such acquisition does not involve a nonexempt
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Code) and not with a view to distribution thereof, except for
transfers permitted hereunder. The Investor understands that the Common Stock
must be held indefinitely unless it is registered under the `33 Act or an
exemption from such registration becomes available.

Section 5.3. Financial Matters. The Investor represents and
warrants to the Company that it understands that the purchase of the Shares
involves substantial risk and that its financial condition and investments are

such that it is in a financial position to hold the Shares for an indefinite
period of time and to bear the economic risk of, and withstand a complete loss
of, such Shares. In addition, by virtue of its expertise, the advice available
to it and previous investment experience, such Investor has extensive knowledge
and experience in financial and business matters, investments, securities and
private placements and the capability to evaluate the merits and risks of the
transactions contemplated by this Agreement. The Investor represents that it is
an "accredited investor" as that term is defined in Regulation D promulgated
under the '33 Act.

During the negotiation of the transactions contemplated herein, the
Investor and its representatives have been afforded full and free access to
corporate books, financial statements, records, contracts, documents, and
other information concerning the Company and to its offices and facilities,
have been afforded an opportunity to ask such questions of the Company's
officers and employees concerning the Company's business, operations,
financial condition, assets, liabilities and other relevant matters as they
have deemed necessary or desirable, and have been

given all such information as has been requested, in order to evaluate the
merits and risks of the prospective investment contemplated herein.

Section 5.4. Brokers, etc. The Investor has not dealt with any
broker, finder, commission agent, or other similar person in connection with the
offer or sale of the Common Stock and the transactions contemplated by this
Agreement, and is under no obligation to pay any broker's fee, finder's fee, or
commission in connection with such transactions.

ARTICLE VI

THE CLOSING AND CLOSING CONDITIONS

Section 6.1. The Closing. The purchase and sale of the Common
Stock shall take place at the Closing to be held at the offices of Xxxxxxxx &
Xxxxxxxx LLP. 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000. The
Closing shall occur on January 26, 1998, or, at the Company's option, such other
date not later than January 29, 1998, as the Company and the Investor may
designate.

The obligation of the Investor to purchase the Common Stock at the
Closing shall be subject to satisfaction of the following conditions at and as
of the Closing:

Section 6.2. Issuance of Common Stock. The Company shall have
duly issued and delivered certificates to the Investor for the number shares of
the Common Stock purchased by the Investor as provided in Exhibit 2.1.

Section 6.3. Legal Opinion from Counsel for the Company. There
shall be delivered to the Investor the written opinions of Xxxxxxxx & Xxxxxxxx

LLP and Certilman Balin Xxxxx & Xxxxx, LLP, counsel for the Company, in
substantially the form attached as Exhibit 2.4.

Section 6.4. Certificate of Officer of the Company. The
Company shall have delivered to the Investors a certificate of its chief
executive and chief financial officers, or alternatives therefor satisfactory to
counsel for the Investor, dated the date of the Closing, to the effect that the
representations and warranties of the Company are true at and as of the Closing
as if made at and as of the Closing, and that each of the conditions in this
Article 6 has been satisfied.

Section 6.5. Consents and Waivers. The Company shall have
secured a consent to the issuance from the initial purchaser of the Notes, HSBC
Securities, Inc. and a waiver of pre-emptive rights by Pangaea Fund Ltd., each
in form reasonably satisfactory to the Investors.

Section 6.6. Representations and Warranties to be True and
Correct. The representations and warranties contained in Article III shall be
true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date (except
to the extent that any representations and warranties of the

Company specifically apply to conditions existing at a particular date), and the
Company shall have certified to such effect to the Investor in writing.

Section 6.7. Performance. The Company shall have performed and
complied with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the Closing Date, and the
Company shall have certified to such effect to the Investor in writing.

Section 6.8. All Proceedings to Be Satisfactory. All corporate
and other proceedings to be taken by the Company in connection with the
transactions contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to the Investor and its special counsel, and
the Investor and said counsel shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.

Section 6.9. Reasonable Satisfaction of Investor and Counsel.
All instruments applicable to the issuance and sale of the Common Stock and all
proceedings taken in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory to the Investors and their counsel.

ARTICLE VII

MISCELLANEOUS

Section 7.1. Expenses. The Company and the Investor will bear
their own expenses, including legal fees, in connection with this Agreement.

Section 7.2. Remedies Cumulative. Except as herein provided,
the remedies provided herein shall be cumulative and shall not preclude
assertion by any party hereto of any other rights or the seeking of any other
remedies against the other party hereto.

Section 7.3. Brokerage. Each party hereto will indemnify and
hold harmless the others against and in respect of any claim for brokerage or
other commission relative to this Agreement or to the transaction contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.

Section 7.4. Severability. Whenever possible, each provision
of this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provisions shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

Section 7.5. Parties in Interest. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the

respective legal representatives, successors and assigns of the parties hereto
whether so expressed or not.

Section 7.6. Notices. Notices required under this Agreement
shall be deemed to have been adequately given if delivered in person or sent by
certified mail, return receipt requested, to the recipient at its address set
forth in Exhibit 7.6 or such other address as such party may from time to time
designate in writing.

Section 7.7. No Waiver. No failure to exercise and no delay in
exercising any right, power or privilege granted under this Agreement shall
operate as a waiver of such right, power or privilege. No single or partial
exercise of any right, power or privilege granted under this Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies provided in this Agreement
are cumulative and are not exclusive of any rights or remedies provided by law.

Section 7.8. Amendments and Waivers. Except as herein
provided, this Agreement may be modified or amended only by a writing signed by
the Company and by the Investors.

Section 7.9. Survival of Agreements, etc. All agreements,
representations and warranties contained in this Agreement or made in writing by
or on behalf of the Company or the Investor in connection with the transactions
contemplated by this Agreement shall survive the execution and delivery of this
Agreement, the Closing, and any investigation at any time made by or on behalf
of the Investor. Notwithstanding the preceding sentence, however, all such

representations (other than intentional misrepresentations) and warranties, but
no such agreements, shall expire three years after the date of this Agreement.
The Company shall indemnify and hold the Investor harmless from and against all
costs, expenses (including attorneys fees), damages or other liabilities
resulting from a material breach by the Company of any of its representations,
warranties or agreements contained herein.

Section 7.10. Construction. This Agreement shall be governed
by and construed in accordance with the procedural and substantive laws of the
State of New York without regard for its conflicts-of-laws rules. The Company
agrees that it may be served with process in the State of New York and any
action for breach of this Agreement prosecuted against it in the courts of that
State.

Section 7.11. Entire Understanding. This Agreement expresses
the entire understanding of the parties and supersedes all prior and
contemporaneous agreements and undertakings of the parties with respect to the
subject matter of this Agreement.

Section 7.12. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which taken together shall constitute one agreement.

Section 7.13. Assignment; No Third-Party Beneficiaries.

(a) This Agreement and the rights hereunder shall not
be assignable or transferable by either of the Investors or the Company without
the prior written consent of the other parties hereto except, in the case of the
Investors, in accordance with the restrictions on transfer set out in this
Agreement and, in the case of the Company, by operation of law in connection
with a merger, consolidation or sale of substantially all the assets of the
Company. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. The assignment by the either Investor on a
nonexclusive basis of any rights under this Agreement to any such transferee
shall not affect or diminish the rights or obligations of such Investor under
this Agreement and in no event shall any assignment relieve such Investor of its
obligations hereunder.

(b) This Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give to any Person, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.

ARTICLE VIII

TERMINATION

Section 8.1. Termination. This Agreement may be terminated at
any time prior to the Closing:

(a) by mutual consent of the Investor and the
Company;

(b) by each of the Company and the Investor if the
Closing shall not have occurred by January 29, 1998, provided that the failure
to consummate the transactions contemplated hereby is not a result of the
failure by the party so electing to terminate this Agreement to perform any of
its obligations hereunder.

Section 8.2. Effect of Termination. Except for the obligations
of Sections 7.1 and 7.3 hereof, if this Agreement shall be terminated pursuant
to Section 8.1, all obligations, representations and warranties of the parties
hereto under the Agreement shall terminate and there shall be no liability,
except for any breach of this Agreement prior to such termination, of any party
to another party.

ARTICLE IX
RIGHT OF CO-SALE

If Galesi proposes to sell any Shares ("Co-Sale Shares") to a party
or affiliated group (the "Transferee") in a transaction or series of
transactions during the twelve month period following the Closing Date
involving the sale of more than 500,000 shares or resulting in the Transferee
for the first time controlling the power to vote more than 35% of the total
votes for nominees to the Company's board of directors, Galesi shall first
give reasonable notice in reasonable detail to the Investor in sufficient time
to allow the Investor to participate in the sale on the same terms and

conditions as Galesi. To the extent any prospective purchaser or purchasers
refuses to purchase shares or other securities from the Investor exercising
its rights of co-sale hereunder, Galesi shall not sell to such prospective
purchaser or purchasers any Shares unless and until, simultaneously with such
sale, Galesi shall purchase the offered shares or other securities from the
Investor. Notwithstanding the foregoing, the provisions of Article IX shall
not apply to (i) any pledge of Co-Sale Shares made pursuant to a bona fide
loan transaction that creates a mere security interest; (ii) any transfer to
the ancestors, descendants or spouse, employees of entities owned or
controlled, or to trusts for the benefit of such persons, of Galesi; or (iii)
any bona fide gift; provided that (A) Galesi shall inform the Investor of such
pledgee, transfer or gift prior to effecting it and (B) the pledgee,
transferee or donee shall furnish the Investor with a written agreement to be
bound by and comply with all provisions of Article IX. Such transferred
Co-Sale Shares will remain "Co-Sale Shares" hereunder, and such pledgee,
transferee or donee shall be treated as "Galesi" for purposes of this
Agreement.

Notwithstanding the foregoing, the provisions of Article IX shall not
apply to the sale of any Co-Sale Shares (a) on the open market, including

block trades, except that Galesi shall be required to provide reasonable
advance notice to the Investor of any such sales in excess of the limitations
imposed by Rule 144(e) promulgated under the 33 Act whether or not such
limitations then apply; or (b) to the public pursuant to a registration
statement filed with, and declared effective by, the Commission, provided that
the Investor shall have the right to include its Shares in any such
registration statement filed in connection with an underwritten public
offering (subject to any limitation placed by the managing underwriter on the
number of shares of Common Stock which may be included in such registration
statement).

ARTICLE X

COVENANTS OF THE INVESTOR

Section 10.1. Lock-up Period. The Investor agrees not to
offer, sell or contract to sell, or otherwise dispose of, directly or
indirectly, any of the Shares beneficially owned by the Investor for a period
of 365 days from the date hereof without the prior written consent of the
Company. Notwithstanding the foregoing, the provisions of this Section 10.1
shall not apply to (i) any private sale or other disposition to any Qualified
Holder (A) not on the open market or (B) to the public pursuant to a
registration statement filed with the Commission, provided that the Qualified
Holder acquiring such Shares shall agree to be bound by the provisions of this
Section 10.1 or (ii) the sale of Co-Sale Shares pursuant to Article IX hereof.

ARTICLE XI

ARBITRATION

If at any time there shall be a dispute arising out of or relating to
any provision of this Agreement or any agreement contemplated hereby, such
dispute shall be submitted for binding and final determination by arbitration
in accordance with the regulations then obtaining of the

American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) resulting from such arbitration shall be in writing, and shall be
final and binding upon all involved parties. The site of any arbitration shall
be within New York City, New York.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.

AMNEX, INC.

By
-----------------------------------
Name:
Title:

INVESTOR

By
-----------------------------------
Name:
Title:

With respect to ARTICLE IX only

-------------------------------------
Xxxxxxxxx Xxxxxx

ATTACHMENTS TO:
---------------

FORM OF STOCK PURCHASE AGREEMENT
Between
AMNEX, Inc.
and
the Investors named therein

Attachments:
- Schedule of Differences
- Disclosure Schedule
- Exhibit 2.1 - Schedule of Purchasers
- Exhibit 2.4 - Opinion of Company Counsel
- Exhibit 4.10 - Registration Rights Agreement
- Exhibit 7.6 - Addresses for Notices

SCHEDULE OF DIFFERENCES
-----------------------

Material differences between attached Form of Stock Purchase Agreement and the
various Stock Purchase Agreement referred to below:

---------------------- -------------------- --------------------- --------------------- --------------------
Aggregate Purchase
Investor Date of Agreement Shares Purchased Price per Share Price
---------------------- -------------------- --------------------- --------------------- --------------------

Granite Associates, January 14, 1998 1,363,637 $1.10 $1,500,000
L.P.
---------------------- -------------------- --------------------- --------------------- --------------------
Victory Ventures LLC January 16, 1998 1,163,794 $1.16 $1,350,000

Brea Group, Inc. 129,310 $150,000
---------------------- -------------------- --------------------- --------------------- --------------------

Xxxxxxxx Xxxxxxxxx January 22, 1998 862,069 $1.16 $1,000,000
---------------------- -------------------- --------------------- --------------------- --------------------

AMN Investments, January 26, 1998 862,069 $1.16 $1,000,000
L.L.C.
---------------------- -------------------- --------------------- --------------------- --------------------

DISCLOSURE SCHEDULES

Schedule 3.2

Options, Warrants, Registration Rights, etc.

(i) Outstanding options, warrants, scrip, rights to subscribe for, puts,
calls, rights of first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of
capital stock of the Company or any of its Subsidiaries

Options

Total number of outstanding options: approximately 3,563,198

Outstanding Warrants

Total number of outstanding warrants: 5,151,615

Put Agreements

Under the Asset Purchase Agreement, dated November 8, 1996 between AMNEX,
Inc. and Cresent Public Communications Inc., Coastal Telecom Payphone Company,
Inc., BEK TEL, Inc., Garden State Telephone Installation & Service Co., Inc. and
Xxxxx Xxxx (collectively, the "Sellers") and subject to the terms thereof,
Sellers have the right to require AMNEX to buy back a certain amount of shares
based upon AMNEX having failed to file, and if AMNEX fails to file a
registration statement within specified time periods. In no event will the
amount of shares purchased exceed $3,000,000.

Commitments

See (ii)(10) of this Schedule 3.2

Securities Convertible in Common Stock

1. $15,000,000 8 1/2% Convertible Subordinated Notes due 2002. The Notes are
convertible at any time prior to maturity at an initial conversion price
of $2.7844 into 5,387,157 shares of common stock, plus an indeterminate
amount of shares based upon adjustments to the conversion price.

2. Private Placement of 1,000 Shares of Series M Convertible Preferred
Stock. Under the Securities Purchase Agreement, dated as of December 24,
1997 between AMNEX, Inc. and Pangaea Fund Ltd., AMNEX issued 1,000 shares
of Series M Convertible Preferred Stock, convertible into shares of $.001
par value common stock of AMNEX, Inc.

3. Private Placement of 750 Shares of Series M Convertible Preferred Stock.
Under the Securities Purchase Agreement, dated as of January 26, 1998
between AMNEX, Inc. and Fourteen Hill Capital, L.P., AMNEX issued 750
shares of Series M Convertible Preferred Stock, convertible into shares
of $.001 par value common stock of AMNEX, Inc.

Right of First Refusal

1. Private Placement of 1,000 Shares of Series M Convertible Preferred
Stock. Under the Securities Purchase Agreement, AMNEX, Inc. granted
Pangaea Fund Ltd. the right to participate, on a pro-rata basis, in any
equity financing offered by AMNEX for the one year period following the
closing.

2. Stock Purchase Agreement dated as of January 14, 1998 between AMNEX, Inc.
and Granite Associates, L.P. Under the Stock Purchase Agreement granted
Granite Associates, L.P. the right to participate, on a pro-rata basis, in
offerings of securities offered by AMNEX, Inc., subject to certain
restrictions and conditions.

3. Stock Purchase Agreement dated as of January 16, 1998 among AMNEX, Inc.,
Victory Ventures LLC and Brae Group, Inc. Under the Stock Purchase
Agreement the Company granted Victory Ventures LLC and Brae Group, Inc. the
right to participate, on a pro-rata basis together with any other holder of
the Company's securities with similar preemptive rights, in offerings of
securities offered by AMNEX, Inc., subject to certain restrictions and
conditions.

4. Stock Purchase Agreement dated as of January 22, 1998 among AMNEX, Inc.
and Xxxxxxxx Xxxxxxxxx Under the Stock Purchase Agreement the Company
granted Xxxxxxxx Xxxxxxxxx the right to participate, on a pro-rata basis
together with any other holder of the Company's securities with similar
preemptive rights, in offerings of securities offered by AMNEX, Inc.,
subject to certain restrictions and conditions.

5. Private Placement of 750 Shares of Series M Convertible Preferred Stock.
Under the Securities Purchase Agreement, AMNEX, Inc. granted Fourteen Hill
Capital, L.P. the right to participate, on a pro-rata basis, in any equity
financing offered by AMNEX for the one year period following the closing.

(ii) Registration Rights

1. HSBC Securities, Inc. ("HSBC") and Xxxxxxx Xxxxxx & Xxxxx ("RP&C").
In connection with the $15 million note offering, the Company issued
warrants to HSBC, the placement agent and RPC, the international sales
agent, for the purchase price 96,250 and 65,365 Common Shares,
respectively. HSBC and RPC were granted demand and piggyback registration
rights for the warrant shares.

2. National Operator Service, Inc. ("NOS").
Pursuant to an Equity Participation Plan for NOS, dated August 18, 1994,
NOS was issued 100,000 Common Shares and granted a warrant for the purchase
of 50,000 Common Shares. Pursuant to the Equity Participation Plan, NOS has
piggyback registration rights with respect to the shares and warrant
shares.

3. Wall Street Consultants, Inc. ("Wall Street").
On July 7, 0000, Xxxx Xxxxxx was granted an option to acquire 50,000 Common
Shares and granted piggyback registration rights in the event of a sale by
the Company of Common Shares for cash.

4. Xxxxxxxx & Xxxxxxxx Incorporated ("Xxxxxxxx").
On July 15, 1994, the Company granted to Xxxxxxxx and certain of its
officers warrants for the purchase of 200,000 Common Shares and granted
piggyback registration rights in the event of a sale by the Company of
Common Shares for cash.

5. X.X. Xxxxxxx & Co., Inc. ("Xxxxxxx").
On July 15, 1994, the Company granted to Xxxxxxx warrants for the purchase
of 35,000 Common Shares and granted piggyback registration rights in the
event of a sale by the Company of Common Shares for cash.

6. Transaction Network Services Inc. ("TNS").
On April 3, 1996, the Company granted to TNS warrants for the purchase of
100,000 Common Shares and granted piggyback registration rights in the
event of a sale by the Company of Common Shares.

7. Coastal Communications of America ("Coastal Communications").
In connection with the acquisitions between December 1996 and March 1997 of
certain assets from Coastal Communications, the Company issued and
aggregate of 262,626 Common Shares and granted piggyback registration
rights in the event the Company filed a registration statement for the sale
by the Company of Common Shares for cash.

8. Capital Network System Inc. ("CNSI").
In connection with the Company's June 1996 acquisition of all of the
outstanding Common Shares of CNSI, the Company agreed to register the
resale of (i) 4,099,086 Common Shares acquired by the CNSI shareholders and
(ii) 400,000 Common Shares underlying certain warrants issued to them and
granted CNSI shareholders piggyback registration rights in the

event the Company files a registration statement covering the sale by the

Company of any securities for cash.

9. Robb, Peck, XxXxxxx Clearing Corporation ("Xxxx, Xxxx").
The Company has agreed, upon demand, to file a registration statement with
the SEC covering the resale of an aggregate of 550,000 Common Shares
underlying certain warrants issued to Robb, Peck, and granted Xxxx, Xxxx
certain piggyback registration rights in the event the Company files a
registration statement covering the sale by the Company of Common Shares
for cash.

10. Teleplus, Inc.
In connection with the Company's August 1996 acquisition of certain assets
of Teleplus, the Company issued 526,168 Common Shares in January 1997,
agreed to issue an additional 526,168 Common Shares in January 1998, agreed
to register the resale of such Common Shares, and granted Teleplus
piggyback registration rights with respect to such Common Shares.

11. National Billing
In connection with the Company's September 1996 acquisition of 80% of the
outstanding Common Shares of NBE, the Company issued an aggregate of
550,725 Common Shares to the NBE shareholders, agreed to register the
resale of such Common Shares and granted the NBE shareholders piggyback
registration rights with respect to these shares.

12. Xxxxxxxxx Xxxxxx
In connection with a Stock Exchange Agreement between the Company and
Xxxxxxxxx Xxxxxx entered into in January 1997, the Company has agreed to
file a registration statement between July 1998 and October 1998 covering
the resale of an aggregate of 3,000,000 Common Shares that are either
outstanding (1,500,000) or are issuable pursuant to warrants granted to him
(1,500,000). In June 1997, the Company issued additional warrants to Xx.
Xxxxxx for the purchase of up to 500,000 Common Shares which are to be
included in the registration statement to be filed between July 1998 and
October 1998.

13. Coastal Telecom Payphone Company, Inc. ("Coastal Telecom").
In connection with the Company's November 1996 acquisition of certain
assets of Coastal Telecom, Garden State Telephone Installation and Service
Co., Inc. and BEK Tel, Inc., the Company granted piggyback registration
rights with regard to the resale of 2,282,989 Common Shares. The
registration rights only apply to a sale of securities by the Company.

14. $15,000,000 8 1/2% Convertible Subordinated Notes due 2002.
In connection with the Company's September 1997 sale of $15,000,000 8 1/2%
Convertible Subordinated Notes due 2002, the Company agreed to file a
registration statement within 90 days of the closing covering the sale of
the notes and underlying Common Shares and to use its reasonable best
efforts to cause the registration statement to be declared effective by the
SEC as soon as practible but in any event within 180 days of the closing.

15. Private Placement of 1,000 Shares of Series M Convertible Preferred Stock.
In connection with the Company's December 1997 sale of 1,000 shares of
Series M Convertible Preferred Stock (the "Series M Stock"), the Company
agreed to file a registration statement covering Common Stock issuable upon
(i) conversion of the shares of Series M Stock and (ii) exercise of
warrants (a) to purchase 40,000 shares of Common Stock issued to Pangaea
Fund Ltd. and (b) to purchase 20,000 shares of Common Stock issued to
Xxxxxx Unman Securities and to use its reasonable best efforts to cause the
registration statement to be declared effective by the SEC within 90 days
of the closing.

16. Stock Purchase Agreement dated as of January 14, 1998 between AMNEX, Inc.
and Granite Associates, L.P. In connection with the Stock Purchase
Agreement, the Company agreed to use its best efforts to register the
shares of common stock issued to Granite Associates, L.P. on a registration
statement to be filed by AMNEX, Inc. on prior to January 29, 1998.

17. Stock Purchase Agreement dated as of January 16, 1998 among AMNEX, Inc.,
Victory Ventures LLC and Brae Group, Inc. In connection with the Stock
Purchase Agreement, the Company agreed to to register the shares of common
stock issued to Victory Ventures LLC and Brae Group, Inc. on a registration
statement to be filed by AMNEX, Inc. on prior to January 29, 1998, or other
similar registration statement prepared by AMNEX, Inc. within 30 days of
the closing.

18. Stock Purchase Agreement dated as of January 22, 1998 among AMNEX, Inc.
and Xxxxxxxx Xxxxxxxxx In connection with the Stock Purchase Agreement, the
Company agreed to to register the shares of common stock issued to Xxxxxxxx
Xxxxxxxxx on a registration statement to be filed by AMNEX, Inc. on prior
to January 29, 1998, or other similar registration statement prepared by
AMNEX, Inc. within 30 days of the closing.

19. Private Placement of 750 Shares of Series M Convertible Preferred Stock.

In connection with the Company's January 26, 1998 sale of 750 shares of
Series M Convertible Preferred Stock (the "Series M Stock"), the Company
agreed to file a registration statement covering Common Stock issuable upon
(i) conversion of the shares of Series M Stock and (ii) exercise of
warrants (a) to purchase 30,000 shares of Common Stock issued to Fourteen
Hill Capital, L.P. and (b) to purchase 15,000 shares of Common Stock issued
to Xxxxxx Unman Securities and to use its reasonable best efforts to cause
the registration statement to be declared effective by the SEC within 90
days of the closing.

(iii) Anti-dilution or price adjustment provisions contained in any
securities of the Company triggered by the issuance of the Common Stock of
the Company

None.

Preemptive rights, etc.

See Rights of First Refusal.

Schedule 3.9.1

Absence of Undisclosed Liabilities

On December 15, 1997, a billing dispute between the Company and AT&T regarding
the rates assessed pursuant to an agreement between Capital Network System, Inc.
("CNSI") and AT&T dated October 27, 1995 culminated in termination of certain
international telecommunications services provided by AT&T, including service to
Mexico. The Company is taking immediate action to restore service, with the
ultimate goal of entering into a service agreement which reflects current market
conditions and rates which are approximately 50% of rates charged by AT&T.
Although the Company has already restored service representing 50% of prior
revenues in Mexico, there is no guarantee the Company will be able to restore
service to the Caribbean, which represented approximately 10% of the total
international services previously provided by AT&T.

Additionally, the eventual resolution of the billing dispute between the Company
and AT&T may require the payment of past due sums in the amount of $1.2 million.
An additional sum of $3.6 million was the subject of dispute prior to the
acquisition of CNSI by the Company and is the subject of an indemnification
claim previously asserted.

Schedule 3.9.2

Tax Returns

The following tax returns have not yet been filed. The federal tax return is
currently being reviewed by Ernst & Young and the state tax returns will be
filed upon completion of the E&Y review. During 1996 estimated federal and state
payments were made and hence no material liability exists related to these
unfiled tax returns.

1996 Income Tax Returns

Amnex, Inc.

Florida
Federal
New York

CNSI and ANEI:

All states except the following states for which we are not required to file:

South Dakota Alaska
Delaware Washington
Wyoming

Crescent:

New Jersey Pennsylvania
New York

AHE:

Alabama New York
California Oregon
Colorado Pennsylvania
Georgia Tennessee
Idaho Utah
Kentucky Virginia
Louisiana
Massachusetts
Mississippi
New Jersey

NBE:

California
Texas

Schedule 3.10

No Material Adverse Change

The termination of certain telecommunication services by AT&T described more
fully in Schedule 3.7.1 may have adverse implications, although as of the daet
of this Agreement, it is the opinion of management of the Company that alternate
sources of service will result in increased profit margins.

Schedule 3.12

Litigation

1. D. Xxxx Xxxxxxx v. AMNEX, Inc. and American Network Exchange, Inc.,
Index No. 603399/97, Supreme Court of the State of New York

On July 2, 1997, D. Xxxx Xxxxxxx, the holder of a 50% equity interest in the
joint venture company formed by Community Network Services, Inc., MicroTel
Communications Corp. and the Company (which holds the remaining 50% equity
interest), filed suit against the Company in the Supreme Court of the state of
New York. The suit alleges, among other things, that the Company made certain
misrepresentations and committed certain breaches under the joint venture
agreement among the parties, and seeks rescission of such agreement,
compensatory damages in the sum of $10,000.00, punitive damages in the sum of
$25,000,000, and attorneys' fees. The Company filed a motion to dismiss or in
the alternative to stay the proceeding pending arbitration and also a reply to
the plaintiff's response. Plaintiff has offered to settle this matter and the
Company is evaluating the offer.

2. Keystone Corporation, Coastal Telecom Payphone Co., Inc., BEK Tel. Inc.,
Garden State Telephone Installation & Service Co., Inc., National Telecom
USA, Inc., National Telecom Hospitality USA, Inc. and Xxxxx X. Xxxx v.
AMNEX, Inc., American Network Exchange, Inc., Crescent Public
Communications Inc. and American Hotel Exchange, Inc., Index No. 97/604764,
Supreme Court o f the State of New York

On September 25, 1997, Xxxxx Xxxx and his affiliates, National Telecom USA,
Inc., The Keystone Corporation, Coastal Telecom Payphone Company, Inc., BEK Tel,
Inc., Garden State Telephone Installation & Service Co., Inc. and National
Telecom Hospitality USA (collectively "National") filed suit against the Company
and its subsidiaries, American Network Exchange, Inc. ("ANWI"), Crescent Public
Communications Inc. ("Crescent") and American Hotel Exchange, Inc. alleging
breaches of various contracts, negligence, misappropriation of trade secrets,
conversion of various assets, fraud, negligent misrepresentations and promissory
estoppel, and seeking rescission of certain claims, specific performance of
other claims, damages in the amount of $6,300,000, punitive damages and
attorneys' fees. On September 30, 1997, the Company and National reached an
agreement of settlement of certain of the claims. Pursuant to this settlement,
on September 30, 1997, the Company paid National $1,000,000 in cash and
delivered a note in the principal amount of $840,000 (the "National Note").
Thereafter, the Company filed a motion to dismiss and compel arbitration or, in
the alternative, to stay pending arbitration and also a reply to plaintiffs'
response.

The plaintiffs also attempted to obtain a temporary restraining order and then a
permanent injunction to stop the Company from (i) reducing temporarily their
weekly payments to reflect accrued billing and related interest costs associated
with their traffic and (ii) increasing the charge for the underlying unbundled
services the Company provides for them. The TRO was denied after oral argument.
To date, no decision has been made on the permanent injunction.

3. Xxxxxx X. Xxxxxxx vs. AMNEX, Inc. and Capital Network System, Inc.
("CNSI"), No. 97-07955, District Court of Xxxxxx County, Texas

In connection with the Company's June 1996 acquisition of Capital Network
System, Inc. ("CNSI"), CNSI issued a promissory note in favor of Xxxxxx X.
Xxxxxxx (the "Xxxxxxx Note"), a principal shareholder of the Company, in the
principal amount of $1,197,700 payable on July 31, 1997, with interest due on
the unpaid principal balance at a rate of 10.5% per annum. On July 11, 1997, Xx.
Xxxxxxx filed this suit. He assets several causes of action against the Company,
including enforcement of an alleged settlement agreement regarding
indemnification claims, and seeks damages in the amount of the principal and
interest due under the Xxxxxxx Note, attorneys' fees and exemplary damages in an
unstated amount. The causes of action asserted by Xx. Xxxxxxx against CNSI
relate to monies allegedly due under a consulting agreement, and damages claimed
include attorneys' fees. The Company is planning to appeal the denial of its
motion to compel arbitration and plea to xxxxx the action and has asserted as an
affirmative defense a fraud claim against Xx. Xxxxxxx.

4. Derivative Claims Threatened by Xxxxxx X. Xxxxxxx

On August 11, 1997, the Company received a letter from counsel to Xx. Xxxxxxx
which demanded that the Board of Directors conduct an investigation into certain
matters, specifically (i) the propriety of certain transactions with Xx. Xxxxxx
and (ii) possible mismanagement of the Company. Counsel to Xx. Xxxxxxx demanded
that suit be brought against any officer or Director of the Company for
wrongdoing, fraud, breach of fiduciary duty, self dealing, gross mismanagement
or under any other theory of liability and further stated that if his demand is
refused, Xx. Xxxxxxx will take appropriate action, including possibly a
shareholder's derivative action. On August 29, 1997, the Company advised counsel
to Xx. Xxxxxxx that the outside Directors of the Company have been requested to
investigate the assertions made.

5. Arbitration Award

A number of disputes between the Company and Xxxx Xxxx, a former employee, were
decided by an arbitration panel on December 8, 1997. The Company expects that
Xx. Xxxx will take steps to have his award in the amount of $138,704.11
confirmed by a court.

6. Dolphin USA, Inc. v. Capital Network System, Inc. and American Network
Exchange, Inc., Case Xx. 00-00000, Xxxxxxxx Xxxxx xx Xxxxxx Xxxxxx, Xxxxx

On September 30, 1996, Dolphin USA, Inc. ("Dolphin") brought suit against the
Company's affiliates ANEI and CNSI. The suit is based primarily on an alleged
breach of contract for the provision of long distance service. Dolphin has
requested damages in the amount of approximately $2,000,000. ANEI and CNSI have
counterclaimed for the $30,000 unpaid balance of a promissory note, which claim
is undisputed. The parties are currently engaged in discovery and the case is
currently scheduled for mediation in early February 1998 and trial in April
1998.

7. Midcom Communications, Inc. v. Fulfillment Enterprises, Inc. and Capital
Network System, Inc., Arbitration Hearings, Case No. 75 199 257 96

On July 24, 1997, Midcom Communications, Inc. filed a lawsuit against
Fulfillment Enterprises, Inc. ("FEI"), a CNSI subsidiary which AMNEX did not
acquire, and CNSI. Midcom alleges CNSI is jointly and severally liable for
monies due for services provided to FEI by Midcom. Midcom claims that FEI
assigned all of its obligations under a contract between Midcom and FEI to CNSI,
an alleged "affiliate" of FEI, or, alternatively, that FEI and CNSI were a
single business enterprise thereby making CNSI liable for the outstanding
invoices, totaling about $200,000.00. CNSI has filed a general denial.

8. Scorpion Enterprises, Inc. d/b/a the Wine Cellar, USA Car Rental, Auto
Security & Sound and LA Dam Limo v. Coin-Tel Communications, National
Telecom USA, Inc., Coastal Telecom Payphone, Inc., Xxxx Xxx, Xxxxxxx Xxx,
ABC Company and DEF Corp., Docket No. UNN-L-5628-97, Superior Court of
New Jersey Law Division: Union County

Crescent acquired the assets of Coastal Telecom Payphone, Inc. ("Coastal") in
1996. This is a suit for recovery of back commissions in the total amount of
$41,000.00 allegedly owed by Coastal. The alleged liability both predates and
postdates the closing of the Coastal/Crescent transactions. To date, the
Company has not been properly served with this lawsuit.

9. Xxxxx Xxxxx, on his own behalf, and on behalf of all persons similarly
situated, and on behalf of the general public v. Asia Pacific Telecom,
National Business Exchange, Inc., Pacific Xxxx, MCI Communications
Corporation and Docs I through XX. No. 985470, Superior Court of the State
of California, County of San Francisco.

NBE provides billing and collection services for various telecommunications
companies based on information provided by those companies. This is a class
action suit for injunction, restitution and other relief filed against NBE and
certain other parties concerning the wrongful billing of charges (a total of
$59.85) for Internet services, which charges the Plaintiff states were not
properly authorized. Plaintiff alleges a violation of the Consumer Legal
Remedies Act, unfair business practices, intentional misrepresentation, and
negligent misrepresentation. The only prayer for judgment affecting the Company
is that NBE be enjoined from seeking to collect monies from members of the class
on behalf of Asia Pacific, its former client.

10. Xxxxx Xxxxxx, as assignee for Zankle Worldwide Telecom Group, Inc.
(d/b/a Mr. Gickles, Inc.) v. American Network Exchange, Inc., Case No.
1309 C.D. 1996, Court of Common Pleas of XxXxxx County, Pennsylvania,
Civil Division

ANEI entered into a contract to provide telecommunications services with a
company doing business as Mr. Gickles, Inc. The Company's fraud department
determined that there were massive fraud on the account. The contractual
relationship was terminated and no additional commissions were paid. Some years

later, Xxxxx Xxxxxx, a former office of Mr. Gickles, filed suit against ANEI in
Pennsylvania. The initial claim made in the lawsuit was for $6,883.94.
However, Xx. Xxxxxx has now increased his claim to $1 million. Eventually, the
Company prevailed on a motion to dismiss. Xx. Xxxxxx has appeal the dismissal.

11. Pennsylvania Public Commission ("PUC"), Informan Investigation Number
97.0145

In the third quarter of 1997, the PUC initiated an informan investigation into
two limited aspects of the Company's operator services operations in that state.
In response, ANEI has provided certain information and voluntarily ceased
charging a set use fee on certain local exchange carrier-owned payphones. Given
its voluntary actions, the Company does not expect that resolution of the
investigation will have a material adverse effect on its operations.

12. Default

Letter dated January 13, 1998 from Xxxxxxxxxx, XxXxxxx & Xxxxx, P.C., counsel to
the property manager to AMNEX, Inc., as tenant, in regard to leased premises
located at 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. (the "Washington Site"). The
letter states that a suit has been instituted in the Landlord and Tenant Branch
of the Civil Division of the Superior Court of the District of Columbia. AMNEX
no longer maintains assets or operations at the Washington Site. On an
accelerated basis, the total sum of payments due under the lease is
approximately $15,00.

13. Summit Capital Corp. v Capital Network, Inc. No. CV98-00188, Superior
Court of the State of Arizona

The suit is for all default remedies available under an equipment lease,
including the sum of $236,148 for lease payments on an accelerated basis

Schedule 3.13.1

Government Approvals

See item 11 on Schedule 3.12

Schedule 3.19

Environmental Matters

None.

Schedule 3.20

Title to Property

1,000 shares of common stock of Capital Network System, Inc. were pledged to
Sirrom Capital Corporation on June 28, 1996 as security for a $2,000,000 loan.

EXHIBIT 2.1

SCHEDULE OF PURCHASERS

---------------------- -------------------- --------------------- --------------------- --------------------
Date of Agreement Shares Purchased Price per Share Aggregate Purchase
Investor Price
---------------------- -------------------- --------------------- --------------------- --------------------

---------------------- -------------------- --------------------- --------------------- --------------------
Granite Associates, January 14, 1998 1,363,637 $1.10 $1,500,000
L.P.
---------------------- -------------------- --------------------- --------------------- --------------------
Victory Ventures LLC January 16, 1998 1,163,794 $1.16 $1,350,000

Brea Group, Inc. 129,310 $150,000
---------------------- -------------------- --------------------- --------------------- --------------------
Xxxxxxxx Xxxxxxxxx January 22, 1998 862,069 $1.16 $1,000,000
---------------------- -------------------- --------------------- --------------------- --------------------
AMN Investments, January 26, 1998 862,069 $1.16 $1,000,000
L.L.C.
---------------------- -------------------- --------------------- --------------------- --------------------

EXHIBIT 2.4

OPINION OF COMPANY COUNSEL
January __, 1998

Investor
Address

Re: Securities Purchase Agreement, dated January __, 1998, among
AMNEX, Inc. and the Investor named therein.

Ladies and Gentlemen:

We have acted as special counsel for AMNEX, Inc., a New York
corporation (the "Company"), in connection with the transactions contemplated by
the Stock Purchase Agreement, dated January __, 1998 among the Company and the
investors named therein (the "Stock Purchase Agreement"). This opinion is
furnished to you pursuant to Section 6.3 of the Stock Purchase Agreement.

We have examined originals or copies of the Stock Purchase Agreement.
Unless otherwise defined herein, terms defined in the Stock Purchase Agreement
shall have the same meanings herein.

The opinions hereinafter expressed are subject to the following further
qualifications and exceptions:

(1) The effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, including, without limitation, laws relating to fraudulent
transfers or conveyances, preferences and equitable subordination.

(2) Limitations imposed by general principles of equity upon the
availability of equitable remedies or the enforcement of provisions of the Stock
Purchase Agreement, and the effect of judicial decisions which have held that
certain provisions are unenforceable where their enforcement would violate the
implied covenant of good faith and fair dealing, or would be commercially
unreasonable.

(3) We express no opinion as to the effect on the opinions expressed
herein of (a) the compliance or non-compliance of any party to the Stock
Purchase Agreement (other than the Company) with any laws or regulations
applicable to it, or (b) the legal or regulatory status or the nature of the
business of any such party.

(4) We express no opinion as to compliance by the Company with any:
(i) state securities law; (ii) antitrust law; (iii) patent law; (iv)

environmental law; and (v) bankruptcy law.

(5) The effect of judicial decisions which may permit the introduction
of extrinsic evidence to supplement the terms of the Documents or to aid in the
interpretation of the Stock Purchase Agreement.

(6) The enforceability of provisions of the Stock Purchase providing
for indemnification or contribution, to the extent such indemnification or
contribution is against public policy.

(7) The enforceability of provisions of the Stock Purchase Agreement
imposing or which could be construed as effectively imposing a penalty.

(8) The enforceability of any provision of the Stock Purchase
Agreement which purports to establish a particular court as the forum for the
adjudication of any controversy relating to the Stock Purchase Agreement.

Based upon and subject to the foregoing, we are of the opinion that:

(a) The Company is a corporation validly existing as a corporation and
in good standing under the laws of the State of New York, with full corporate
power and authority to conduct its business as described in the Company's Annual
Report on Form 10-K for its fiscal year ended December 31, 1996, as amended, and
is duly qualified as a foreign corporation to do business in each jurisdiction
in which the failure to so qualify would have a Material Adverse Effect.

(b) As of the date hereof, the authorized capital stock, of the
Company consists of 70,000,000 shares of Common Stock, $.001 par value, of which
________ shares are issued and outstanding and (b) 5,000,000 shares of Preferred
Stock, $.001 par value, of which ___________ shares are issued and outstanding.
All of such outstanding shares have been validly issued and are fully paid and
nonassessable. No shares of Common Stock or Preferred Stock are subject to
preemptive rights or any other similar rights of the stockholders of the Company
pursuant to any agreement by which the Company is bound. Except as disclosed in
in the Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q,
as filed with the Securities and Exchange Commission, or as set forth on
Schedule 3.2 to the Stock Purchase Agreement, (x) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its subsidiaries, or
arrangements by which the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
subsidiaries except as disclosed in the Securities Purchase Agreement, and (y)
there are no agreements or arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of its or their securities under
the 1933 Act (except as set forth in the Stock Purchase Agreement).

ended December 31, 1996 and Quarterly Reports on Form 10-Q for the periods ended
June 30, 1997 and September 30, 1997, as the same may have been amended, or as
set forth on Schedule 3.12 to the Securities Purchase Agreement, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body or any governmental agency or self-regulatory organization
pending or threatened against or affecting the Company or any of its
subsidiaries, wherein an unfavorable decision, ruling or finding would have a
Material Adverse Effect or which would adversely affect the validity or
enforceability of or the authority or ability of the Company to perform its
obligations under the Stock Purchase Agreement.

(d) The execution, delivery and performance of and compliance with the
Documents and the issuance of the Shares have not resulted and will not result
in any violation of, conflict with, or constitute a default under (or an event
which with the passage of time or the giving of notice or both would constitute
a default under), any contract, agreement, instrument, judgment or decree
binding upon the Company, which, individually or in the aggregate, would have a
Material Adverse Effect.

(e) The Company has the corporate power and authority to execute and
deliver, and to perform and observe the provisions of, the Stock Purchase
Agreement, and to issue, sell and deliver the Shares.

(f) The Stock Purchase Agreement has been duly authorized, executed
and delivered by the Company. The Stock Purchase Agreement constitutes valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms.

(g) There are no preemptive rights to subscribe for or purchase any
Preferred Stock or Common Stock pursuant to the Company's Certificate of
Incorporation or Bylaws.

(h) The Shares have each been duly authorized. Upon payment and
delivery in accordance with the Securities Purchase Agreement, the Shares will
be validly issued, fully paid and nonassessable.

(i) The Company meets the eligibility requirements for the use of Form
S-3 for the registration of the Shares.

(l) The execution, delivery and performance of the Stock Purchase
Agreement by the Company are not in violation of its certificate of
incorporation or by-laws.

(m) The sale and issuance of the Shares in accordance with the terms
of the Stock Purchase Agreement will not violate any federal or New York statute
or regulation applicable to the Company.

(n) No registration with, consent or approval of, notice to, or other
action by, any governmental entity is required on the part of the Company for
the execution, delivery or performance by the Company of the Stock Purchase
Agreement, or for the issuance and sale by the Company of the Shares, or, if
required, such registration has been made, such consent or

approval has been obtained, such notice has been given or such other appropriate
action has been taken.

(o) The offering and sale of the Shares is exempt from registration under the
Securities Act of 1933, as amended.

Very truly yours,

EXHIBIT 4.10

REGISTRATION RIGHTS AGREEMENT

See Exhibit 10.2 to the Report on Form 10-K of which this Exhibit 10.5 forms a
part for the Registration Rigths Agreement

EXHIBIT 7.6

ADDRESSES FOR NOTICES

AMNEX, Inc.

0 Xxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000

Granite Associates, L.P.

0 Xxxxxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, XX 00000

Victory Ventures L.L.C.

000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000

Brea Group, Inc.

x/x Xxxxxxx Xxxxxxxx X.X.X.
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000

Xxxxxxxx Xxxxxxxxx

000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000

AMN Investments, L.L.C.

Xxx Xxxxxxx Xxxx
Xxxxxxx, XX 00000

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Table of Contents

Exhibit 10.5 AMNEX, Inc.

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