LEASE AGREEMENT


     THIS  LEASE is made as of the 2nd day of  January,  1998,  between  BC & HC
Properties, LLC having an address at 3832 Falls Road, Baltimore,  Maryland 21211
("Landlord"), and Coastal Office Products, Inc. ("Tenant").

                                    ARTICLE 1
                               DEMISE OF PREMISES

Section 1.01. Demise of Premises.

     Landlord,  for  and  in  consideration  of the  payment  of  the  rent  and
performance of the covenants and agreements hereinafter mentioned, hereby leases
to Tenant and Tenant hereby leases from Landlord the premises  consisting of (i)
the parcels of land known as 3830,  3832,  3834 and 3838 Falls Road,  Baltimore,
Maryland 21211, which are more particularly  described in attached Schedule "A";
(ii) all improvements  constructed  upon such parcels;  and (iii) all easements,
rights,  and appurtenances  relating to such parcels  (hereinafter  collectively
called the "Premises"),  for the term of five (5) years beginning on the 1st day
of  January,  1998  (the  "Commencement  Date"),  and  ending on the 31st day of
December, 2002 (hereinafter called the "Original Term"). Section 1.02. Extension
Term.  Provided  that there has not been an event of and  provided  that  Tenant
gives written  notice  exercising the option within one hundred and eighty (180)
days  before the then  current  term  expires,  Tenant  shall have the option to
extend  this Lease for a period of two (2) years  (the  period of  extension  is
hereinafter  called an "Extension  Term" and the Original Term together with any
Extension Term(s) is hereinafter called the "Term").


                                      RENT
         Section 2.01.  Annual Rent.

     (a) The  Annual  Rent for the  Original  Term shall be ONE  HUNDRED  THIRTY
THOUSAND DOLLARS  ($130,000.00),  payable in equal monthly installments,  of TEN
THOUSAND  EIGHT  HUNDRED  AND  THIRTY-THREE   DOLLARS  and  THIRTY-THREE   CENTS
($10,833.33).  The rent  payable  under the  provisions  of this Article 2.01 is
hereinafter called "Annual Rent."

     (b) The Annual Rent for the Extension Term shall continue to be ONE HUNDRED
THIRTY THOUSAND DOLLARS ($130,000.00), payable in equal monthly installments, of
TEN THOUSAND  EIGHT  HUNDRED AND  THIRTY-THREE  DOLLARS and  THIRTY-THREE  CENTS
($10,833.33).  Section 2.02. No Set-Off. Subject only to that certain "Indemnity
Agreement"  in  favor  of  Manchester  and  Coastal  executed  contemporaneously
herewith,  Tenant  covenants,  without any previous  demand therefor and without
deduction,  set-off,  recoupment,  or counter  claim,  to pay the Annual Rent to
Landlord on the first (1st) day of each  calender  month during the Term. If the
Term commences on a day other than the first (1st) day of a calender month,  the
Annual Rent for the period from the Commencement  Date to the first (1st) day of
the  first   (1st)  full   calender   month  of  the  Term  shall  be   prorated
proportionately and shall be payable on the Commencement Date, provided further,
however,  that in the event that Landlord shall  transfer the premises,  then in
that  event  Tenant  shall  have the right of set off as to  obligations  of the
Landlord expressly set forth herein.

                                        1
<PAGE>
Section 2.03.  Additional Rent.

     Whenever  under the terms of this Lease any sum of money is  required to be
paid by Tenant in addition to the Annual  Rent herein  reserved,  whether or not
such  sum is  designated  as  "Additional  Rent"  or  provision  is made for the
collection of such sum as "Additional  Rent," such sum shall,  nevertheless,  be
deemed to be "Additional Rent," and shall be collectible as rent.

Section 2.04.  Late Payment of Rent.

     In the  event  that  any  monthly  or other  installment  of  Annual  Rent,
Additional Rent, or any other monetary sum due Landlord is past due by more than
fifteen (15) days, Tenant shall pay to Landlord as Additional Rent a late charge
equal to five percent (5%) of the unpaid Annual Rent,  Additional  Rent or other
sum to compensate  Landlord for its  additional  expenses  associated  with late
payment.

         Section 2.05.  Payment.

     All rent payable and all statements deliverable by Tenant to Landlord under
this  Lease  shall  be paid  and  delivered  to  Landlord  at 3832  Falls  Road,
Baltimore,  Maryland  21211,  or to such other person,  firm or entity and/or at
such other  address as Landlord  shall  designate by written  notice.  ARTICLE 3
TAXES AND INSURANCE  Section 3.01. Taxes. (a) Tenant shall, at its sole expense,
pay all real estate taxes,  and ad valorem  taxes,  whether  general or special,
ordinary or extraordinary,  and all water rents, sewer charges,  special benefit
assessments,  including without  limitation,  front foot benefit charges and all
other governmental impositions  or charges of every kind and nature  whatsoever,
including  without  limitation  a tax or capital  levy on rents,  whether or not
wholly or partially in lieu of an increase in taxes or other  charges  mentioned
herein, imposed,  levied, assessed or charged upon the Premises ("Taxes") by any
governmental unit having taxing powers (the "Taxing Authority"). Within ten (10)
days after the Commencement  Date pursuant to Landlord's bill to Tenant,  Tenant
shall pay Landlord Taxes for the partial tax year beginning on the  Commencement
Date and ending on the last day of the last month of the then  current tax year.
Thereafter,  within  thirty  (30) days after  receipt by  Landlord of a tax bill
during the Term,  Landlord shall deliver to Tenant a bill for Taxes  accompanied
by the tax bill from the Taxing  Authority.  Tenant shall pay Landlord in a lump
sum within  thirty (30) days after  receipt of  Landlord's  bill.  Taxes for the
partial tax year at the end of the Term, if any,  shall be adjusted by Landlord,
if not  previously  done  within  sixty (60) days after the end of the Term,  at
which time Landlord shall refund to Tenant any overpayment of Taxes.

     (b) Any Taxes which are being  contested by Landlord shall  nevertheless be
included for purposes of the  computation  of the liability of Tenant for Taxes;
provided,  however,  that in the  event the  Taxes  are  reduced  as a result of
Landlord's  protest,  Landlord agrees to reimburse Tenant an amount equal to the
reduction in Taxes,  less reasonable  expenses incurred by Landlord in obtaining
the reduction in Taxes. Landlord shall have no obligation to contest,  object or
litigate  the levying or  imposition  of any Taxes and may  settle,  compromise,
consent to, waive or otherwise determine in its discretion any Taxes without the
consent or approval of Tenant.

Section 3.02.  Insurance Costs.

     (a) Landlord will keep in force with  companies  licensed to do business in
the state  where the  Premises  is  located  and which  have a rating of [B+] or
better from Best's Key

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<PAGE>
Rating  Guide  and  Supplemental  Service,  Property,  Casualty  (or  comparable
insurance rating service), at Landlord's initial expense at all times during the
Term of this Lease and during such other times as Tenant  occupies  the Premises
or any part thereof:

     (i) Commercial  general liability  insurance written on an occurrence basis
with respect to the Building,  the Common  Areas,  and the Property with minimum
combined  single  limits of One Million and 00/100  ($1,000,000.00)  Dollars per
occurrence and in the aggregate.  Such liability  insurance  shall, in addition,
extend through  contractual  liability  insurance,  to any liability of Landlord
arising  out of the  indemnities  provided  herein  and shall be  subject to the
waiver of subrogation  specified  therein.  Such liability  insurance shall also
include broad form endorsement coverage including personal injury coverage.

     (ii) All risk casualty  insurance with  replacement  cost  endorsement  and
without  deductible  in excess of One  Thousand and 00/100  ($1,000.00)  Dollars
covering the Premises, the Building,  and the Property,  including all leasehold
improvements,  in an  amount  equal  to  the  full  replacement  value  thereof,
exclusive of the land. The coverage shall include boiler and machinery coverage,
where  applicable.  All  proceeds  of  insurance  shall be used to  restore  the
Premises,  the  Building,  and the Property to the  condition in which they were
prior to the occurrence of the loss.

     (b) On or before the date of this Lease,  landlord will deposit with Tenant
copies of policies of insurance  required by the  provisions  of this Section or
certificates thereof satisfactory in form and substance to Tenant, together with
satisfactory  evidence  of the  payment  of the  required  premium  or  premiums
thereof.  Failure to deposit  such  policies  shall not relieve  Landlord of its
obligations  to obtain and keep in force  insurance  coverage  required  by this
Lease.

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<PAGE>
The insurance required hereby may be maintained by means of a policy or policies
of blanket insurance so long as the provisions of this lease are fully satisfied
and the required amounts are specifically allocated to the Premises.

     (c) All  policies of  insurance  required to be carried by Landlord by this
Section   hereof  shall  provide  that  the  policy  shall  not  be  subject  to
cancellation,  termination or change except after thirty (30) days prior written
notice to  Tenant,  and all such  policies  shall name  Tenant as an  additional
insured as its interest may appear.

     (d) If Landlord  shall not comply with its covenants  made in this Section,
Tenant may (but shall not be obligated  to) cause  insurance as aforesaid too be
issued,  and in such event Landlord  agrees to reimburse  Tenant for the premium
for such insurance to the extent,  if any, that the policy insures more than the
demised premises,  promptly upon Tenant's demand, and if Landlord does not do so
Tenant  may  subtract  such  amount  from  the next  installment(s)  of rent due
hereunder. (e) If for any reason Landlord fails to provide and keep in force any
or all of the insurance  policies set forth in this Section,  then in such event
Landlord shall  indemnify and hold Tenant  harmless  against any and all claims,
actions,  damages,  liability  and  expense  (including,  but  not  limited  to,
attorney's  fees)  which  would  have been  covered  by such  insurance.  Tenant
acknowledges  receipt of a copy of Policy  BPP1776945,  effective 8/7/97 through
8/7/98,  which Policy is in compliance with these conditions.  (f) Tenant shall,
at its sole expense, pay the Insurance Cost (as hereinafter defined). "Insurance
Cost" shall mean actual, direct expenses paid by Landlord to obtain and maintain
Landlord's public liability,  fire, casualty, loss of rental value, and extended
coverage

                                       -4-
<PAGE>
property  damage  insurances,  maintained to insure Landlord with respect to the
Premises,  including  all  improvements  thereon,  and such other  insurance  as
Landlord shall reasonably deem appropriate,  all coverages to be in such amounts
as Landlord shall reasonably deem appropriate, provided that the amounts of such
coverage as set forth by Section  3.02 (a).  (g) Unless paid by Tenant  prior to
the execution of this Lease,  within ten (10) days after the  Commencement  Date
pursuant to Landlord's  bill to Tenant,  Tenant shall pay Landlord the Insurance
Costs  for  the  partial  annual  insurance  billing  period  beginning  on  the
Commencement  Date and  ending  on the  last  day of the last  month of the then
current billing period. For each succeeding  insurance billing period during the
Term, Landlord shall deliver to Tenant a bill for the Insurance Cost accompanied
by the bill from the insurance company.  Tenant shall pay Landlord in a lump sum
within thirty (30) days after  receipt of  Landlord's  bill. In the event Tenant
fails to pay in a timely  manner any amount for the  Insurance  Cost as required
under this Section,  Landlord shall have the right,  but not the obligation,  to
pay the  Insurance  Cost.  Any amount so paid by Landlord  shall be deemed to be
owing by Tenant to  Landlord  and due and  payable  within  five (5) days  after
demand.  Upon Tenant's  written  demand,  Landlord  shall provide Tenant with an
itemized  schedule  evidencing  the  Insurance  Cost  together  with  copies  of
insurance certificates and evidence of payment.  Insurance Costs for the partial
annual  insurance  period at the end of the Term,  if any,  shall be adjusted by
Landlord,  if not  previously  done within  sixty (60) days after the end of the
Term, at which time Landlord shall refund to Tenant any overpayment of Insurance
Costs.



                                                        -5-
<PAGE>
                                    ARTICLE 4
                                    UTILITIES
Section 4.01. Use of Utilities.

     Tenant  covenants  and  agrees  that at all times  its use of  water,  gas,
electricity and telephone  services,  and other utilities  located on or serving
the Premises  shall never exceed the capacity of the mains,  feeders,  ducts and
conduits bringing the same to the premises;  provided,  however, that Tenant may
increase the capacity of the mains,  feeders,  ducts and conduits if Tenant pays
for and  performs all  necessary  work  therefor,  subject to  Landlord's  prior
written  approval,  which  shall not be  unreasonably  withheld.  Section  4.02.
Payment for  Utilities.  Tenant  shall make  arrangements  with each utility and
public body to provide,  in  Tenant's  name,  gas,  electricity,  water,  sewer,
telephone, heat, air conditioning and other utilities necessary for Tenant's use
of the  Premises.  Tenant  shall pay directly to the entity  furnishing  utility
service the cost of all service  connection  fees and the cost of all  utilities
consumed  throughout  the  Term.  In the event  Tenant  fails to pay in a timely
manner any sum required under this Section,  Landlord shall have the right,  but
not the  obligation,  to pay any such sum. Any sum so paid by Landlord  shall be
deemed to be owing by Tenant to  Landlord  and due and  payable  within five (5)
days after demand.  Tenant's  obligation  for the payments of costs incurred for
utilities  which serve the Premises prior to the termination of this Lease shall
survive the termination of this Lease.



                                                        -6-
<PAGE>
Section 4.03. Interruption of Utilities.

     Landlord  shall  not  be  liable  to  Tenant  for  damages  because  of any
interruptions in utility  services,  and Tenant shall not be entitled to claim a
constructive  eviction because of such an interruption.  If utility services are
interrupted, Landlord shall proceed with reasonable diligence to restore service
to the extent that it is within  Landlord's  control and obligations  under this
Lease.  ARTICLE 5 USE AND  COMPLIANCE  WITH LAWS Section  5.01.  Permitted  Use.
Tenant shall not use or permit the Premises, or any part thereof, to be used for
any purposes other than business or professional offices. Furthermore, no use of
the  Premises  shall be made or permitted to be made that shall result in: (i) a
waste of the Premises or any part thereof; (ii) a public or private nuisance; or
(iii) an improper,  unlawful,  or objectionable use, as reasonably determined by
Landlord.  Except as otherwise  provided herein,  Tenant shall comply at its own
expense with all restrictive covenants and governmental regulations and statutes
affecting the Premises either now or in the future,  throughout the Term. Except
as otherwise  provided  herein,  Tenant shall be  responsible  for obtaining and
maintaining  all licenses and permits  respecting  Tenant's use and occupancy of
the premises, and shall pay all minor privilege charges,  occupancy permit fees,
license  fees or other  charges or taxes which are imposed on or with respect to
the Premises or the use and occupancy of the Premises.  Section 5.02. Compliance
with Laws.

                                                        -7-
<PAGE>
     Except as provided for herein,  Tenant, at Tenant's  expense,  shall comply
with all  laws,  ordinances,  and  regulations  of  federal,  state,  and  local
authorities, including but not limited to the Americans with Disabilities Act of
1990 and Section 5 of the Maryland State Human Relations Commission Act, as they
relate to the Premises and Tenant's use of the  Premises,  and with any recorded
covenants,  conditions,  and  restrictions,   regardless  of  when  they  become
effective,  including,  without limitation,  all applicable federal,  state, and
local laws,  ordinances,  or  regulations  pertaining to air and water  quality,
Hazardous  Material,  waste  disposal,  air emissions,  and other  environmental
matters, all zoning and other land use matters,  utility availability,  and with
any direction of any public  officer or officers,  pursuant to law,  which shall
impose any duty upon Landlord or Tenant with respect to the use or occupation of
the  Premises.  Section  5.03.  Landlord's  Compliance  with  Laws.  (a)  If any
alterations   are  required  to  be  made  to  the  Premises  or  the  leasehold
improvements due to Legal Requirements because the same were in violation of any
Legal  Requirements  existing on the  Commencement  Date,  or if, as a result of
Landlord undertaking any alterations,  repairs,  maintenance or other activities
in the  Premises,  alterations  are  required to be made to the  Premises due to
Legal  Requirements,  then Landlord shall make such alterations at its sole cost
and expense; and Landlord shall take all reasonable steps to minimize disruption
to Tenant while making such alterations.  Subject to Landlord's  obligations set
forth above in the previous sentence, if any alterations are required to be made
to the Premises due to a change in Legal Requirements  occurring on or after the
commencement Date (and not in connection with alterations,  repairs, maintenance
or other activities on the Premises undertaken by Landlord), then Landlord shall
make such  alterations as aforesaid,  provided that the cost of such alterations
shall

                                                       -8-
<PAGE>

be amortized over their useful life and Tenant shall only be responsible for the
payment of a portion of such replacement  cost. The Tenant's portion shall equal
a fraction of the total  replacement  cost,  the numerator of which shall be the
number of years (including  fractional parts of years) remaining in the Term and
the denominator of which shall equal to the  amortization  term.  Landlord shall
pay the  remainder  of such costs.  Tenant's  share shall be paid to Landlord in
consecutive and equal monthly installments over the remainder of the lease Term.
If, as a result of Tenant undertaking any alterations,  repairs,  maintenance to
other  activities in or to the Premises,  alterations are required to be made to
the Premises due to Legal Requirements,  then Tenant shall make such alterations
at Tenant's sole cost and expense. (b) Within ten (10) days after receipt,  each
party shall advise the other,  in writing,  and provide the other with a copy of
(as applicable),  any notices alleging violation of Legal Requirements  relating
to any portion of the Premises or of the Premises; any claims made or threatened
in writing regarding  noncompliance  with Legal Requirements and relating to any
portion of the Premises or of the Premises;  or any  governmental  or regulatory
actions or investigations  instituted or threatened regarding noncompliance with
the ADA and relating to any portion of the Premises or the Premises. (c) As used
in  this  Section,  "Legal  Requirements"  means  environmental,   air  quality,
wetlands,  shoreline,  flood  plan,  zoning,  planning,  subdivision,  building,
health, labor,  discrimination,  fire, traffic, safety and other governmental or
regulatory rules, laws, ordinances,  statutes, codes and requirements (including
any   administrative,   judicial  or  similar   interpretations  or  rulings  or
legislative  clarifications  that may be made  after any point in time but which
relate  to any of the same as they  exist at such  point  in  time),  including,
without limitation, the Fair Housing

                                                       -9-
<PAGE>
Act of 1968 (as amended) and the Americans with Disabilities Act of 1990 and the
Accessability Guidelines promulgated with respect thereto ("ADA").

Section 5.04. Effect on Insurance.

     Tenant  will not do,  omit to do, or suffer to be done or keep or suffer to
be kept  anything  in,  upon,  or about the  Premises  which  will  violate  the
provisions of Landlord's  policies  insuring the Premises against loss or damage
by fire or other  hazards  (including,  but not limited to,  public  liability),
which will  adversely  affect  Landlord's  fire or liability  insurance  premium
rating or which will prevent  Landlord from procuring such policies in companies
acceptable to Landlord.  If anything done, omitted to be done, or suffered to be
done by Tenant,  or kept or  suffered by Tenant to be kept in, upon or about the
Premises shall cause the premium rate of fire or other insurance on the Premises
in companies  acceptable to Landlord to be increased beyond the established rate
from time to time fixed by the appropriate  underwriters  with regard to the use
of the Premises for the  purposes  permitted  under this Lease or for the use or
uses  being  made  thereof,  Tenant  will pay the  amount  of such  increase  as
Additional  Rent upon  Landlord's  demand and will  thereafter pay the amount of
such  increase,  as the same may vary from time to time,  with  respect to every
premium  relating to coverage of the Premises during a period falling within the
Term  of  this  Lease  until  such  increase  is  eliminated.  In  addition,  if
applicable,  Landlord may at its option  rectify the  condition  existing on the
Premises  which is causing or is a contributing  cause of the increased  premium
rate in the event that the Tenant  should fail to do so, and Landlord may charge
the cost of such action to Tenant as Additional Rent,  payable on demand,  which
shall accrue from the date that Landlord became  obligated for the costs of such
action. In determining whether increased premiums are the result of Tenant's use
of the Premises, a schedule, issued by

                                                       -10-
<PAGE>
the organization setting the insurance rate on the Premises, showing the various
components of such rate,  shall be conclusive  evidence of the several items and
charges that make up the fire insurance premium on the Premises.

Section 5.05 Environmental Conditions.

     (a)  Definitions.  "Toxic or  Hazardous  Substances"  shall be  interpreted
broadly to include,  but not be limited to, any  material or  substance  that is
defined or classified  under  federal,  state or local laws as: (a) a "hazardous
substance" pursuant to Section 101 of the Comprehensive  Environmental Response,
Compensation and Liability Act, 42 U.S.C.  Section 9601(14),  Section 311 of the
Federal  Water  Pollution  Control  Act,  33  U.S.C.  Section  1321,  as  now or
thereafter amended;  (b) a "hazardous waste" pursuant to Section 1004 or Section
3001 of the Resource  Conservation and Recovery Act, 42 U.S.C.  Section 6903, 42
U.S.C.  Section 6921, as now or hereafter  amended;  (c) a toxic pollutant under
Section 307(1)(a) of the Federal Water Pollution Contract Act, 33 U.S.C. Section
1317(1)(a);  (d) a "hazardous air pollutant"  under Section 112 of the Clean Air
Act, 42 U.S.C.  Section  7412,  as now or  hereafter  amended;  (e) a "hazardous
material" under the Hazardous  Material  Transportation  Act, 49 U.S.C.  Section
1802(2),  as now or  hereafter  amended;  (f)  toxic or  hazardous  pursuant  to
regulations  promulgated now or hereafter under the aforementioned  laws; or (g)
presenting  a risk to human  health or the  environment  under other  applicable
federal,  state or local laws,  ordinances or  regulations,  as now or as may be
passed or promulgated in the future.  "Toxic or Hazardous Substances" shall also
mean any substance  that after release into the  environment  and upon exposure,
ingestion,  inhalation or assimilation,  either directly from the environment or
directly by ingestion through food chains, will or may reasonably be anticipated
to cause death, disease, behavior abnormalities,

                                                       -11-
<PAGE>
cancer or genetic  abnormalities.  "Toxic or Hazardous Substances"  specifically
includes,  but is not limited to,  asbestos,  polychorinated  biphenyls  (PCBs),
petroleum and petroleum based  derivatives and urea  formaldehyde.  "Appropriate
Authorities" means all federal, state or county governments, or the departments,
commissions,   boards  and  officers  thereof  having   jurisdiction   over  the
administration  and enforcement of Environmental  Laws, and such public or other
officials as are required to approve  particular  permits,  licenses,  consents,
waivers  or other  approvals  needed  in  connection  with the use,  storage  or
disposal  of  Hazardous  Substances.  "Environmental  Laws"  means  each  of the
foregoing  statutes  and  ordinances  as the same shall be amended  from time to
time, and any similar or successor laws,  federal,  state or local, or any rules
or regulations promulgated thereunder.

     (b) Representations  and Warranties.  (i) Neither Landlord nor, to the best
knowledge of Landlord,  any of  Landlord's  previous  tenants or occupants is in
violation or subject to any existing, pending or threatened investigation by any
governmental  authority  under  any  applicable  federal,  state or  local  law,
regulation  or ordinance  pertaining  to air and water  qualify,  the  handling,
transportation,  storage  treatment,  usage or  disposal  of Toxic or  Hazardous
Substances,  air emissions, other environmental matters and all zoning and other
land use matters; (ii) Any handling,  transportation,  storage, treatment or use
of Toxic or Hazardous  Substances  that has occurred on the Premises to date has
been  in  compliance  with  all  applicable  federal,   state  and  local  laws,
regulations and ordinances;  (iii) No leak, spill, release, discharge,  emission
or disposal of Toxic or  Hazardous  Substances  has  occurred on the Premises to
date and the soil, groundwater,  and soil vapor on or under the premises is free
of  Toxic  or  Hazardous  Substances  as of the  date  the  term of  this  Lease
commences.

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<PAGE>
     (c)  Landlord's  Indemnity.  Landlord  agrees to  indemnify,  defend  (with
counsel  reasonably  satisfactory  to Tenant) and hold Tenant and its  officers,
employees,  contractors and agents harmless from any claims, judgments, damages,
penalties,  fines,  expenses,  liabilities or losses arising during or after the
Lease Term out of or in any way relating to the presence, release or disposal of
Toxic or Hazardous  Substances  on or from the  Premises,  or to a breach of the
environmental  warranties made by Landlord above,  unless the Toxic or Hazardous
Substances  are  present as a result of the acts or  omissions  of  Tenant,  its
officers,  employees,  contractors or agents  occurring  within the term of this
Lease  or  any  extension  thereof.   Such  indemnity  shall  include,   without
limitation, costs incurred in connection with:

(a)  Toxic or  Hazardous  Substances  present or  suspected to be present in the
     soil,  groundwater,  or soil vapor on or under the Premises  before  Tenant
     occupies the Premises or the Lease Term commences; or

(b)  Toxic or Hazardous Substances that migrate, flow, percolate,  diffuse or in
     any way move onto or under the Premises,  during Tenant's  occupancy of the
     Premises after the Lease Term commences; or

(c)  Toxic or Hazardous  Substances present on or under the Premises as a result
     of any discharge,  dumping,  spilling  (accidental  or otherwise)  onto the
     Premises during Tenant's  occupancy of the Premises or after the Lease Term
     commences  by any person,  corporation,  partnership,  or entity other than
     Tenant, its officers, employees, contractors or agents.

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<PAGE>
(c)  The indemnification provided by this section shall also specifically cover,
     without limitation,  costs incurred in connection with any investigation of
     site  conditions  or any cleanup,  remedial,  removal or  restoration  work
     required by any federal,  state or local  governmental  agency or political
     subdivision  or other third  party  because of the  presence  or  suspected
     presence of Toxic or Hazardous Substances in the soil,  groundwater or soil
     vapor on or under the  Premises,  unless the Toxic or Hazardous  Substances
     are present as a result of the actions of Tenant, its officers,  employees,
     contractors  or agents.  Such  costs may  include,  but not be limited  to,
     diminution  in  the  value  of  the  Premises,  damages  for  the  loss  or
     restriction  on use of rentable  or useable  space or of any amenity of the
     Premises,  sums paid in settlements of claims,  attorneys fees, consultants
     fees and expert fees. The foregoing  environmental  indemnity shall survive
     the  expiration or  termination of this Lease and/or any transfer of all or
     any portion of the Premises,  or of any interest in this Lease. It shall be
     governed by the laws of the State of Maryland.

(d)  Tenant's  Indemnity.  Tenant  shall (i) not  cause or  permit  any Toxic or
     Hazardous Substances hereinafter "Hazardous Substances" to be brought upon,
     kept or used in or about the  Premises by Tenant,  its  agents,  employees,
     contractors  or  invitees,  without the prior  written  consent of Landlord
     (which  Landlord  shall  not  unreasonably   withhold  as  long  as  Tenant
     demonstrates  to Landlord's  reasonable  satisfaction  that such  Hazardous
     Substances  is necessary  or useful to Tenant's  business and will be used,
     kept and  stored in a manner  that  complies  with all  Environmental  Laws
     regulating any such Hazardous Substances so brought upon or used or kept in
     or about the Premises).  If Tenant breaches the  obligations  stated in the
     preceding sentence, or

                                                       -14-
<PAGE>
          if the presence of Hazardous  Substances  on the  Premises  caused  or
          permitted  by Tenant  results in  contamination  of the Premises or if
          contamination of the Premises by Hazardous Substances otherwise occurs
          for which Tenant is legally  liable to Landlord  for damage  resulting
          therefrom,  then  Tenant  shall  indemnify,  defend and hold  Landlord
          harmless  from  any and all  claims,  judgments,  damages,  penalties,
          fines,  costs,  liabilities or losses (including,  without limitation,
          diminution in value of the Premises generally, damages for the loss or
          restriction  on use of rentable  or usable  space or of any amenity of
          the premises  generally,  damages  arising from any adverse  impact on
          marketing of space in the  premises,  and sums paid in  settlement  of
          claims,  attorneys' fees, consultant fees and expert fees) which arise
          during  or  after  the Term as a result  of such  contamination.  This
          indemnification  of Landlord by Tenant includes,  without  limitation,
          costs incurred in connection with any investigation of site conditions
          or any cleanup,  remedial, removal or restoration work required by any
          federal,  state or local  government  agency or political  subdivision
          because of Hazardous Substances present in the soil or ground water on
          or under the Premises. Without limiting the foregoing, if the presence
          of any  Hazardous  Substances  on the Premises  caused or permitted by
          Tenant results in any contamination of the Premises, then Tenant shall
          promptly  take all  actions at its sole  expense as are  necessary  to
          return  the  Premises  to  the   condition   existing   prior  to  the
          introduction  of  any  such  Hazardous  Substances  to  the  Premises;
          provided  that  Landlord's  approval  of such  actions  shall first be
          obtained, which approval shall not be unreasonably withheld so long as
          such actions would not potentially have any material adverse long-term
          effect on the Premises.



                                                       -15-
<PAGE>
                                    ARTICLE 6
                             MAINTENANCE AND REPAIRS

Section 6.01. Obligations to Maintain and Repair.

     (a) Tenant acknowledges that it has received the Premises in good order and
condition with the exception of leaking windows along the southern wall of 3830.
Tenant  shall at all  times at its own  expense  keep and  maintain  the  entire
Premises  (including,  but  not  limited  to,  plumbing,  heating,   electrical,
sprinkler,  heating,  and air  conditioning  systems  thereon) in good order and
repair, and in a neat, safe, clean, and orderly condition.

     (b) Tenant shall make, at its sole expense and with reasonable  promptness,
all  necessary  non-structural,   foreseen  and  unforeseen,  and  ordinary  and
extraordinary repairs of any nature whatsoever to the Premises.  Tenant shall be
obligated  to make all  structural  and non-  structural  repairs  to any damage
caused by any waste,  misuse,  or  neglect of the  Premises,  its  apparatus  or
appurtenances by Tenant, its agents, servants, or employees;  provided, however,
that  Landlord  shall make  repairs  required as a result of a covered  casualty
under Landlord's insurance with respect to the Premises.  All repairs undertaken
by Tenant shall be completed to Landlord's reasonable satisfaction.

     (c)  Except as  provided  in  Section  6.01 (b),  Landlord  shall  make all
structural  repairs  to the  premises.  Except  as  otherwise  provided  herein,
Landlord shall not be required to maintain,  keep, or repair the Premises or any
part thereof.  Tenant shall be charged with the  protection of its own property,
and in no event shall Landlord be liable for any damage to Tenant's  property by
reason of fire, other casualty,  the elements,  leakage of water,  steam, or the
acts or neglect of any other person.

                                                       -16-
<PAGE>

Section 6.02. Return of Premises.

     Tenant shall,  at the  expiration of the Term or at the sooner  termination
thereof by  forfeiture  or  otherwise,  deliver up the Premises in the same good
order and  condition  as it was at the  beginning  of the  tenancy,  except  (i)
reasonable  wear and tear, (ii) to the extent the Premises is not required to be
repaired and/or maintained by Tenant, and (iii) damage by fire or other casualty
to the extent there is actually  paid to  Landlord,  to repair any damage to the
Premises,  sufficient  net  proceeds  from the policies of any  insurance  which
Tenant is obligated to provide and maintain.

                                    ARTICLE 7
                         TENANT'S ALTERATIONS AND SIGNS

Section 7.01. Alterations.

     (a)  Tenant  covenants  that it will  not make  any  material  alterations,
additions,  improvements  or changes of any kind to the Premises,  without first
securing  Landlord's written consent,  which will not be unreasonably  withheld.
Prior to  obtaining  Landlord's  consent,  Tenant shall be required to submit to
Landlord  written plans for any alteration,  addition,  improvement or change of
any kind to the Premises.  Landlord's  consent may be  conditioned  upon,  among
other things,  satisfactory proof that Tenant, at its sole expense,  is carrying
or causing to be carried  such  insurance,  in such  amounts as  Landlord  deems
reasonably necessary to protect Landlord's interest in the Premises form any act
or  omission  of  Tenant's  contractors  or  subcontractors.   Any  alterations,
additions,  improvements or changes as Landlord shall permit in writing shall be
made by Tenant at Tenant's sole expense. The approval of plans by Landlord shall
not constitute any assumption of  responsibility  by Landlord for their accuracy
or sufficiency.

                                                       -17-
<PAGE>
     (b) Any structural or non-structural alterations,  additions,  improvements
or changes by Tenant which are  permitted  hereunder  or  hereafter  approved by
Landlord shall be the property of Tenant until  expiration of the Term, at which
time they shall  become the  property of Landlord  and remain on the Premises at
the expiration of the Term; provided,  however,  that Landlord's approval of any
alteration, addition, improvement or change may be conditioned upon, among other
things, the restoration of the Premises to its original condition existing as of
the Commencement  Date, in which event Tenant shall comply with such requirement
prior to the expiration of the Term .

Section 7.02. Signs.

     Tenant  covenants  that it  will  not,  without  Landlord's  prior  written
consent,  which shall not be  unreasonably  withheld,  place or permit any sign,
light,  awning,  decoration,  placard,  billboard,  advertising matter, pole, or
other thing of any kind,  whether  permanent  or  temporary,  on the exterior of
Premises.  In the event such  consent is given,  Tenant  agrees to pay any minor
privilege or other tax . In the event of a violation of this  Section,  Landlord
may take action as it deems  necessary to abate the  violation.  Tenant  further
covenants  that it will not paint or make any change in or on the outside of the
Premises without the permission of Landlord in writing.

                                    ARTICLE 8
                           MECHANICS' AND OTHER LIENS

Section 8.01. Mechanics' Liens.

     (a) If an action to establish  and/or  enforce any mechanics' or other lien
against any part of the  Premises  is filed by reason of any labor,  material or
service furnished or alleged to have been furnished to Tenant or for any change,
alteration  or repair to the  Premises  made by Tenant,  Tenant  shall cause the
requested  or  established  lien to be released  of record by  payment,  bond or
otherwise allowed by law, at Tenant's expense, within thirty (30) days after the
filing of the complaint; and Tenant shall, at its expense, defend any proceeding
for the  enforcement  of any lien,  discharge  any  judgment  thereon,  and save
Landlord harmless from all losses and expenses  resulting  therefrom,  including
counsel fees and other  expenses  incurred by Landlord if it elects to defend or
participate in the defense of such proceeding.

     (b) Landlord shall not be liable for any labor or materials furnished or to
be furnished to Tenant upon credit, and no mechanics' or other lien for labor or
materials shall attach to or affect the reversionary or other estate or interest
of Landlord in and to the Premises or the Building.

Section 8.02. Other Liens.

     Tenant shall not permit the Premise to be subject to any statutory  lien by
reason of any act or  omission  on the part of  Tenant,  or any of his  approved
concessionaires,  licensees or subtenants or their respective agents,  servants,
employees  or  contractors;  and in the  event  that  any lien  attaches  to the
Premises,  Tenant  shall  discharge  the same by payment,  bond or  otherwise as
allowed by law,  at its own  expense,  within  thirty  (30) days after  Tenant's
creditor or alleged creditor initiates the action.
                                       18
<PAGE>

                                    ARTICLE 9
                            INDEMNIFICATION BY TENANT

 Section 9.01. Indemnification by Tenant.

     (a) Tenant shall indemnify and save Landlord  harmless from and against any
and all liabilities, claims, actions, damages, penalties or judgments, including
any litigation  expenses and reasonable  attorneys' fees, arising from injury to
person or property sustained by anyone in or about the Premises,  resulting from
any  acts  or  omissions  of  Tenant,  or  of  Tenant's   officers,   directors,
shareholders,  agents, employees, contractors or subtenants. Tenant, at its sole
expense, shall defend any and all suits or actions (just or unjust) which may be
brought  against  Landlord,  or in which  Landlord may be impleaded  with others
based upon  allegations  of any claim or claims arising from any act or omission
of Tenant or of Tenant's officers, directors,  shareholders,  agents, employees,
contractors or subtenants.  Tenant's obligation to indemnify Landlord under this
Section  shall  apply to claims  arising  out of any act or omission of Bruce C.
Clasing and Harold B. Clasing (the  "Clasings") only to the extent that any such
act or  omission  occurs  during  the  course  or in the  scope of the  Clasings
employment  by Tenant.  Tenant's  indemnification  obligation  shall survive the
termination of this Lease.

     (b) Landlord shall not be responsible or liable for any damage or injury to
any persons, at any time in or about the Premises, including damage or injury to
Tenant or to any of Tenant's officers, agents, employees,  contractors, invitees
or subtenants  unless caused by the act or omission of Landlord or of Landlord's
officers, directors, shareholders, agents, employees, or contractors as the case
may be.

                                   ARTICLE 10
                               TENANT'S INSURANCE

Section 10.01. Public Liability Insurance.

     Tenant shall  provide,  at its sole  expense,  and keep in force during the
Term for the  benefit  of  Landlord  and  Tenant  as  insured  parties,  and the
Landlord's  mortgagee,  as their  respective  interests  may appear,  commercial
general liability insurance,  written on an occurrence basis with respect to the
Premises   and  the   business   operated   by   Tenant   and  any   subtenants,
concessionaires,  or licensees of Tenant,  in the amount of at least One Million
and 00/100  Dollars  ($1,000,000.00)  for each  occurrence  and Two  Million and
00/100  Dollars  ($2,000,000.00)  in the  aggregate  and umbrella  coverage with
limits of Fourteen  Million and 00/100 Dollars  ($14,000,000.00)  per occurrence
and Fourteen Million and 00/100 Dollars  ($14,000,000.00) in the aggregate.  The
limits shall be increased  periodically  over the Term as Landlord may from time
to time  reasonably  require  on the basis  that  prudent  owners of  comparable
properties are requiring increased coverage.
                                       19
<PAGE>
Section 10.02.  Plate Glass Insurance.

     Throughout the Term,  Landlord may with Tenant's  consent and at Landlord's
initial  expense,  maintain plate glass insurance for the full insurance cure of
all of the plate glass in the Premises,  and Tenant shall reimburse the Landlord
for such coverage; PROVIDED, HOWEVER,. if Tenant withholds consent, Tenant shall
be obligated for  replacement  of plate glass at Tenant's sole expense.  Section
10.03.  Workers  Compensation  Insurance.  During the Term,  Tenant, at its sole
expense,  shall  provide and keep in force  workers'  and  statutory  employers'
compensation  insurance,  in form and in amounts required by law. Section 10.04.
General Provisions of Insurance Coverage. All required insurance shall be issued
by an insurance company or companies of recognized  financial  standing licensed
to do business in Maryland and  acceptable to Landlord.  At the beginning of the
Term and  thereafter  not less than thirty (30) days prior to the  expiration of
any policy period, Tenant shall deliver to Landlord certificates  evidencing the
insurance  required by this Article,  together with copies of the policies,  and
proof that the premiums  have been paid.  The  insurance  may not be canceled or
amended  without thirty (30) days' prior written notice given to Landlord and at
Landlord's request, to any mortgagee of the Premises.

Section 10.05.  Blanket Insurance Coverage.

     Any  insurance  required to be  provided by Tenant  under this Lease may be
provided by blanket  insurance  covering  the  Premises,  provided  such blanket
insurance complies with all of the other requirements of this Lease with respect
to the particular insurance involved.

       Section 10.06.  Failure to Maintain Insurance.

     Tenant's  failure to procure and  maintain any  insurance  required by this
Lease,  and to pay the  premiums  and  renewal  premiums  as they become due and
payable,  and to deliver all required  certificates  of  insurance  and renewals
thereof  and copies of policies  to  Landlord  within the time  provided in this
Lease, shall constitute an Event of Default by Tenant. In the event Tenant fails
to procure and maintain any  insurance  required  under this  Article,  Landlord
shall have the right,  but not the  obligation,  to procure  and  maintain  such
insurance. Any sum paid by Landlord to procure or maintain insurance required of
Tenant by this Article shall be deemed to be owing by Tenant to Landlord and due
and payable within five (5) days after demand.

Section 10.07. Waiver of Subrogation.

     Landlord and Tenant  hereby waive the right to claim  liability  (by way of
subrogation or otherwise)  against the other party for any loss or damage to the
extent  of any  insurance  proceeds  actually  received  plus the  amount of any
deductible  under any such  insurance  policy.  Landlord  and Tenant  shall each
obtain a clause in each  insurance  policy  required by this Lease  stating that
this waiver is given prior to an  occurrence  giving rise to a loss and will not
invalidate the policy.

                                      -20-
<PAGE>
         Section 10.08.  Insurance on Tenant's Property and Improvements.

     (a) During the Term,  Tenant,  at its sole expense,  shall maintain in full
force and effect, in a reputable company or companies licensed to do business in
Maryland,  and insurance  policy or policies  providing  protection  against any
peril  included  within  the  classification  of "fire and  extended  coverage,"
covering all Tenant's trade fixtures, merchandise and other property in or about
the Premises, and all alterations,  additions, improvements made by or on behalf
of Tenant for the full  replacement  cost.  Such policy or policies of insurance
shall be in form  satisfactory  to  Landlord  and shall name  Landlord as a loss
payee.
                                   ARTICLE 11
                            SUBLETTING OR ASSIGNMENT

Section 11.01.  Restrictions on Subletting and Assignment.

     (a) Except as otherwise  provided by this Section 11.01,  Tenant  covenants
that it will  not  sublet  or  assign  the  Premises,  or any part  thereof,  by
operation  of law or  otherwise,  or permit the same to be used by any person or
entity  other than  Tenant or  employees  of Tenant  without  the prior  written
consent of Landlord,  which consent may be withheld in the reasonable discretion
of Landlord.  Any lawful levy or sale on execution or other legal  process,  and
also  any  assignment  or  sale in  bankruptcy,  or  insolvency,  or  under  any
compulsory  procedure,  or the  appointment  of a receiver by a state or federal
court,  shall be deemed an assignment  within the meaning of this Lease.  In the
event that Landlord  does consent to any such  subletting,  assignment,  or use,
Tenant  hereunder  shall remain liable for the  performance of all the covenants
and conditions of this Lease. Consent by Landlord to any subletting, assignment,
or use shall apply to only the  specific  request and shall be required  for any
further subletting, assignment, or use.

Section 11.02.  Transfer of Corporate Shares.

     If Tenant is a corporation and if at any time during the Term of this Lease
any part or all of the corporate shares of Tenant, or of a parent corporation of
which the Tenant is a direct or indirect  subsidiary,  shall be  transferred  by
sale, assignment,  bequest, inheritance,  operation of law, or other disposition
so as to result in a change in the present effective voting control of Tenant or
of such parent  corporation  by the person or persons  owning or  controlling  a
majority  of the shares of Tenant or of such parent  corporation  on the date of
this Lease, Tenant shall promptly notify Landlord in writing of such change, and
such change in voting  control shall  constitute an Assignment of this Lease for
all purposes of this Section;  provided,  however, that this provision shall not
apply to the  transfer  of  corporate  shares of a parent  corporation  which is
publicly traded on a recognized public stock exchange or in the over-the-counter
market.



                                      -21-
<PAGE>
Section 11.03.  Use by Related Entities.

     Tenant is a wholly owned  subsidiary  of  Manchester  Equipment  Co.,  Inc.
("Manchester").  Tenant may permit any part of the  Premises  to be  occupied or
used by any other controlled  subsidiary of Manchester  without Landlord's prior
written  consent,  and without such use or occupancy  being deemed a subletting,
assignment,  or use  that  would  otherwise  require  Landlord's  prior  written
consent; provided,  however, that Tenant shall remain liable for the performance
of all the  covenants  and  conditions  of this Lease,  and any use or occupancy
permitted under this Section 11.03 shall not interfere with Tenant's  successful
operations  or cause  Tenant to incur any rent  expense  in excess of the Annual
Rent and Additional Rent payable under this Lease.

Section 11.03. Acceptance of Rent from Transferee.

     The  acceptance by Landlord of the payment of rent following any assignment
or other  transfer  prohibited  by this  Article  11 shall not be deemed to be a
consent by Landlord to any such  assignment or other transfer nor shall the same
be deemed a waiver of any right or remedy of Landlord hereunder.

                                   ARTICLE 12
                   QUIET ENJOYMENT, SUBORDINATION, ATTORNMENT
                            AND ESTOPPEL CERTIFICATE

Section 12.01. Quiet Enjoyment.

     Landlord  warrants that Tenant shall have the peaceable and quiet enjoyment
of the  Premises  free from any eviction or  interference  by Landlord if Tenant
pays the Annual Rent and  Additional  Rent  provided for herein,  and  otherwise
fully performs the terms, covenants and conditions imposed by this Lease.

Section 12.02. Subordination.

     (a) The holder of any  mortgage or deed of trust now  existing or hereafter
placed upon the  Premises  shall have the right to elect,  at any time,  whether
this Lease shall be  subordinate to the operation and effect of such mortgage or
deed of trust or superior thereto, without the necessity for execution by Tenant
of any instrument other than this Lease, and such election shall be binding upon
Tenant.  If,  however,  the holder of the  mortgage or deed of trust  desires to
confirm that effect of this provision, then upon request Tenant shall execute an
attornment or subordination agreement in form satisfactory to such holder.


                                      -22-
<PAGE>
     (b) Within thirty (30) days following the date of this Agreement,  Landlord
shall undertake, and shall use commercially reasonable efforts (exclusive of the
payment  of any  monetary  consideration)  to  obtain,  from all  mortgagees  or
beneficiaries  under any mortgages or deeds of trust  encumbering  the premises,
one or more agreements of non-disturbance in favor of the Tenant,  such that, if
any  proceedings  are brought for the foreclosure of any portion of the Premises
are a part,  or if the  power  of sale  under a  mortgage  or deed of  trust  is
exercised,  then  Tenant's  rights under this Lease shall not be  disturbed  and
shall  remain in full force and  effect for the Term so long as Tenant  performs
and  observes all of the terms,  covenants  and  conditions  of this Lease to be
performed  or observed by it and  provided  that Tenant  agrees to attorn to the
purchaser upon any such  foreclosure or sale and recognize such purchaser as the
Landlord  under this Lease.  Landlord  shall have no obligation to negotiate the
form of any agreement of non- disturbance if Tenant and any mortgagee or deed of
trust  beneficiary  disagree  with  respect to the form or content of a proposed
agreement of non-disturbance. As regards any and all mortgages or deeds of trust
encumbering  the  premises  and  created  subsequent  to the date of this Lease,
Landlord shall use commercially reasonable efforts to obtain from the mortgagees
or beneficiaries with respect thereto,  one or more agreements of subordination,
attornment  and  non-disturbance  in  favor  of the  Tenant  such  that,  if any
proceedings are brought for the foreclosure of any portion of the Premises are a
part,  or if the power of sale under a mortgage  or deed of trust is  exercised,
then Tenant's rights under this Lease shall not be disturbed and shall remain in
full force and effect for the Term so long as Tenant  performs  and observes all
of the terms, covenants and conditions of this Lease to be performed or observed
by it and provided that Tenant  agrees to attorn to the purchaser  upon any such
foreclosure  or sale and  recognize  such  purchaser as the Landlord  under this
Lease.


                                      -23-
<PAGE>

     (c) If through  the use of  commercially  reasonable  efforts  Landlord  is
unable to secure  agreements  of  non-disturbance  as provided for herein,  then
Landlord shall exercise  Landlord's  right, if any, under any such existing deed
of trust encumbering the property and will use commercially  reasonable  efforts
to secure the right by  modification  to any such existing deed of trust as well
as any future  such deed of trust,  that any notice of default to be given under
such  deed(s) of trust be given by  duplicate  notice to Landlord  addressed  to
Tenant and Landlord  further  agrees that Tenant shall be held harmless from any
defaults by Landlord in any such deed of trust and agrees that Tenant shall have
the  right to cure  defaults  as to  Landlord's  payment  obligations  under any
indebtedness  secured by virtue of such deeds of trust upon which  Tenant  shall
have the right to be repaid by Landlord.

Section 12.03. Attornment and Estoppel Certificates.

     (a) Within ten (10) days after a written  request from time to time made by
Landlord or Tenant,  but not in excess of three (3) times in any calender  year,
Landlord  or  Tenant  shall  deliver  to the  other a  signed  and  acknowledged
statement in writing setting forth:  (i) that this Lease is unmodified,  in full
force and effect,  no  knowledge  of existing  defaults of Landlord  and free of
defenses  against  enforceability  (or  if  there  have  been  modifications  or
defaults,  or if Tenant claims defenses against the enforceability  hereof, then
stating the  modifications,  defaults and/or defenses);  (ii) the dates to which
all rent has been paid,  and the amount of any  advance  rents  paid;  (iii) the
commencement  and expiration dates of the Original Term; (iv) whether Tenant has
given written notice  exercising its rights, if any, to renew this Lease, and if
so, the Extension  Term so elected;  (v) that Tenant had no  outstanding  claims
against  Landlord  (or,  if there are any  claims,  then  stating the nature and
amount of such claims);  and (iv) that status of any other  obligation of either
party  under or with  respect to this  Lease,  it being  intended  that any such
statement  may be  relied  upon by any  purchaser  or  mortgagee  of  Landlord's
interest in the Premises, or any prospective purchaser or mortgagee.

     (b) When requested by Landlord,  Tenant shall promptly execute an agreement
in the form  reasonably  required by Landlord  with any  purchaser of Landlord's
interest in the premises  for the purpose of attorning to said  purchaser as its
Landlord,  provided that such purchaser  executes such agreement for the purpose
of recognizing this Lease.


                                      -24-
<PAGE>

                                   ARTICLE 13
                          LANDLORD'S ENTRY ON PREMISES

Section 13.01. Landlord's Entry on Premises.

     Tenant  agrees  that  Landlord  and its  representatives  may  enter to the
Premises to inspect the Premises,  to enforce the  provisions of this Lease,  to
make repairs  required of it hereunder,  and to rectify  defaults of the Tenant.
Landlord may bring upon the  Premises  all things  necessary to perform any work
done in the Premises pursuant to this Section 13.01. If the nature of a required
repair requires  immediate action by Landlord,  then Tenant shall admit Landlord
to the Premises immediately. Any other admission of the Landlord to the Premises
shall  be  during  Tenant's  business  hours,  or  if at  other  times,  at  the
convenience  of Tenant.  Nothing herein  contained  shall be construed to impose
upon  Landlord  any  obligation  or  responsibility  whatsoever  for  the  care,
maintenance or repair of the Premises, except as otherwise specifically provided
in this Lease.

                                   ARTICLE 14
                             FIRE OR OTHER CASUALTY

Section 14.01. Fire or Other Casualty.

     In the event the Premises is damaged by fire,  storm, the elements,  act of
God,  unavoidable accident and/or the public enemy, but not to such an extent as
to render the same  untenantable,  then  Landlord  shall restore the Premises as
speedily as possible,  and there shall be no  abatement  of Annual Rent.  If the
Premises  is injured or damaged by any of the  aforesaid  causes only to such an
extent as to render it  partially  un-tenantable,  Landlord  shall  restore such
portion of the  Premises so injured or damaged as speedily as  possible,  Annual
Rent to abate  proportionately  on such  part of the  Premises  as may have been
rendered  wholly  un-tenantable  until  such time as such part  shall be fit for
occupancy,  and after which time the full amount of Annual Rent reserved in this
Lease  shall be  payable.  If the  Premises  is injured or damaged by any of the
aforesaid  causes to such an extent as to render the same wholly  un-tenantable,
then this Lease shall  thereupon  become  null and void,  and any  liability  of
Tenant shall terminate upon payment of all Annual Rent,  Additional Rent and any
other sums due and payable to the date of such happening.

  ARTICLE 15
                                  CONDEMNATION

Section 15.01. Effect of Condemnation.

     If the whole or any part of the Premises  shall be taken under the power of
eminent  domain,  or shall be sold by  Landlord  under  threat  of  condemnation
proceedings,  then this Lease shall terminate as to the part so taken or sold on
the day when Tenant is required to yield possession thereof,  and Landlord shall
make such  repairs and  alterations  as may be necessary in order to restore the
part not taken or sold to useful  condition,  and the Annual  Rent  hereinbefore
specified shall be reduced  proportionately as to the portion of the Premises so
taken or sold.  If the  amount  of the  Premises  so taken or sold is such as to
impair  substantially  the usefulness of the Premises for the purposes for which
the same is hereby  leased,  then Tenant shall have the option to terminate this
Lease as of the date when Tenant is required to yield possession.

                                      -25-
<PAGE>

Section 15.02. Condemnation Awards.

     In any and all events of condemnation, all compensation awarded or paid for
any such taking or sale of the fee and the leasehold, or any part thereof, shall
belong  to and be the  property  of  Landlord,  except  for such sum as shall be
awarded to Tenant for  relocation of its business or on account of the taking of
fixtures installed by Tenant, which shall become the property of Tenant provided
such sum is by separate  award and does not reduce the amount to which  Landlord
is entitled hereunder.

Section 15.03. Notice of Condemnation.

     Landlord  shall notify  Tenant within ten (10) days of receipt of notice of
condemnation.

                                   ARTICLE 16
                                DEFAULT OF TENANT

Section 16.01. Events of Default.

     The following occurrences shall be Events of Default:

     (a)  the failure of Tenant to make any payment of Annual Rent or Additional
          Rent  payable  by Tenant  within ten (10) days after the same shall be
          due and payable,  which  failure  shall remain  uncured after five (5)
          days written notice,

     (b)  the  appointment  of a receiver  or  trustee  for Tenant in any court,
          which appointment is not vacated in thirty (30) days, or

     (c)  the adjudication of Tenant as bankrupt or insolvent, or

     (d)  the assignment by Tenant for the benefit of creditors, or

     (e)  the  failure  by Tenant  to  perform  or comply  with any of the other
          terms,  covenants,  or conditions of this Lease, which violation shall
          remain uncured after thirty (30) days written notice.

Section 16.02. Notice of Termination.

     Upon the  occurrence  of an Event of Default,  Landlord may, at its option,
terminate  this Lease in  writing,  in which case  Tenant  shall  continue to be
liable to Landlord as hereinafter provided.

Section 16.03. Landlord's Right to Re-Enter Premises.

     Upon the occurrence of an Event of Default,  or at any time thereafter,  in
addition to and without  prejudice  to any other  rights and  remedies  Landlord
shall have at law or  equity,  shall have the right to  re-enter  the  Premises,
recover possession thereof,  and dispossess any or all occupants of the Premises
in the manner  prescribed  by the statute  relating to summary  proceedings,  or
similar  statutes,  but Tenant  shall remain  liable to Landlord as  hereinafter
provided.


                                      -26-
<PAGE>

Section 16.04. Landlord's Remedies.

     (a)  In  case  of  any  Event  of  Default,  re-entry,   expiration  and/or
dispossession by summary proceedings,  whether or not this Lease shall have been
terminated:

          (i) All  delinquent  Annual  Rent and  Additional  Rent  shall  become
     payable  and  shall  be paid up to the time of such  re-entry,  termination
     and/or dispossession;

          (ii) Landlord shall have the right, but not the obligation,  to re-let
     the Premises or any part  thereof for the account of Tenant,  either in the
     name of the Landlord or as agent for Tenant, for a term or terms which may,
     at the  Landlord's  option,  be less than or exceed the period  which would
     have otherwise constituted the balance of the Term and to grant concessions
     for rent, costs, brokerage fees and attorneys' fees;

          (iii) Tenant shall  reimburse  Landlord for any expenses that Landlord
     actually incurs in connection  with  recovering  possession of the Premises
     and any re-letting thereof such as court costs,  attorneys' fees, brokerage
     fees, the costs of advertising  and the costs of any alterations or repairs
     required for re-letting.

          (iv) Tenant,  or the legal  representatives  of Tenant,  at Landlord's
     option,  shall pay Landlord,  either (a) on a monthly basis, the difference
     between the Annual Rent and  Additional  Rent  reserved  hereunder  and the
     rent, if any, received by Landlord pursuant to any re- letting, or (b) in a
     lump sum,  liquidated  damages in an amount  equal to the sum of the Annual
     Rent that would have  become due during the  remainder  of the Term plus an
     estimate  of the  Additional  Rent that  would  have  become due during the
     remainder of the Term.  The parties  agree that option (b) will  constitute
     agreed  liquidated  damages and not a penalty,  because  Landlord's  actual
     charges may be too difficult to ascertain with certainty.

     (b) Landlord may distrain,  by any legal means, for any overdue installment
of Annual Rent or Additional Rent.

     (c) No re-letting by Landlord, whether it be for a longer or shorter period
than remains in the Term,  shall operate as a surrender or  termination  of this
Lease or as a waiver or  postponement  of any right of Landlord  against  Tenant
without a specific written declaration to such effect by Landlord.

     (d) Any and all remedies  available to Landlord for the  enforcement of the
provisions of this Lease are cumulative and not exclusive, and Landlord shall be
entitled  to pursue  either the  rights  enumerated  in this  Lease or  remedies
authorized  by law,  or both.  Tenant  shall be liable for any costs or expenses
incurred by Landlord in  enforcing  any terms of this Lease,  or in pursuing any
legal action for the enforcement of Landlord's rights, including court costs and
reasonable attorney's fees, in amounts to be affixed by court.

     (e) Both Landlord and Tenant shall each use commercially reasonable efforts
to mitigate any damages  resulting  from a default of the other party under this
Lease.
                                      -27-
<PAGE>

                                   ARTICLE 17
                              TERMINATION BY TENANT

Section 17.01. Options to Terminate.

     (a) If during  the first  three  (3)  years of the  Term,  either  Bruce C.
Clasing and Harold Clasing (the "Clasings")  voluntarily leave the employment of
Tenant,  or any entity  succeeding,  related to or controlled  by Tenant,  or if
either of the  Clasings  are  terminated  from such  employment  for "cause," as
defined in each of their employment agreements, which are hereby incorporated by
reference,  then Tenant shall have the option to terminate the Lease upon thirty
(30) days written notice to Landlord. Upon exercise of this option to terminate,
Tenant shall pay to Landlord all Annual Rent and Additional Rent due and payable
to Landlord through the termination date of the Lease.

     (b)  Commencing  with the expiration of the third year of the initial term,
Tenant  shall  have the right to  terminate  this  Lease at any time both of the
Clasings are not  employed by Tenant,  or any entity  succeeding,  related to or
controlled by Tenant, if such employment is terminated for "cause" as defined in
each of their "Employment Agreements" or by voluntary retirement.  Upon exercise
of this option to  terminate,  Tenant  shall pay to Landlord all Annual Rent and
Additional Rent due and payable to Landlord  through the termination date of the
Lease.  Tenant may exercise this option upon thirty (30) days written  notice to
Landlord.

                                   ARTICLE 18
                                  MISCELLANEOUS

Section 18.01. Successors and Assigns.

     This Lease and the covenants,  terms and conditions  herein contained shall
inure to the  benefit  of and be  binding  upon  Landlord,  its  successors  and
assigns,  and shall be binding  upon and inure to the  benefit of Tenant and its
permitted successors and assigns.

Section 18.02. Holding Over.

     If Tenant shall not immediately surrender possession of the Premises at the
termination of this Lease, Tenant shall become a tenant from month to month upon
all of the terms, covenants,  and conditions of this Lease, provided Annual Rent
shall be paid to and  accepted by  Landlord,  in advance,  at double the rate of
Annual Rent payable  hereunder just prior to the termination of this Lease;  but
unless and until  Landlord  shall accept such Annual Rent from Tenant,  Landlord
shall continue to be entitled to retake  possession of the Premises  without any
prior notice whatsoever to Tenant.

                                      -28-

<PAGE>
Section  18.03.  Waiver.

     Any waiver of any  covenant or  condition of this Lease shall extend to the
particular  case  only,  and only in the  manner  specified,  and  shall  not be
construed  as applying  to or in any way  waiving  any  further or other  rights
hereunder.  The exercise of any of the options  aforesaid shall not be construed
as a waiver of Landlord's  right to recover  actual damages for any breach in an
action at law,  or to  restrain  any  breach or  threatened  breach in equity or
otherwise. Acceptance of rent with knowledge of default shall not be a waiver of
that default,  and acceptance of partial payment shall not be deemed  acceptance
of the full amount owed nor  prejudice  Landlord's  right to recover the balance
owed or to pursue any remedy available to it. Section 18.04. Notices. Any Notice
required or permitted by this Lease to be given by either party to the other may
be either personally  delivered or sent by facsimile or certified mail, properly
addressed  and prepaid,  to the addresses of the parties  herein  given,  unless
another  address  shall  have been  substituted  for such  address  by Notice in
writing. Notices shall be deemed given the first business day following the date
of so  depositing  or the  date of  personal  delivery  or the  date of  faxing,
provided that any Notice sent by facsimile shall be promptly sent by first class
mail as well.

     A copy of all notices to Tenant shall be provided to:

                                    David I. Roth, Esq.
                                    Kressel, Rothlein & Roth, Esqs.
                                    684 Broadway
                                    Massapequa, N.Y. 11758

                                    Mr. Barry R. Steinberg, President
                                    Manchester Equipment
                                    160 Oser Avenue
                                    Hauppauge, N.Y. 11788

     A copy of all notices to Landlord shall be provided to:

                                    Bruce C. Clasing
                                    Harold B. Clasing
                                    3832 Falls Road
                                    Baltimore, MD 21211

                                    Frank L. Kollman, Esq.
                                    Kollman & Sheehan, PA
                                    20 South Charles Street
                                    Baltimore, MD 21201

                                      -29-
<PAGE>

Section 18.05. Captions.

     The  headings and captions  used in this Lease are for the  convenience  of
parties only and are not a part of this Lease.

Section 18.06. Broker.

     (a) Landlord represents and warrants that it has not employed,  directly or
indirectly,  expressly or impliedly,  any brokers or finders in connection  with
the  leasing of the  Premises.  Landlord  agrees to  indemnify  and hold  Tenant
harmless from and against any and all claims of any person,  firm or corporation
claiming  any  brokerage  commission,   finder's  fee  or  similar  compensation
(including,   without  limitation,  the  cost  of  reasonable  attorneys'  fees)
resulting from a breach by Landlord of this representation and warranty.

     (b) Tenant  represents  and warrants that it has not employed,  directly or
indirectly,  expressly or impliedly,  any brokers or finders in connection  with
the  leasing of the  Premises.  Tenant  agrees to  indemnify  and hold  Landlord
harmless from and against any and all claims of any person,  firm or corporation
claiming  any  brokerage  commission,   finder's  fee  or  similar  compensation
(including,   without  limitation,  the  cost  of  reasonable  attorneys'  fees)
resulting from a breach by Tenant of this representation and warranty.

Section 18.07. Obligations Surviving Termination.

     If this Lease is terminated  for any reason other than default of Tenant or
Landlord,  all  liabilities of the parties shall be adjusted as of the effective
date of  termination.  Any  termination  of this  Lease by reason of  default of
Tenant shall not affect any  obligation  or  liability  of Tenant which  accrued
prior to the effective date of termination. All such obligations and liabilities
of the defaulting party shall survive such termination.

Section 18.08. Landlord's Liability.

     If Tenant  obtains a money judgment  against  Landlord or its successors or
assigns under any provisions  of, or with respect to, this Lease,  or on account
of any matter,  condition or circumstance arising out of the relationship of the
parties  under this Lease,  Tenant's  occupancy of the  Premises,  or Landlord's
ownership of the Premises,  Tenant shall be entitled to have execution upon such
judgment  only upon  Landlord's  estate in the Premises and not out of any other
assets of  Landlord,  any of its  members,  or its  successors  or assigns;  and
Landlord  shall be  entitled  to have  any  such  judgment  so  qualified  as to
constitute a lien only on  Landlord's  estate,  subject to any liens  antedating
such judgment;  provided,  however,  that this sentence shall be inapplicable to
the extent that the judgment against Landlord is covered by insurance, or to the
extent Tenant may be entitled to be indemnified pursuant to this or any separate
agreement.

Section 18.09. Governing Law and Jurisdiction.

     This Lease  shall be  governed  and  controlled  by the law of the State of
Maryland. Tenant hereby waives any objection to the venue of any action filed by
Landlord  against  Tenant in any state or federal court of Maryland,  and waives
any claim for the transfer of any such action to any other court.

                                      -30-
<PAGE>
Section 18.10. No Trial by Jury.

     Landlord and Tenant  hereby waive trial by jury in any action or proceeding
or counterclaim brought by either party against the other party on any and every
matter, directly or indirectly arising out of or with respect to this Lease.

Section 18.11. Use of Plurals and Gender.

     The use of the singular herein shall include the plural and vice versa, and
the use of any gender shall include all genders.

Section 18.12. Severability.

     If any term or provision,  or any portion thereof,  of this Lease, shall to
any extent, be invalid or unenforceable, the remainder of the Lease shall not be
deemed invalidity or unenforceable.

Section 18.13. Entire Agreement.

     This Lease and the attached  exhibits,  if any, contain the final agreement
of the parties.  Landlord shall not have any obligations not expressly set forth
in  this  Lease;  and  neither  party  shall  be  bound  by  prior  promises  or
representations not expressly set forth in this Lease.

     Section 18.14.  Abutting Premises.

     Landlord  acknowledges  that Landlord is the owner of certain real property
contiguous to the demised  premises,  to wit: premises known as 3840 Falls Road,
Baltimore,  Md., "the contiguous  premises."  Landlord  undertakes and agrees to
maintain  such  premises  so as not to suffer or permit  any use  thereon  which
interferes with the Tenant's right to use the demised premises. Landlord agrees,
at Landlord's expense, to maintain comprehensive liability insurance coverage in
the amounts as required herein for the demised  premises  insuring  Landlord for
liability  arising  from  or  out of  ownership,  and/or  use of the  contiguous
premises.  Landlord shall be solely  responsible for all costs and expenses with
respect to the contiguous  premises and agrees to hold Tenant  harmless from any
tax,  assessment  or  other  such  imposition,  insurance  expense,  maintenance
expense,  repair  expense,  violation of any Legal  Requirement  as set forth in
Section 5.03 or existence of hazardous substance as set forth in Section 5.05.

                                      -31-
<PAGE>
     Landlord  agrees that in the event any  alterations to or demolition of the
improvements or the contiguous  premises is to be undertaken  during the term of
this  Lease,  Landlord  will give  notice to Tenant in  writing of not less than
thirty (30) days and that such  alterations or demolition work will be performed
in such a way as to minimize disruption to Tenant.

     IN WITNESS  WHEREOF,  the parties  hereto have caused these  presents to be
duly executed as of the date first above written.

ATTEST/WITNESS:                                    BC & HC PROPERTIES, LLC

                                            By:       (SEAL)


ATTEST/WITNESS:                                    COASTAL OFFICE PRODUCTS, INC.

                                            By:        (SEAL)

E:\agreements\Business\Lease\coastal-with-bc&hcprop.manchester.wpd

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