ASSET PURCHASE AGREEMENT


                                      AMONG


                           ELECTROGRAPH SYSTEMS, INC.,


                              BITWISE DESIGNS, INC.


                                       AND


                         ELECTROGRAPH ACQUISITION, INC.


                         MANCHESTER EQUIPMENT CO., INC.


                                 April 15, 1997






<PAGE>


                                TABLE OF CONTENTS

                                                    Page
 1. Definitions ....................................
 2. Basic Transaction ..............................
    (a) Purchase and Sale of Assets ................
    (b) Assumption of Liabilities ..................
    (c) Preliminary Purchase Price..................
    (d) Preliminary Purchase Price Adjustment.......
    (e) Payment of Intercompany Liabilities.........
    (f) The Closing ................................
    (g) Deliveries at the Closing ..................
    (h) Allocation .................................
 3. Representations and Warranties of ESI...........
    (a) Organization of ESI.........................
    (b) Authorization of Transaction ...............
    (c) Noncontravention ...........................
    (d) Brokers' Fees ..............................
    (e) Title to Assets ............................
    (f) Financial Statements .......................
    (g) Events Subsequent to Most Recent Fiscal
                  Year End .................................
    (h) Undisclosed Liabilities ....................
    (i) Legal Compliance ...........................
    (j) Tax Matters ................................
    (k) Real Property ..............................
    (l) Intellectual Property ......................
    (m) Tangible Assets ............................
    (n) Inventory ..................................
    (o) Contracts ..................................
    (p) Notes and Accounts Receivable ..............
    (q) Powers of Attorney .........................
    (r) Insurance ..................................
    (s) Litigation .................................
    (t) Product Warranty ...........................
    (u) Product Liability ..........................
    (v) Employees ..................................
    (w) Employee Benefits ..........................
    (x) Guaranties .................................
    (y) Environment, Health, and Safety ............
    (z) Disclosure .................................
 4. Representations and Warranties of Manchester
                  and EAI...................................
    (a) Organization of Manchester .................
    (b) Authorization of Transaction ...............
    (c) Noncontravention ...........................
    (d) Brokers' Fees ..............................
 5. Pre-Closing Covenants ..........................
    (a) General ....................................
    (b) Notices and Consents .......................
    (c) Operation of Business ......................
    (d) Preservation of Business ...................
    (e) Full Access ................................
    (f) Notice of Developments .....................
 6. Post-Closing Covenants .........................
    (a) General ....................................
    (b) Litigation Support .........................
    (c) Transition .................................
    (d) Confidentiality ............................
    (e) Covenant Not to Compete ....................
<PAGE>

 7. Conditions to Obligation to Close ..............
    (a) Conditions to Obligation of Manchester
                  and EAI...................................
    (b) Conditions to Obligation of ESI.............
 8. Remedies for breaches of This Agreement ........
    (a) Survival of Representations and Warranties .
    (b) Indemnification Provisions for Benefit of
         ESI............................................
    (c) Indemnification Provisions for Benefit of
         the Target ....................................
    (d) Matters Involving Third Parties .............
    (e) Determination of Adverse Consequences .......
    (f) Other Indemnification Provisions ............
 9. Termination .....................................
    (a) Termination of Agreement ....................
    (b) Effect of Termination .......................
 10. Miscellaneous ...................................
    (a) Press Releases and Public Announcements .....
    (b) No Third-Party Beneficiaries ................
    (c) Entire Agreement ............................
    (d) Succession and Assignment ...................
    (e) Counterparts ................................
    (f) Headings ....................................
    (g) Notices .....................................
    (h) Governing Law ...............................
    (i) Amendments and Waivers ......................
    (j) Severability ................................
    (k) Expenses ....................................
    (l) Construction ................................
    (m) Incorporation of Exhibits and Schedules .....
    (n) Specific Performance ........................
    (o) Submission to Jurisdiction ..................
    (p) Tax Matters .................................
    (q) Employee Benefits Matters ...................
    (r) Bulk Transfer Laws ..........................

Exhibit A                  Statement of Assets
Exhibit B                  Form of Bill of Sale and Assignment
Exhibit C                  Allocation Schedule
Exhibit D                  November 30, 1996 Financial Statements
Exhibit E                  Form of Opinion of Counsel to ESI and Bitwise
Exhibit F                  Form of Opinion of Counsel to Manchester
                                     and EAI
Exhibit G                  Manchester Promissory Note

Disclosure Schedule        Exceptions to Representations and Warranties


<PAGE>
                            ASSET PURCHASE AGREEMENT

     AGREEMENT entered into on April 15, 1997 by and among Manchester  Equipment
Co.,  Inc., a New York  corporation  ("Manchester"),  Electrograph  Acquisition,
Inc.,  a New  York  Corporation  ("EAI"),  Bitwise  Designs,  Inc.,  a  Delaware
corporation  ("Bitwise") and Electrograph Systems,  Inc., a New York corporation
("ESI"). Manchester, EAI, Bitwise and ESI are sometimes referred to collectively
herein as the "Parties."

     WHEREAS,  ESI is a value added  distributor of  microcomputer  peripherals,
components and accessories;

     WHEREAS, ESI is a wholly-owned subsidiary of Bitwise;

     WHEREAS,  Manchester desires to purchase substantailly all of the assets of
ESI and ESI desires to sell to Manchester  substantially  all of its assets upon
the terms contained herein.

     WHEREAS,  EAI is a newly formed  subsidiary  of  Manchester  which has been
created to acquire the assets of ESI.

     NOW,  THEREFORE,  in  consideration of the premises and the mutual promises
herein  made,  and in  consideration  of the  representations,  warranties,  and
covenants herein contained, the Parties agree as follows.

     1. Definitions.

     "Acquired Assets" means all right, title, and interest in and to all of the
assets of ESI as set forth on Exhibit A, including all of its (a) real property,
leaseholds  and  subleaseholds  therein,  improvements,  fixtures,  and fittings
thereon, and easements,  rights-of-way,  and other appurtenants thereto (such as
appurtenant  rights in and to public streets),  (b) tangible  personal  property
(such as machinery,  equipment,  Inventory), (c) Intellectual Property, goodwill
associated  therewith,  the tradename  including  "Electrograph  Systems,  Inc."
licenses and sublicenses  granted and obtained with respect thereto,  and rights
thereunder,  remedies against infringements thereof, and rights to protection of
interests therein under the laws of all  jurisdictions,  (d) leases,  subleases,
and  rights  thereunder,  (e)  agreements,   contracts,  indentures,  mortgages,
instruments,  Security Interests,  guaranties,  other similar arrangements,  and
rights thereunder,  (f) accounts, notes, and other receivables,  (g) securities,
if any, (h) claims, deposits, prepayments,  refunds, causes of action, choses in
action, rights of recovery, rights of set
 <PAGE>
off, and rights of recoupment  (including  any such item relating to the payment
of Taxes), (i) franchises,  approvals, permits, licenses, orders, registrations,
certificates,  variances,  and similar  rights  obtained  from  governments  and
governmental  agencies,   (j)  books,  records,   ledgers,   files,   documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials, (k) any Cash excluding the Mitsubishi Letter
of Credit Deposit; provided, however, that the Acquired Assets shall not include
(i) the  corporate  charter,  qualifications  to conduct  business  as a foreign
corporation,   arrangements   with   registered   agents   relating  to  foreign
qualifications,  taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates,  and other documents relating to
the organization, maintenance, and existence of ESI as a corporation (ii) any of
the rights of ESI under this Agreement (or under any other agreement between ESI
on the one hand and  Manchester  on the other hand  entered into on or after the
date of this  Agreement)  and  (iii)  any  and all  rights  of ESI in and to the
Mitsubishi Letter of Credit Deposit.

     "Adverse  Consequences" means all actions,  suits,  proceedings,  hearings,
investigations,  charges, complaints,  claims, demands, injunctions,  judgments,
orders, decrees, rulings,  damages, dues, penalties,  fines, costs, amounts paid
in settlement,  Liabilities,  obligations,  Taxes, liens, losses,  expenses, and
fees, including court costs and reasonable attorneys' fees and expenses.

     "Affiliate"  has the  meaning  set forth in Rule  12b-2 of the  regulations
promulgated under the Securities Exchange Act.

     "Affiliated  Group" means any  affiliated  group within the meaning of Code
Sec.  1504(a) or any similar group  defined under a similar  provision of state,
local, or foreign law.

     "Assumed  Liabilities"  means (a) all Liabilities of ESI as recorded on the
November 30, 1996 balance sheet, and as adjusted for the passage of time through
the Closing Date in accordance with past custom and practice and in the ordinary
course of business of ESI,  and to be  recorded  on the Closing  Date  Financial
Statements, and subject to the representations and warranties of ESI herein, (b)
all obligations of ESI under the agreements,  contracts,  leases,  licenses, and
other  arrangements  referred to in the definition of Acquired Assets either (i)
to furnish goods,  services,  and other non-Cash benefits to another party after
<PAGE> 

the  Closing  or (ii) to pay for  goods,  services,  and other  non-Cash
benefits  that  another  party  will  furnish to it after the  Closing,  (c) any
Liability of ESI for unpaid Taxes (with respect to ESI or otherwise) for periods
prior to the Closing which were not due and payable prior to Closing,  exclusive
of federal and state income taxes and (d) any Liability or obligation  under any
insurance  policy,  health or medical or life insurance plan of ESI in effect as
of the  Closing  Date;  provided,  however,  the Assumed  Liabilities  shall not
include (i) any  obligation of ESI to indemnify any Person by reason of the fact
that such  Person  was a  director,  officer,  employee,  or agent of ESI or was
serving  at the  request  of  ESI  as a  partner,  trustee,  director,  officer,
employee,  or agent of  another  entity  (whether  such  indemnification  is for
judgments, damages, penalties, fines, costs, amounts paid in settlement, losses,
expenses,  or  otherwise  and whether  such  indemnification  is pursuant to any
statute, charter document,  bylaw, agreement, or otherwise),  (ii) any Liability
of ESI for costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby, (iii) any Liability or obligation of ESI under
this Agreement (or under any other agreement between ESI on the one hand and EAI
or  Manchester  on the  other  hand  entered  into on or after  the date of this
Agreement),  (iv) any Liability or obligation of ESI under the Employee  Benefit
Plan,  (v) any  Liability  or  obligation  of ESI  under  the  Nationsbank  Loan
Agreements,  (vi) any  Liability or  obligation  with respect to the  Mitsubishi
Letter of Credit or (vii) any Liability  resulting  from any breach of contract,
breach  of  warranty,  tort  infringement  or  violation  of law or  (viii)  any
Liability not disclosed and expressly assumed.

     "Bad Debt  Account  Receivables"  means those  account  receivables  of ESI
existing on the Closing  Date which have not been  collected  within 120 days of
the  Closing  Date;  provided,  however,  that EAI has used its best  efforts to
collect such account  receivables.  "Best  efforts" for purposes of this defined
term shall  mean the  sending  of at least two  lawyer  letters  to the  account
debtor.

     "Basis" means any past or present fact,  situation,  circumstance,  status,
condition,  activity,  practice,  plan,  occurrence,  event,  incident,  action,
failure  to act,  or  transaction  that  forms or could  form the  basis for any
specified consequence.

     "Book Value Adjustment" has the meaning set forth in Section 2(d) below.

     "Cash" means cash and cash equivalents (including marketable securities and
short term  investments)  calculated in accordance  with GAAP applied on a basis
consistent with the preparation of the Closing Date Financial Statements.
<PAGE>

     "Closing" has the meaning set forth in Section 2(e) below.

     "Closing Date" has the meaning set forth in Section 2(e) below.

     "Closing Date Financial  Statements" means the financial  statements of ESI
to be prepared by Manchester at its cost  reflecting the financial  condition of
ESI as of the day prior to the Closing Date,  prepared in  accordance  with GAAP
and in accordance with ESI's previous  financial  statements and to be delivered
to the Parties within 90 days of the Closing Date and accepted by the Parties in
writing.  In the  event  of a  dispute  regarding  the  Closing  Date  Financial
Statements which cannot be resolved by the Parties within 15 days of delivery of
the Closing Date Financial  Statements,  the Closing Date  Financial  Statements
shall be reviewed by the Jericho,  New York office of KPMG Peat  Marwick,  which
costs of review  shall be split  equally  by  Bitwise  and  Manchester,  and the
decision of KPMG Peat Marwick shall be final.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Confidential  Information" means any information concerning the businesses
and affairs of ESI that is not already generally available to the public.

     "Controlled  Group of Corporations"  has the meaning set forth in Code Sec.
1563.

     "Disclosure Schedule" has the meaning set forth in Section 3 below.

     "Employee Benefit Plan" means the Bitwise Designs, Inc. 401 K Plan.

     "Employee  Pension  Benefit  Plan" has the  meaning set forth in ERISA Sec.
3(2).

     "Employee  Welfare  Benefit  Plan" has the  meaning set forth in ERISA Sec.
3(1).

     "Environmental,   Health,   and  Safety   Laws"  means  the   Comprehensive
Environmental  Response,  Compensation  and Liability Act of 1980,  the Resource
Conservation  and Recovery Act of 1976, and the  Occupational  Safety and Health
Act of 1970, Each as amended, together with all other laws (including rules,
<PAGE>

regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges  thereunder) of federal,  state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment,  public
health and safety,  or employee  health and safety,  including  laws relating to
emissions,   discharges,   releases,   or  threatened  releases  of  pollutants,
contaminants, or chemical,  industrial,  hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture,  processing,  distribution,  use, treatment, storage, disposal,
transport,  or handling of pollutants,  contaminants,  or chemical,  industrial,
hazardous, or toxic materials or wastes.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended.

     "Extremely  Hazardous  Substance"  has the meaning set forth in Sec. 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended.

     "GAAP" means United States generally accepted  accounting  principles as in
effect from time to time.

     "Hart-Scott-Rodino Act" means the Hart-Scott-Rodino  Antitrust Improvements
Act of 1976, as amended.

     "Indemnified Party" has the meaning set forth in Section 8(d) below.

     "Indemnifying Party" has the meaning set forth in Section 8(d)below.

     "Intellectual  Property"  means (a) all inventions  (whether  patentable or
unpatentable and whether or not reduced to practice),  all improvements thereto,
and all patents, patent applications, and patent disclosures,  together with all
reissuance,  continuations,  continuations-in-part,  revisions,  extensions, and
reexaminations  thereof, (b) all trademarks,  service marks, trade dress, logos,
trade names, and corporate names,  together with all translations,  adaptations,
derivations,  and  combinations  thereof and including  all goodwill  associated
therewith,  and all  applications,  registrations,  and  renewals in  connection
therewith,  (c) all copyrightable  works, all copyrights,  and all applications,
registrations,  and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential  business  information  (including ideas,  research and
development,  know-how,  formulas,  compositions,  manufacturing  and production
<PAGE>

processes and techniques,  technical data,  designs,  drawings,  specifications,
customer  and supplier  lists,  pricing and cost  information,  and business and
marketing plans and proposals),  (f) all computer  software  (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).

     "Intercompany  Liabilities"  means  those  Liabilities  of ESI  to  Bitwise
Designs,  Inc. in  existence  as of the day prior to the Closing Date other than
the sum  equal to the value of the  Mitsubishi  Letter  of  Credit  Deposit  and
evidenced by a  Certificate  of the Chief  Financial  Officer of Bitwise and the
President of ESI delivered to EAI at Closing.

     "Inventory" means all goods in process and finished goods, manufactured and
purchased parts and supplies and other items deemed inventory in accordance with
GAAP in the operation of ESI's business.

     "Knowledge" means actual knowledge after reasonable investigation.

     "Liability" means any liability (whether known or unknown, whether asserted
or unasserted,  whether  absolute or contingent,  whether  accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.

     "Manchester   Promissory  Note"  means  the  promissory  note  of  EAC  and
Manchester  delivered  to Bitwise in  payment of the  Intercompany  Liabilities,
substantially in the form of Exhibit G annexed hereto.

     "Mitsubishi Letter of Credit" means the letter of credit issued by the Bank
of New York to Mitsubishi Electronics on behalf of ESI.

     "Mitsubishi  Letter of Credit  Deposit" means the $350,000  deposit made by
ESI in the Bank of New York in July, 1995 plus all accrued  interest  thereon to
the  Closing  Date  as  evidenced  by  certificate  of  deposit  account  number
697-0599965.

     "Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37).

     "Nationsbank" means Nations Credit Commercial Corporation.
<PAGE>

     "Nationsbank Loan Agreements" means that certain Cross-Collateral  Security
Agreement  dated as of July 19, 1995, as amended by and among  Bitwise,  ESI and
Nationsbank.

     "Non-Saleable  Inventory"  means any  Inventory  of ESI on the Closing Date
that is not sold within 180 days of the Closing Date;  provided,  however,  that
EAI has used  its best  efforts  to sell  such  Inventory.  "Best  efforts"  for
purposes  of this  defined  term  shall  mean  that  EAI has  used  commercially
reasonable  efforts to sell such  Inventory,  including  the  implementation  of
mark-downs in ESI's  Ordinary  Course of Business;  provided,  however,  Bitwise
shall  bear all  financial  responsibility  as an  adjustment  for  Non-Saleable
Inventory  as set forth in  Section  2(d)(ii)  hereof  for any  mark-down  which
reduces the sale price of any Inventory below cost.

     "November  30,  1996  Financial  Statements"  has the  meaning set forth in
Section 3(f) below.

     "Ordinary  Course of  Business"  means  the  ordinary  course  of  business
consistent with past custom and practice (including with respect to quantity and
frequency).

     "Party" has the meaning set forth in the preface above.

     "Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental  entity (or any department,  agency, or political  subdivision
thereof).

     "Prohibited  Transaction"  has the meaning set forth in ERISA Sec.  406 and
Code Sec. 4975.

     "Preliminary  Purchase  Price" has the  meaning  set forth in Section  2(c)
below.

     "Purchase Price" has the meaning set forth in Section 2(d) below.

     "Preliminary  Purchase  Price  Adjustment"  has the  meaning  set  forth on
Section 2(d) below.

     "Reportable Event" has the meaning set forth in ERISA Sec. 4043.

     "Security Interest" means any mortgage, pledge, lien, encumbrance,  charge,
or other  security  interest,  other  than (a)  mechanic's,  materialmen's,  and
similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer  is  contesting  in good faith  through  appropriate  proceedings,  (c)
purchase  money liens and liens  securing  rental  payments  under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.

 <PAGE>

     "Subsidiary" means any corporation with respect to which a specified Person
(or a Subsidiary  thereof)  owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.

     "Tax" means any federal,  state, local, or foreign income,  gross receipts,
license, payroll,  employment,  excise, severance,  stamp, occupation,  premium,
windfall profits,  environmental  (including taxes under Code Sec. 59A), customs
duties,  capital stock,  franchise,  profits,  withholding,  social security (or
similar),  unemployment,  disability,  real property,  personal property, sales,
use,  transfer,  registration,  value  added,  alternative  or  add-on  minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.

     "Tax Return" means any return,  declaration,  report,  claim for refund, or
information  return or statement  relating to Taxes,  including  any schedule or
attachment thereto, and including any amendment thereof.

     "Third Party Claim" has the meaning set forth in Section 8(d) below.

     2. Basic Transaction.

     (a) Purchase and Sale of Assets. On and subject to the terms and conditions
of this Agreement, Manchester and EAI agree to purchase from ESI, and ESI agrees
to sell,  transfer,  convey,  and  deliver  to  Manchester  and EAI,  all of the
Acquired  Assets at the Closing for the  consideration  specified  below in this
Section 2.

     (b) Assumption of  Liabilities.  On and subject to the terms and conditions
of this Agreement, Manchester and EAI agree to assume and become responsible for
all of the Assumed Liabilities at the Closing. Neither, Manchester nor EAI shall
assume or have any responsibility, however, with respect to any other obligation
or Liability of ESI not included  within the definition of Assumed  Liabilities.
Notwithstanding  any other term or  provision  of this  Agreement,  the  Parties
hereby  acknowledge  and agree that neither EAI nor Manchester  shall assume any
obligation  of ESI  under (i) the  Employee  Benefit  Plan or (ii) any  employee
deferred compensation plan incurred prior to the Closing;  (iii) the Nationsbank
Loan Agreement; or (iv) the Mitsubishi Letter of Credit or the Mitsubishi Letter
of Credit Deposit.

 <PAGE>

     (c)   Preliminary   Purchase   Price.   The   preliminary   purchase  price
("Preliminary  Purchase  Price")  payable by  Manchester  to ESI shall equal (i)
$2,500,000  by  delivery of cash  payable by wire  transfer or delivery of other
immediately  available  funds  (ii)  the  Intercompany  Liabilities  payable  by
delivery of the Manchester  Promissory Note and in accordance with Paragraph (d)
below; and (iii) assumption of the Assumed  Liabilities and (iv) 50% of the Book
Value Adjustment, if any, payable by Manchester pursuant to paragraph (d) below.

     (d) Preliminary Purchase Price Adjustments.  The Preliminary Purchase Price
shall be subject to adjustment  ("Preliminary  Purchase  Price  Adjustment")  in
accordance  with this  Paragraph  (d). Any and all  Preliminary  Purchase  Price
Adjustments  required  to be made by  Bitwise  shall be  payable  first  through
reduction of principal of the  Manchester  Promissory  Note and second,  by cash
payments by Bitwise to EAC or Manchester  and otherwise in accordance  with this
Paragraph  (d)  and  Paragraph  (e)  below.   All  Preliminary   Purchase  Price
Adjustments  shall be  subject  to the  agreement  of the  Parties  and shall be
evidenced by written agreement thereof.

     (i) Book Value Adjustment.  The Parties agree that the Purchase Price shall
be subject to upward or  downward  adjustment  in an amount  equal to 50% of the
amount ("Book Value  Adjustment")  by which the book value of ESI (as determined
in accordance  with GAAP) on the Closing Date Financial  Statements  varies from
the book value (as  determined in  accordance  with GAAP) of ESI as set forth on
the  November  30,  1996  Financial  Statements.  In the  event  the book  value
increased  from  November 30,  1996,  then  Manchester  or EAI shall pay the 50%
difference  thereof to Bitwise  within 10 days of  receipt of the  Closing  Date
Financial Statements. In the event the book value of ESI decreased from November
30, 1996, then Bitwise shall pay the 50% difference thereof to EAI or Manchester
within 10 days of receipt of the Closing Date Financial Statements. For purposes
herein,  "book value" shall be defined to mean Assets minus Liabilities,  all as
determined in accordance with GAAP.

     (ii)  Adjustment  for  Non-Saleable  Inventory.  At the Closing,  ESI shall
deliver to EAI or  Manchester a list of all  Inventory  which list shall include
the cost of each item of  Inventory.  The  Preliminary  Purchase  Price shall be
subject to reduction in the event that there exists Non-Saleable  Inventory.  At
the expiration of 180 days of the Closing Date, Manchester and EAI shall deliver
to ESI and/or  Bitwise a list of all  Non-Saleable  Inventory.  The  Preliminary
Purchase Price shall be reduced to the extent that the cost of such Non-Saleable
Inventory  exceeds  the  Inventory  Reserve  as set  forth on the  Closing  Date
Financial Statements.  In addition, the Preliminary Purchase Price shall also be
reduced to reflect the sale of any Inventory  below cost. The Parties agree that
the Inventory Reserve on the Closing Date Financial Statements shall not be less
than $50,000.

 <PAGE>

     (iii)  Adjustment  for Bad Debt Accounts  Receivable.  At the Closing,  ESI
shall deliver to EAC and Manchester a detailed statement of outstanding accounts
receivable  as of a date  which is within  five days of the  Closing  Date.  The
Preliminary Purchase Price shall be subject to reduction in the event that there
exists Bad Debt Account  Receivable  which  cannot be collected  within 120 days
from the Closing Date.  The  Preliminary  Purchase Price shall be reduced to the
extent that the value of such Bad Debt Receivables  exceeds the Bad Debt Reserve
as set forth on the Closing Date Financial Statements.  For purposes hereof, the
value of the Bad Debt Receivables shall be the face value thereof.

     The "Purchase  Price" shall be deemed to be the Preliminary  Purchase Price
as adjusted pursuant to this Paragraph (d).

     (e) Payment of Intercompany Liabilities; Reduction of Manchester Promissory
Note for Preliminary  Purchase Price  Adjustments.  Manchester  shall deliver to
Bitwise  the  Manchester   Promissory  Note  in  payment  of  the   Intercompany
Liabilities.  Any and all Preliminary  Purchase Price Adjustments required to be
made by Bitwise shall be made first through reduction in the principal amount of
the  Manchester  Promissory  Note.  In no  event  shall  the  amount  of  either
Preliminary  Purchase  Price  Adjustment  set forth in each of clause (d)(ii) or
(d)(iii) above separately exceed the amount of $100,000.

     Any and all disputes  among the Parties  shall be set forth in writing.  In
the event that the Parties  cannot in good faith resolve their dispute  within a
reasonable  period  of time,  not to exceed 30 days,  then the  dispute  will be
submitted to the Jericho, New York office of KPMG Peat Marwick. The costs of any
submission to KPMG Peat Marwick shall be shared by each Party.

     In the event that any Inventory is deemed to Non-Saleable  Inventory and an
adjustment  is made  under  Section  2 (d)(ii)  hereof or in the event  that any
account  receivable  is  deemed  to be a Bad  Debt  Account  Receivable  and  an
adjustment is made under Section 2(d)(iii) hereof,  Bitwise shall have the right
to obtain such  Non-Saleable  Inventory or Bad Debt Account  Receivable from EAI
and to sell such Non-Saleable Inventory or to collect upon such Bad Debt Account
Receivable.

 <PAGE>

     (f) The  Closing.  The  closing of the  transactions  contemplated  by this
Agreement  (the  "Closing")  shall take  place at the  offices  of  Goldstein  &
DiGioia,  LLP at 369 Lexington  Avenue,  New York New York 10017,  commencing at
10:00 a.m.  local time on April 18, 1997,  or such other date as the Parties may
mutually  determine (the "Closing Date");  provided,  however,  that the Closing
Date shall be no later than May 2, 1997.

     (g)  Deliveries  at the Closing.  At the  Closing,  (i) ESI will deliver to
Manchester the various certificates,  instruments,  and documents referred to in
Section  7(a)  below;   (ii)   Manchester   will  deliver  to  ESI  the  various
certificates,  instruments,  and  documents  referred to in Section  7(b) below;
(iii) ESI will execute, acknowledge (if appropriate),  and deliver to Manchester
(A) the Bill of Sale and Assignment  (including  real property and  Intellectual
Property  transfer  documents)  in  the  form  of  Exhibit  B;  (B)  such  other
instruments of sale, transfer,  conveyance, and assignment as Manchester and its
counsel  reasonably may request;  (iv) Manchester will execute,  acknowledge (if
appropriate),  and deliver to ESI such  instruments of assumption as ESI and its
counsel  reasonably may request;  and (v) Manchester and EAI will deliver to ESI
the consideration specified in Section 2(c) above.

     (h)  Allocation.  The Parties agree to allocate the Purchase Price (and all
other capitalizable costs) among the Acquired Assets for all purposes (including
financial  accounting  and tax  purposes)  in  accordance  with  the  allocation
schedule attached hereto as Exhibit C.

     3.  Representations  and  Warranties of ESI. ESI represents and warrants to
Manchester and EAI that the  statements  contained in this Section 3 are correct
and complete as of the date of this  Agreement  and will be correct and complete
as of the Closing  Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3), except as
set forth in the disclosure  schedule  accompanying this Agreement and initialed
by the Parties (the  "Disclosure  Schedule").  The  Disclosure  Schedule will be
arranged in  paragraphs  corresponding  to the lettered and numbered  paragraphs
contained in this Section 3.

 <PAGE>

     (a)  Organization  of ESI. ESI is a  corporation  duly  organized,  validly
existing,  and in  good  standing  under  the  laws of the  jurisdiction  of its
incorporation.

     (b)  Authorization  of  Transaction.  ESI  has  full  power  and  authority
(including  full  corporate  power and  authority)  to execute and deliver  this
Agreement  and to  perform  its  obligations  hereunder.  Without  limiting  the
generality of the foregoing,  the board of directors of ESI and Bitwise Designs,
Inc.,  as the sole  stockholder  of ESI,  have duly  authorized  the  execution,
delivery,  and performance of this Agreement by ESI. This Agreement  constitutes
the valid and legally binding obligation of ESI,  enforceable in accordance with
its terms and conditions.

     (c)  Noncontravention.  Neither  the  execution  and the  delivery  of this
Agreement,  nor the consummation of the transactions  contemplated  hereby, will
(i) violate any constitution,  statute, regulation, rule, injunction,  judgment,
order,  decree,   ruling,  charge,  or  other  restriction  of  any  government,
governmental  agency,  or court to which ESI is subject or any  provision of the
charter  or  bylaws  of ESI or  (ii)  conflict  with,  result  in a  breach  of,
constitute a default under,  result in the  acceleration of, create in any party
the right to accelerate,  terminate,  modify,  or cancel,  or require any notice
under any agreement,  contract, lease, license, instrument, or other arrangement
to which ESI is a party or by which it is bound or to which any of its assets is
subject (or result in the  imposition  of any Security  Interest upon any of its
assets)  (subject to the right of any third party to consent to any assignment).
ESI does not need to give any notice to,  make any  filing  with,  or obtain any
authorization,  consent, or approval of any government or governmental agency in
order for the  Parties  to  consummate  the  transactions  contemplated  by this
Agreement  (including the assignments  and assumptions  referred to in Section 2
above).

     (d) Brokers'  Fees.  ESI has no Liability or  obligation to pay any fees or
commissions  to any broker,  finder,  or agent with respect to the  transactions
contemplated  by this  Agreement  for which  Manchester  could become  liable or
obligated.  ESI does not have any  Liability  or  obligation  to pay any fees or
commissions  to any broker,  finder,  or agent with respect to the  transactions
contemplated by this Agreement.

     (e)  Title  to  Assets.  Except  as set  forth  in  Paragraph  3(e)  to the
Disclosure Schedule,  ESI has good and marketable title to, or a valid leasehold
interest in, the properties and assets used by them,  located on their premises,
or shown on the Most Recent  Financial  Statements  or  acquired  after the date
thereof,  free and clear of all Security  Interests,  except for  properties and
assets disposed of in the Ordinary Course of Business since the date of the Most
Recent Balance Sheet. Without limiting the generality of the foregoing,  ESI has
good and marketable title to all of the Acquired  Assets,  free and clear of any
Security  Interest or restriction  on transfer  except as set forth in Paragraph
3(e) to the Disclosure Schedule.

 <PAGE>

     (f) Financial  Statements.  Attached  hereto as Exhibit C are the unaudited
balance  sheets  and  statements  of  income,  and  cash  flow as of and for the
five-month period ended November 30, 1996 (collectively,  the "November 30, 1996
Financial  Statements").  The November 30, 1996 Financial Statements  (including
the notes thereto, if any) have been prepared in accordance with GAAP applied on
a consistent basis  throughout the periods covered  thereby,  present fairly the
financial condition of ESI as of such dates and the results of operations of ESI
for such periods,  are correct and complete,  and are consistent  with the books
and records of ESI (which books and records are correct and complete)  provided,
however,  that the November 30, 1996 Financial  Statements are subject to normal
year-end  adjustments  (which  will  not  be  material  individually  or in  the
aggregate) and lack footnotes and other presentation items.

     (g) Events Subsequent to November 30, 1996 Financial Statements.  Since the
November 30, 1996 Financial Statements,  there has not been any material adverse
change in the business, financial condition,  operations, results of operations,
or future prospects ESI. Without limiting the generality of the foregoing, since
that date:

          (i) ESI has not sold,  leased,  transferred,  or  assigned  any of its
     assets, tangible or intangible,  other than for a fair consideration in the
     Ordinary Course of Business;

          (ii) ESI has not  entered  into any  agreement,  contract,  lease,  or
     license (or series of related agreements,  contracts, leases, and licenses)
     either  involving  more than  $25,000 or  outside  the  Ordinary  Course of
     Business;

          (iii)no  party  (including  any of ESI) has  accelerated,  terminated,
     modified,  or cancelled  any  agreement,  contract,  lease,  or license (or
     series of related  agreements,  contracts,  leases, and licenses) involving
     more than $25,000 to which ESI is a party or by which any of them is bound;

          (iv) ESI has not imposed any Security Interest upon any of its assets,
     tangible or intangible;

          (v) ESI has not made any  capital  expenditure  (or  series of related
     capital  expenditures)  either  involving  more than $25,000 or outside the
     Ordinary Course of Business;

          (vi) ESI has not issued any note,  bond,  or other  debt  security  or
     created,  incurred,  assumed,  or guaranteed any  indebtedness for borrowed
     money or capitalized  lease  obligation  either involving more than $25,000
     singly or $75,000 in the aggregate;

          (viii)  ESI has not  delayed or  postponed  the  payment  of  accounts
     payable and other Liabilities outside the Ordinary Course of Business;

          (ix) ESI has not cancelled, compromised, waived, or released any right
     or claim (or series of related  rights and claims) the  Ordinary  Course of
     Business;

          (x) ESI has not granted any license or  sublicense of any rights under
     or with respect to any Intellectual Property;
<PAGE>

          (xi) ESI has not issued,  sold,  or  otherwise  disposed of any of its
     capital  stock,  or  granted  any  options,  warrants,  or other  rights to
     purchase or obtain (including upon conversion,  exchange,  or exercise) any
     of its capital stock;

          (xii)ESI has not declared, set aside, or paid any dividend or made any
     distribution with respect to its capital stock (whether in cash or in kind)
     or redeemed, purchased, or otherwise acquired any of its capital stock;

          (xiii) ESI has not experienced any material  damage,  destruction,  or
     loss (whether or not covered by insurance) to its property;

          (xiv)ESI  has not  made  any  loan  to,  or  entered  into  any  other
     transaction  with,  any of the  directors,  officers,  and employees of ESI
     outside the Ordinary Course of Business;

          (xv)  Other  than as set forth on  Schedule  G (XV) of the  Disclosure
     Schedule ESI has not entered  into any  employment  contract or  collective
     bargaining  agreement,  written  or  oral,  or  modified  the  terms of any
     existing employment contract or collective bargaining agreement;  (xvi) ESI
     has  not  granted  any  increase  in the  base  compensation  of any of its
     directors, officers, and outside the Ordinary Course of Business;

          (xvii) ESI has not  adopted,  amended,  modified,  or  terminated  any
     bonus,  profit-sharing,  incentive,  severance, or other plan, contract, or
     commitment for the benefit of any of the directors, officers, and employees
     of ESI or taken any such action with respect to the Employee Benefit Plan;

          (xviii) ESI has not made any other change in employment  terms for any
     of its directors,  officers,  and employees  outside the Ordinary Course of
     Business;

          (xix)ESI  has not  made or  pledged  to make any  charitable  or other
     capital contribution outside the Ordinary Course of Business;

          (xx) ESI has not paid any amount to any third  party  with  respect to
     any  Liability  or  obligation  (including  any costs and  expenses ESI has
     incurred  or  may  incur  in  connection   with  this   Agreement  and  the
     transactions  contemplated  hereby)  which would not  constitute an Assumed
     Liability  if in  existence  as of the Closing  other than the  liabilities
     arising under the Nationsbank Loan Agreement;

          (xxi) there  has  not  been  any  other  material  occurrence,  event,
     incident,  action,  failure to act, or  transaction  outside  the  Ordinary
     Course of Business involving ESI; and

          (xxii) ESI has not committed to any of the foregoing.
<PAGE>

     (h) Undisclosed  Liabilities.  ESI does not have any Liability (and, to its
knowledge, there is no Basis for any present or future action, suit, proceeding,
hearing, investigation,  charge, complaint, claim, or demand against any of them
giving rise to any Liability),  except for (i) Liabilities set forth on the face
of the November 30, 1996 Financial Statements (rather than in any notes thereto)
and (ii)  Liabilities  which have  arisen  after the  November  30,  1996 in the
Ordinary Course of Business (none of which results from,  arises out of, relates
to, is in the  nature of, or was  caused by any  breach of  contract,  breach of
warranty, tort, infringement, or violation of law).

     (i) Legal Compliance. To its Knowledge ESI has materially complied with all
applicable  laws  (including  rules,  regulations,  codes,  plans,  injunctions,
judgments,  orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof),  and no action, suit,
proceeding, hearing, investigation,  charge, complaint, claim, demand, or notice
has been filed or, to its knowledge,  commenced against any of them alleging any
failure so to comply  except where failure to comply would not have any material
adverse effect upon ESI or its business.

     (j) Tax Matters.

          (i)  ESI has filed all Tax Returns  that it was required to file prior
               to the  Closing  Date.  All such Tax  Returns  were  correct  and
               complete in all  respects.  All Taxes owed by ESI (whether or not
               shown on any Tax Return) have been paid. ESI currently is not the
               beneficiary of any extension of time within which to file any Tax
               Return.  No  claim  has  ever  been  made  by an  authority  in a
               jurisdiction  where ESI does not file Tax  Returns  that it is or
               may be subject to  taxation  by that  jurisdiction.  There are no
               Security  Interests  on any of the  assets  of ESI that  arose in
               connection with any failure (or alleged failure) to pay any Tax.

          (ii) ESI has  withheld  and  paid  all  Taxes  required  to have  been
               withheld and paid in connection with amounts paid or owing to any
               employee, independent contractor, creditor, stockholder, or other
               third party.

          (iii)Neither ESI nor any director nor officer (or employee responsible
               for Tax matters)  expects any authority to assess any  additional
               Taxes with  respect  to ESI for any period for which Tax  Returns
               have been filed.  There is no dispute or claim concerning any Tax
               Liability of ESI either (A) claimed or raised by any authority in
               writing  or (B) as to  which  any  directors  and  officers  (and
               employees responsible for Tax matters) of ESI.

          (iv) ESI has not waived any statute of limitations in respect of Taxes
               or  agreed  to  any  extension  of  time  with  respect  to a Tax
               assessment or deficiency.
<PAGE>

          (v)  ESI has not filed a consent  under  Code Sec.  341(f)  concerning
               collapsible  corporations.  ESI has not been a United States real
               property  holding  corporation  within  the  meaning of Code Sec.
               897(c)(2)  during the  applicable  period  specified in Code Sec.
               897(c)(1)(A)(ii).  ESI has not  been a  member  of an  Affiliated
               Group filing a consolidated federal income Tax Return (other than
               a group the common  parent of which was  Bitwise)  or (B) has any
               Liability  for the Taxes of any Person (other than any of ESI and
               its  Subsidiaries)  under Treas.  Reg.ss.1.1502-6 (or any similar
               provision of state,  local,  or foreign  law), as a transferee or
               successor, by contract, or otherwise.

          (vi) Section  3(j)  of the  Disclosure  Schedule  sets  forth  the the
               basisof ESI in its assets as of March 31, 1997;

     (k) Real Property.

      (i) ESI does not own any real property.

     (ii)  Section  3(k)(ii)  of the  Disclosure  Schedule  lists and  describes
briefly all real  property  leased or  subleased  by ESI.  ESI has  delivered to
Manchester  correct and complete  copies of the leases and  subleases  listed in
Section 3(k)(ii) of the Disclosure  Schedule (as amended to date).  With respect
to Each  lease  and  sublease  listed  in  Section  3(k)(ii)  of the  Disclosure
Schedule:

          (A)  the lease or sublease is legal, valid, binding,  enforceable, and
               in full force and effect;

          (B)  the lease or sublease will continue to be legal, valid,  binding,
               enforceable,  and in full  force and  effect on  identical  terms
               following  the  consummation  of  the  transactions  contemplated
               hereby  (subject  to the rights of any third  party to consent to
               any assignments and assumptions);

          (C)  ESI is not in material breach or material  default,  and no event
               was  occurred  which,   with  notice  or  lapse  of  time,  would
               constitute   a  breach  or   default   or   permit   termination,
               modification, or acceleration thereunder;

          (D)  to the best of ESI's knowledge, no party to the lease or sublease
               has repudiated any provision thereof;

          (E)  to the best of  ESI's  knowledge,  there  are no  disputes,  oral
               agreements,  or forbearance programs in effect as to the lease or
               sublease;

          (F)  with respect to Each sublease, the representations and warranties
               set forth in subsections  (A)-(E) above are true and correct with
               respect to the underlying lease;
<PAGE>

          (G)  to  the  best  of  ESI's   Knowledge,   ESI  has  not   assigned,
               transferred,  conveyed, mortgaged, deeded in trust, or encumbered
               any interest in the leasehold or subleasehold, except pursuant to
               the Nationsbank Loan Agreements;

     (l) Intellectual Property.

     (i) ESI  owns or has the  right to use  pursuant  to  license,  sublicense,
agreement,  or permission all Intellectual  Property necessary for the operation
of its businesses as presently  conducted.  Each item of  Intellectual  Property
owned or used by ESI immediately prior to the Closing hereunder will be owned or
available  for  use by  Manchester  or EAI on  identical  terms  and  conditions
immediately subsequent to the Closing hereunder.

     (ii) To the best of ESI's knowledge, ESI has not interfered with, infringed
upon,  misappropriated,  or otherwise  come into conflict with any  Intellectual
Property rights of third parties, and neither ESI nor its directors and officers
(and employees with  responsibility for Intellectual  Property matters) has ever
received  any charge,  complaint,  claim,  demand,  or notice  alleging any such
interference, infringement,  misappropriation, or violation (including any claim
that ESI must license or refrain from using any Intellectual  Property rights of
any third  party).  To the  Knowledge of ESI and its directors and officers (and
employees with responsibility for Intellectual Property matters), no third party
has interfered  with,  infringed upon,  misappropriated,  or otherwise come into
conflict with any Intellectual Property rights of ESI.

     (m)  Tangible  Assets.  ESI  owns  or  leases  all  buildings,   machinery,
equipment,  and  other  tangible  assets  necessary  for the  conduct  of  their
businesses as presently conducted. To ESI's Knowledge,  Each such tangible asset
is free from defects (patent and latent), has been maintained in accordance with
normal industry practice,  is in good operating condition and repair (subject to
normal wear and tear),  and is suitable  for the purposes for which it presently
is used.

     (n) Inventory.  The inventory of ESI consists of manufactured and purchased
parts,  goods in process,  and finished goods,  all of which is merchantable and
fit for the purpose for which it was procured, and none of which is slow-moving,
obsolete,  damaged,  or  defective,  subject  only to the reserve for  inventory
writedown set forth on the face of the November 30, 1996 Financial Statements as
adjusted  for the passage of time through the Closing  Date in  accordance  with
past custom and practice.

 <PAGE>

     (o) Contracts.  Section 3(0) of the Disclosure Schedule lists the following
contracts and other agreements to which ESI is a party:

               (i) any agreement (or group of related  agreements) for the lease
          of  personal  property  to or from  any  Person  providing  for  lease
          payments in excess of $20,000 per annum;

               (ii) any  agreement  (or  group of  related  agreements)  for the
          purchase or sale of raw materials, commodities, supplies, products, or
          other personal property, or for the furnishing or receipt of services,
          the  performance  of which will  extend over a period of more than one
          year,   result  in  a  material   loss  to  any  of  ESI,  or  involve
          consideration in excess of $20,000;

               (iii) any agreement concerning a partnership or joint venture;

               (iv) any agreement (or group of related  agreements)  under which
          it has created, incurred,  assumed, or guaranteed any indebtedness for
          borrowed  money,  or any capitalized  lease  obligation,  in excess of
          $20,000 or under  which it has  imposed a Security  Interest on any of
          its assets, tangible or intangible;

               (v) any agreement concerning confidentiality or noncompetition;

               (vi) any agreement involving any of Bitwise or its Affiliates;

               (vii)any profit  sharing,  stock option,  stock  purchase,  stock
          appreciation, deferred compensation, severance, or other material plan
          or  arrangement  for the benefit of the  current or former  directors,
          officers, and employees;

               (viii) any collective bargaining agreement;

               (ix) any  agreement  for the  employment  of any  individual on a
          full-time,  part-time,  consulting,  or other basis  providing  annual
          compensation in excess of $20,000 or providing severance benefits;

               (x) any  agreement  under  which it has  advanced  or loaned  any
          amount to any of the directors,  officers,  and employees  outside the
          Ordinary  Course  of  Business;  (xi) any  agreement  under  which the
          consequences of a default or termination could have a material adverse
          effect on the business,  financial condition,  operations,  results of
          operations, or future prospects of ESI; or
<PAGE>

          (xii)any  other  agreement  (or  group  of  related   agreements)  the
               performance of which involves consideration in excess of $20,000.

     ESI has delivered to Manchester and EAI a correct and complete copy of Each
written agreement listed in Section 3(o) of the Disclosure  Schedule (as amended
to date).  With  respect to Each such  agreement:  (A) the  agreement  is legal,
valid,  binding,  enforceable,  and in full force and effect;  (B) the agreement
will continue to be legal, valid,  binding,  enforceable,  and in full force and
effect  on  identical  terms  following  the  consummation  of the  transactions
contemplated  hereby  subject to the right of any third party to consent to such
assignment; (C) to its knowledge, no party is in breach or default, and no event
has  occurred  which with notice or lapse of time would  constitute  a breach or
default,  or  permit  termination,  modification,  or  acceleration,  under  the
agreement;  and (D) to its  knowledge,  no party has repudiated any provision of
the agreement.

     (p) Notes and Accounts Receivable. All notes and accounts receivable of ESI
are reflected properly on ESI's books and records, are valid receivables subject
to no  setoffs  or  counterclaims,  are  current  and  collectible,  and will be
collected in accordance with their terms at their recorded amounts, subject only
to the  reserve  for bad debts set forth on the face of the  November  30,  1996
Financial  Statements  (rather  than in any notes  thereto) as adjusted  for the
passage of time through the Closing Date in accordance  with the past custom and
practice of ESI.

     (q)  Powers of  Attorney.  There  are no  outstanding  powers  of  attorney
executed  on  behalf  of ESI other  than as set  forth in the  Nationsbank  Loan
Agreement.

     (r) Insurance.  Section 3(r) of the Disclosure  Schedule sets forth to each
insurance policy (including  policies providing property,  casualty,  liability,
and workers'  compensation  coverage and bond and surety  arrangements) to which
ESI is currently a party,  a named  insured,  or otherwise  the  beneficiary  of
coverage:

With  respect to each such  insurance  policy:  (A) the policy is legal,  valid,
binding,  enforceable, and in full force and effect; (B) ESI is not in breach or
default  (including  with  respect to the  payment of  premiums or the giving of
notices),  and no event has  occurred  which,  with notice or the lapse of time,
would constitute such a breach or default, or permit termination,  modification,
or acceleration, under the policy; and (C) no party to the policy has repudiated
any provision thereof.

 <PAGE>

     (s)  Litigation.  Section 3(s) of the  Disclosure  Schedule sets forth each
instance in ESI (i) is subject to any outstanding injunction,  judgment,  order,
decree,  ruling,  or charge or (ii) is a party  or, to the  Knowledge  of any of
ESI's directors and officers (and employees with  responsibility  for litigation
matters)  of  ESI,  is  threatened  to be  made a  party  to any  action,  suit,
proceeding,   hearing,   or  investigation  of,  in,  or  before  any  court  or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator.  None of the actions, suits, proceedings,
hearings,  and  investigations  set  forth  in  Section  3(s) of the  Disclosure
Schedule could result in any material adverse change in the business,  financial
condition, operations, results of operations, or future prospects of any of ESI.

     (t) Product Warranty. Each product manufactured, sold, leased, or delivered
by ESI has been in conformity  with all applicable  contractual  commitments and
all express and implied warranties, and ESI to the best of its Knowledge, has no
Liability  (and  there is no Basis  for any  present  or  future  action,  suit,
proceeding, hearing, investigation,  charge, complaint, claim, or demand against
any of them giving rise to any Liability)  for  replacement or repair thereof or
other damages in connection  therewith,  subject only to the reserve for product
warranty  claims set forth on the face of the November  30, 1996  Balance  Sheet
(rather  than in any notes  thereto) as adjusted for the passage of time through
the Closing Date in  accordance  with the past custom and  practice.  No product
manufactured,  sold,  leased,  or delivered  by ESI is subject to any  guaranty,
warranty, or other indemnity beyond the applicable standard terms and conditions
of sale or lease.

     (u) Product Liability.  To the best of its Knowledge,  ESI has no Liability
(and  there is no Basis for any  present  or future  action,  suit,  proceeding,
hearing, investigation,  charge, complaint, claim, or demand against any of them
giving  rise to any  Liability)  arising  out of any  injury to  individuals  or
property as a result of the ownership, possession, or use by it.

     (v) Employees.  To the best of ESI's Knowledge no executive,  key employee,
or group of employees has any plans to terminate employment.  ESI is not a party
to or  bound  by any  collective  bargaining  agreement,  nor  has  any of  them
experienced any strikes, grievances,  claims of unfair labor practices, or other
collective bargaining disputes.
<PAGE>

     (w) Employee Benefits.

          (i)  Section  3(w) of the  Disclosure  Schedule  lists  each  Employee
      Benefit Plan that ESI maintains or to which ESI contributes.

               (a) Each such  Employee  Benefit  Plan (and Each  related  trust,
          insurance contract,  or fund) complies in form and in operation in all
          respects with the  applicable  requirements  of ERISA,  the Code,  and
          other applicable laws.

               (b) To its knowledge, each such Employee Benefit Plan which is an
          Employee  Pension Benefit Plan meets the  requirements of a "qualified
          plan" under Code Sec. 401(a).

               (c) ESI has delivered to Manchester  and EAI correct and complete
          copies of the plan documents and summary plan descriptions.

               (d) ESI does not currently  maintain,  has not  maintained  since
          August 7, 1994 and has no Liability with respect to any  Multiemployer
          Plan.

          (ii)  Section 3 (w) of the  Disclosure  Schedule  also sets  forth all
     other  fringe  benfits  such as  medical,  health or life  insurance  plans
     provided  by ESI to its  employees.  ESI  shall  deliver a copy of all such
     plans to Manchester prior to closing.


     (x)  Guaranties.  Except as set forth in Paragraph  3(X) of the  Disclosure
Schedule,  ESI is not a guarantor or  otherwise  is liable for any  Liability or
obligation (including indebtedness) of any other Person.

     (y) Environment, Health, and Safety.

     To its  knowledge,  ESI has complied with all  Environmental,  Health,  and
Safety Laws, and no action, suit, proceeding,  hearing,  investigation,  charge,
complaint,  claim,  demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.  Without  limiting the generality of the
preceding  sentence,  ESI has  obtained and been in  compliance  with all of the
terms and conditions of all permits,  licenses,  and other  authorizations which
are required under, and has complied with all other  limitations,  restrictions,
conditions, standards, prohibitions,  requirements,  obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety Laws.
<PAGE>

     (z)  Disclosure.  The  representations  and  warranties  contained  in this
Section 3 do not  contain  any untrue  statement  of a material  fact or omit to
state  any  material  fact  necessary  in  order  to  make  the  statements  and
information contained in this Section 3 not misleading.

     4.  Representations  and  Warranties of Manchester and EAI. Each of EAI and
Manchester  represents and warrants to ESI that the statements contained in this
Section 4 are correct and complete as of the date of this  Agreement and will be
correct and  complete as of the Closing  Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section  4),  except as set forth in the  Disclosure  Schedule.  The  Disclosure
Schedule  will be arranged  in  paragraphs  corresponding  to the  lettered  and
numbered paragraphs contained in this Section 4.

     (a)  Organization  of EAI and  Manchester.  Each of EAI and Manchester is a
corporation  duly organized,  validly  existing,  and in good standing under the
laws of the jurisdiction of its incorporation.

     (b) Authorization of Transaction. Each of EAI and Manchester has full power
and authority  (including  full  corporate  power and  authority) to execute and
deliver this Agreement and to perform its obligations hereunder.  This Agreement
constitutes  the  valid  and  legally  binding  obligation  of  Each  of EAI and
Manchester, enforceable in accordance with its terms and conditions.

     (c)  Noncontravention.  Neither  the  execution  and the  delivery  of this
Agreement,  nor the consummation of the transactions  contemplated  hereby, will
(i) violate any constitution,  statute, regulation, rule, injunction,  judgment,
order,  decree,   ruling,  charge,  or  other  restriction  of  any  government,
governmental  agency,  or court to which  Manchester  or EAI is  subject  or any
provision of its charter or bylaws or (ii) conflict with, result in a breach of,
constitute a default under,  result in the  acceleration of, create in any party
the right to accelerate,  terminate,  modify,  or cancel,  or require any notice
under any agreement,  contract, lease, license, instrument, or other arrangement
to which Manchester or EAI is a party or by which it is bound or to which any of
its respective  assets is subject.  Neither EAI nor Manchester needs to give any
notice  to,  make any filing  with,  or obtain any  authorization,  consent,  or
approval of any  government or  governmental  agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
<PAGE>

     (d)  Brokers'  Fees.  Neither  EAI  nor  Manchester  has any  Liability  or
obligation to pay any fees or commissions to any broker,  finder,  or agent with
respect to the  transactions  contemplated  by this  Agreement for which ESI, or
Bitwise could become liable or obligated.

     5. Pre-Closing Covenants.  The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.

     (a)  General.  Each of the  Parties  will use its best  efforts to take all
action  and to do all  things  necessary,  proper,  or  advisable  in  order  to
consummate and make effective the  transactions  contemplated  by this Agreement
(including satisfaction,  but not waiver, of the closing conditions set forth in
Section 7 below).

     (b) Notices and Consents.  ESI will give any notices to third parties,  and
ESI will use its  reasonable  best  efforts to obtain any third  party  consents
and/or  estoppels  that  Manchester or EAI  reasonably may request in connection
with the matters  referred to in Section  3(c) above.  Each of the Parties  will
give any notices to, make any filings with, and use its reasonable  best efforts
to obtain  any  authorizations,  consents,  and  approvals  of  governments  and
governmental agencies in connection with the matters referred to in Section 3(c)
and Section 4(c) above.

     (c) Operation of Business.  ESI will not engage in any  practice,  take any
action,  or enter into any transaction  outside the Ordinary Course of Business.
Without  limiting  the  generality  of the  foregoing,  ESI will not (i) pay any
amount to any third party with respect to any Liability or obligation (including
any costs and  expenses ESI has  incurred or may incur in  connection  with this
Agreement and the transactions  contemplated  hereby) which would not constitute
an Assumed Liability if in existence as of the Closing, or (ii) otherwise engage
in any  practice,  take any action,  or enter into any  transaction  of the sort
described in Section 3(g) above.

     (d)  Preservation  of Business.  ESI will keep its business and  properties
substantially  intact,  including its present operations,  physical  facilities,
working  conditions,  and  relationships  with  lessors,  licensors,  suppliers,
customers, and employees.

     (e) Full Access.  ESI will permit  representatives of Manchester and EAI to
have full access at all reasonable times, and in a manner so as not to interfere
with the normal  business  operations  to all premises,  properties,  personnel,
books, records (including Tax records), contracts, and documents.
<PAGE>

     (f) Notice of  Developments.  Each Party will give prompt written notice to
the other Party of any material adverse  development  causing a breach of any of
its own  representations  and  warranties  in Section 3 and Section 4 above.  No
disclosure by any Party pursuant to this Section 5(f), however,  shall be deemed
to amend  or  supplement  the  Disclosure  Schedule  or to  prevent  or cure any
misrepresentation, breach of warranty, or breach of covenant.

     (g)  Exclusivity.  ESI will not (i) solicit,  initiate,  or  encourage  the
submission of any proposal or offer from any Person  relating to the acquisition
of any capital stock or other voting securities,  or any substantial  portion of
its assets, (including any acquisition structured as a merger, consolidation, or
share  exchange)  or  (ii)   participate  in  any  discussions  or  negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. ESI will notify Manchester immediately if any Person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.

     6. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.

     (a)  General.  In case at any time after the Closing any further  action is
necessary or desirable to carry out the purposes of this Agreement,  Each of the
Parties will take such further  action  (including the execution and delivery of
such  further  instruments  and  documents)  as the other Party  reasonably  may
request,  all the sole cost and  expense of the  requesting  Party  (unless  the
requesting Party is entitled to indemnification therefor under Section 8 below).
ESI  acknowledges  and agrees that from and after the Closing EAI and Manchester
will be entitled to possession of all documents,  books,  records (including Tax
records),  agreements,  and financial  data of any sort relating to the business
except for stock ledgers and minute books.

     (b) Litigation  Support. In the event and for so long as any Party actively
is  contesting  or  defending  against any action,  suit,  proceeding,  hearing,
investigation,  charge,  complaint,  claim, or demand in connection with (i) any
transaction  contemplated  under  this  Agreement  or (ii) any fact,  situation,
circumstance,  status, condition,  activity, practice, plan, occurrence,  event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the business of ESI as conducted  prior to the Closing Date, the other
Pary will cooperate  with the  contesting or defending  Party and its counsel in
the contest or defense, make available its personnel, and provide such testimony
and access to its books and records as shall be necessary in connection with the
contest  or  defense,  all at the sole cost and  expense  of the  contesting  or
defending  Party  (unless  the  contesting  or  defending  Party is  entitled to
indemnification therefor under Section 8 below).
<PAGE>

     (c)  Transition.  ESI will not take any action that is designed or intended
to have the effect of discouraging any lessor, licensor,  customer, supplier, or
other business  associate from maintaining the same business  relationships with
EAI or  Manchester  after the  Closing  as it  maintained  with ESI prior to the
Closing.  ESI will refer all customer  inquiries relating to the business of ESI
to EAI or Manchester from and after the Closing.

     (d)  Confidentiality.   ESI  will  treat  and  hold  as  such  all  of  the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement,  and deliver promptly to Manchester or
destroy, at the request and option of Manchester,  all tangible embodiments (and
all copies) of the Confidential Information which are in its possession.  In the
event that ESI is  requested  or  required  (by oral  question  or  request  for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative   demand,   or  similar  process)  to  disclose  any  Confidential
Information,  ESI will notify Manchester  promptly of the request or requirement
so that Manchester may seek an appropriate  protective order or waive compliance
with the  provisions  of this Section  6(d).  If, in the absence of a protective
order or the  receipt of a waiver  hereunder,  ESI is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for  contempt,  ESI may  disclose  the  Confidential  Information  to the
tribunal;  provided,  however, that ESI shall use its reasonable best efforts to
obtain,  at the reasonable  request of Manchester,  an order or other  assurance
that confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as Manchester shall designate.

     (e) Covenant Not to Compete.  For a period of five years from and after the
Closing Date,  neither  Bitwise,  its affiliates nor ESI will engage directly or
indirectly  in any  business  that ESI  conducts as of the  Closing  Date in any
geographic  area in which ESI  conducts  that  business as of the Closing  Date;
provided,  however,  that  (i)  Manchester  acknowledges  and  consents  to  the
continued  operation  of  present  businesses   conducted  by  Bitwise  and  its
affiliates as of the date hereof and agrees that Bitwise and its  affiliates may
continue such business  after the Closing Date and (ii) no owner of less than 5%
of the outstanding  stock of any publicly traded  corporation shall be deemed to
engage solely by reason thereof in any of its businesses. In order to effectuate
the covenant  contained  herein,  Bitwise and its affiliates agree that it shall
not represent  Mitsubishi,  Sony or Nokia in the sale of computer  monitors.  In
addition, Bitwise and its affiliates represent and warrant that it does not have
possession of any customer  lists of ESI and if it comes into  possession of any
such lists it will  immediately  return such lists to  Manchester.  If the final
judgment  of a  court  of  competent  jurisdiction  declares  that  any  term or
provision of this Section 6(e) is invalid or  unenforceable,  the Parties  agree
that the court making the determination of invalidity or unenforceability  shall
have the power to reduce the scope,  duration, or area of the term or provision,
to delete specific words or phrases,  or to replace any invalid or unenforceable
term or provision  with a term or provision  that is valid and  enforceable  and
that comes closest to expressing  the intention of the invalid or  unenforceable
term or provision,  and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
<PAGE>

     7. Conditions to Obligation to Close.

     (a)  Conditions to Obligation of  Manchester.  The obligation of Manchester
and  EAI to  consummate  the  transactions  to be  performed  by Each of them in
connection  with  the  Closing  is  subject  to  satisfaction  of the  following
conditions:

               (i)  the  representations  and  warranties  of ESI set  forth  in
          Section 3 above shall be true and correct in all material  respects at
          and as of the Closing Date;

               (ii)  ESI  shall  have  performed  and  complied  with all of its
          covenants hereunder in all material respects through the Closing;

               (iii) ESI shall have  procured  all of the third  party  consents
          and/or estoppels  specified in Section 5(b) above  including;  without
          limitation,  the consent of all  distributors of the assignment of all
          distribution  and service  agreements to Manchester in form acceptable
          to Manchester;

               (iv) no action,  suit, or proceeding  shall be pending before any
          court or  quasi-judicial  or  administrative  agency  of any  federal,
          state, local, or foreign jurisdiction or before any arbitrator wherein
          an unfavorable injunction,  judgment, order, decree, ruling, or charge
          would (A) prevent consummation of any of the transactions contemplated
          by this Agreement,  (B) cause any of the transactions  contemplated by
          this  Agreement to be  rescinded  following  consummation,  (C) affect
          adversely  the right of EAI to own the  Acquired  Assets or to operate
          the former businesses of ESI as conducted prior to the Closing, or (D)
          affect  adversely  the its right to own its assets and to operate  its
          businesses (and no such injunction,  judgment,  order, decree, ruling,
          or charge shall be in effect);

               (v) ESI shall have  delivered to Manchester and EAI a certificate
          to the effect that Each of the conditions  specified  above in Section
          7(a)(i)-(iv) is satisfied in all respects;
<PAGE>

               (vi) ESI shall have  delivered to EAI a copy of a certificate  of
          name change to be filed with the Secretary of State of New York within
          five days of the closing;

               (vii)  Manchester and EAI shall have received from counsel to ESI
          an  opinion in form and  substance  as set forth in Exhibit E attached
          hereto,  addressed to Manchester  and EAI, and dated as of the Closing
          Date;

               (viii)  all  actions  to be  taken  by  ESI  in  connection  with
          consummation  of  the   transactions   contemplated   hereby  and  all
          certificates,  opinions,  instruments, and other documents required to
          effect  the  transactions   contemplated  hereby  will  be  reasonably
          satisfactory in form and substance to Manchester and EAI.

Manchester and EAI may waive any condition  specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.

     (b)  Conditions to  Obligation of ESI. The  obligation of ESI to consummate
the transactions to be performed by it in connection with the Closing is subject
to satisfaction of the following conditions:

               (i) the  representations  and  warranties  set forth in Section 4
          above shall be true and correct in all material  respects at and as of
          the Closing Date; (ii) Each of Manchester and EAI shall have performed
          and  complied  with all of its  covenants  hereunder  in all  material
          respects through the Closing;

               (iii)  no  action,  suit,  or  proceeding  shall  be  pending  or
          threatened before any court or quasi-judicial or administrative agency
          of any federal,  state,  local, or foreign  jurisdiction or before any
          arbitrator wherein an unfavorable injunction, judgment, order, decree,
          ruling,  or  charge  would  (A)  prevent  consummation  of  any of the
          transactions  contemplated  by this  Agreement or (B) cause any of the
          transactions  contemplated by this Agreement to be rescinded following
          consummation (and no such injunction, judgment, order, decree, ruling,
          or charge shall be in effect);

               (iv) Each of EAI and  Manchester  shall have  delivered  to ESI a
          certificate to the effect that Each of the conditions  specified above
          in Section 7(b)(i)-(iii) is satisfied in all respects;

               (v) ESI shall have  obtained a release  of ESI and  Bitwise  from
          Mitsubishi  Electronics  of  America  and  Sony  with  respect  to all
          guarantees  and  letters  of  credit  issued  in  connection  with the
          agreements  set forth on Schedule 3(o) annexed  hereto,  and ESI shall
          have received the original Mitsubishi Letter of Credit;

               (vi)  Manchester  shall have paid to Nationsbank all amounts owed
          by ESI as of the Closing Date under the Nationsbank Loan Agreement;
<PAGE>

               (vii)  Manchester  shall have obtained the written release of ESI
          and  Bitwise  with  respect  to any and  all  Assumed  Liabilities  or
          Acquired  Assets,  or,  in the  alternative,  in the  event  that such
          releases cannot be obtained,  indemnified Bitwise and ESI with respect
          thereto;

               (viii) ESI shall have received from counsel to Manchester and EAI
          an  opinion  in form and  substance  as forth in  Exhibit  F  attached
          hereto, addressed to ESI, and dated as of the Closing Date;

               (ix)  Manchester  and EAC shall  have  delivered  the  Manchester
          Promissory Note;

               (x) EAI and Sam Taylor  shall  have  entered  into an  employment
          agreement upon terms acceptable to EAI; and

               (xi)  all  actions  to be  taken  by  Manchester  and/or  EAI  in
          connection with consummation of the transactions  contemplated  hereby
          and all  certificates,  opinions,  instruments,  and  other  documents
          required  to  effect  the  transactions  contemplated  hereby  will be
          reasonably satisfactory in form and substance to ESI.

ESI may waive any  condition  specified  in this  Section  7(b) if it executes a
writing so stating at or prior to the Closing.

     8. Remedies for Breaches of This Agreement.

     (a) Survival of Representations and Warranties.

     All of the  representations  and  warranties of Manchester  and EAI and ESI
contained in this Agreement shall survive the Closing and continue in full force
and effect for a period of six (6) months.

     (b) Indemnification Provisions for Benefit of Manchester and EAI.

               (i) In the event  ESI or  Bitwise  breaches  (or in the event any
          third party alleges facts that, if true,  would mean ESI has breached)
          any of  its  respective  representations,  warranties,  and  covenants
          contained in this Agreement,  and, if there is an applicable  survival
          period pursuant to Section 8(a) above, provided that Manchester or EAI
          makes a written  claim for  indemnification  against  ESI  pursuant to
          Section 10(g) below within such survival period,  then ESI and Bitwise
          agree, jointly and severally, to indemnify Manchester and EAI from and
          against the entirety of any Adverse Consequences Manchester or EAI may
          suffer  through  and after  the date of the claim for  indemnification
          (including any Adverse Consequences Manchester or EAI may suffer after
          the end of any applicable survival period) resulting from, arising out
          of,  relating  to, in the  nature  of, or caused by the breach (or the
          alleged breach) provided,  however, that ESI or Bitwise shall not have
          any  obligation  to indemnify  Manchester  or EAI from and against any
          Adverse  Consequences  resulting from, arising out of, relating to, in
          the  nature of, or caused by the  breach  (or  alleged  breach) of any
          representation or warranty of ESI or Bitwise until Manchester or EAI
<PAGE>

          has suffered  Adverse  Consequences by reason of all such breaches (or
          alleged breaches) in excess of a $75,000 aggregate threshold and after
          application  of the  accrued  contingency  reserve as set forth in the
          Closing Date Financial Statements(at which point ESI will be obligated
          thereafter to indemnify  Manchester  and EAI from and against all such
          Adverse  Consequences).  The $75,000 aggregate  threshold provided for
          herein  shall not be  applicable  to the  Preliminary  Purchase  Price
          Adjustments provided for in Sections 2(d)(ii) or (iii) herein.

               (ii) ESI and Bitwise agree to indemnify  Manchester  and EAI from
          and against the entirety of any Adverse Consequences Manchester or EAI
          may suffer resulting from,  arising out of, relating to, in the nature
          of,  or  caused  by any  Liability  of  ESI  which  is not an  Assumed
          Liability  including  any Liability of ESI that becomes a Liability of
          Manchester  or EAI  under  any bulk  transfer  law  (other  than  bulk
          transfer  sales  taxes)  of any  jurisdiction,  under any  common  law
          doctine of de facto  merger or  successor  liability,  or otherwise by
          operation of law .

               (iii) The  Parties  agree that any and all  obligations  incurred
          hereunder  for  indemnification  for the benefit of  Manchester or EAI
          shall be satisfied first through  reduction of the principal amount of
          the Manchester Promissory Note.

         (c) Indemnification Provisions for Benefit of ESI.

               (i) In the event  Manchester or EAI breaches (or in the event any
          third party alleges facts that, if true,  would mean Manchester or EAI
          has breached) any of its  representations,  warranties,  and covenants
          contained in this Agreement,  and, if there is an applicable  survival
          period  pursuant  to Section  8(a)  above,  provided  that ESI makes a
          written  claim for  indemnification  against  Manchester  pursuant  to
          Section  10(g) below  within such  survival  period,  then  Manchester
          agrees to  indemnify  ESI from and against the entirety of any Adverse
          Consequences  ESI may suffer  through  and after the date of the claim
          for indemnification (including any Adverse Consequences ESI may suffer
          after  the end of any  applicable  survival  period)  resulting  from,
          arising out of, relating to, in the nature of, or caused by the breach
          (or the alleged breach).

               (ii)  Manchester  agrees to  indemnify  ESI and Bitwise  from and
          against  the  entirety  of any  Adverse  Consequences  ESI may  suffer
          resulting  from,  arising  out of,  relating  to, in the nature of, or
          caused by any Assumed  Liability  (including any Liability of ESI that
          becomes a Liability of Manchester  or EAI for any bulk transfer  sales
          taxes of any jurisdiction);
<PAGE>

         (d) Matters Involving Third Parties.

               (i) If any third party shall  notify any Party (the  "Indemnified
          Party") with respect to any matter (a "Third Party  Claim")  which may
          give rise to a claim for indemnification  against the other Party (the
          "Indem-nifying  Party")  under this  Section  8, then the  Indemnified
          Party shall promptly notify the Indemnifying Party thereof in writing;
          provided,  however, that no delay on the part of the Indemnified Party
          in notifying the  Indemnifying  Party shall  relieve the  Indemnifying
          Party from any  obligation  hereunder  unless  (and then solely to the
          extent) the Indemnifying Party thereby is prejudiced.

               (ii) The  Indemnifying  Party  will have the right to defend  the
          Indemnified  Party  against the Third Party Claim with  counsel of its
          choice  reasonably  satis-factory to the Indemnified  Party so long as
          (A) the Indemnifying  Party notifies the Indemnified  Party in writing
          within 15 days  after the  Indemnified  Party has given  notice of the
          Third  Party  Claim that the  Indemnifying  Party will  indemnify  the
          Indemnified  Party  from  and  against  the  entirety  of any  Adverse
          Consequences the Indemnified Party may suffer resulting from,  arising
          out of,  relating  to, in the nature of, or caused by the Third  Party
          Claim, (B) the Indemnifying  Party provides the Indemnified Party with
          evidence  reasonably  acceptable  to the  Indemnified  Party  that the
          Indemnifying Party will have the financial resources to defend against
          the Third  Party Claim and  fulfill  its  indemnification  obligations
          hereunder,  (C) the Third Party Claim  involves only money damages and
          does not seek an injunction or other equitable relief,  (D) settlement
          of, or an adverse  judgment  with respect to, the Third Party Claim is
          not, in the good faith judgment of the  Indemnified  Party,  likely to
          establish a precedential  custom or practice materially adverse to the
          continuing  business  interests of the Indemnified  Party, and (E) the
          Indemnifying  Party  conducts  the  defense of the Third  Party  Claim
          actively and diligently.

               (iii) So long as the Indemnifying Party is conducting the defense
          of the Third Party Claim in accordance  with Section  8(d)(ii)  above,
          (A) the Indemnified  Party may retain separate  co-counsel at its sole
          cost and  expense  and  participate  in the defense of the Third Party
          Claim, (B) the Indemnified  Party will not consent to the entry of any
          judgment or enter into any settlement  with respect to the Third Party
          Claim without the prior written consent of the Indemnifying Party (not
          to be withheld unreasonably),  and (C) the Indemnifying Party will not
          consent to the entry of any judgment or enter into any settlement with
          respect to the Third Party Claim without the prior written  consent of
          the Indemnified Party (not to be withheld unreasonably).
<PAGE>

               (iv) In the event any of the conditions in Section 8(d)(ii) above
          is or becomes  unsatisfied,  however,  (A) the  Indemnified  Party may
          defend against, and consent to the entry of any judgment or enter into
          any settlement with respect to, the Third Party Claim in any manner it
          reasonably may deem  appropriate  (and the Indemnified  Party need not
          consult with, or obtain any consent from,  the  Indemnifying  Party in
          connection  therewith),  (B) the Indemnifying Party will reimburse the
          Indemnified Party promptly and periodically for the costs of defending
          against the Third Party Claim  (including  reasonable  attorneys' fees
          and expenses),  and (C) the Indemnifying Party will remain responsible
          for  any  Adverse   Consequences  the  Indemnified  Party  may  suffer
          resulting  from,  arising  out of,  relating  to, in the nature of, or
          caused by the Third Party Claim to the fullest extent provided in this
          Section 8.

     (e) Determination of Adverse  Consequences.  All  indemnification  payments
under this Section 8 shall be deemed adjustments to the Purchase Price.

     (f)  Other  Indemnification   Provisions.   The  foregoing  indemnification
provisions  are in  addition  to,  and  not in  derogation  of,  any  statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant.

     9. Termination.

     (a)  Termination of Agreement.  The Parties may terminate this Agreement as
provided below:

               (i)  Manchester  or ESI may  terminate  this  Agreement by mutual
          written consent at any time prior to the Closing;

               (ii)  Manchester  may terminate  this Agreement by giving written
          notice to ESI at any time prior to the Closing (A) in the event ESI or
          Bitwise  has  breached  any  material  representation,   warranty,  or
          covenant   contained  in  this  Agreement  in  any  material  respect,
          Manchester  has  notified  ESI of  the  breach,  and  the  breach  has
          continued  without  cure for a period of 10 days  after the  notice of
          breach  or (B) if the  Closing  shall not have  occurred  on or before
          April 30, 1997,  by reason of the failure of any  condition  precedent
          under Section 7(a) hereof (unless the failure  results  primarily from
          Manchester or EAI itself breaching any  representation,  warranty,  or
          covenant contained in this Agreement); and
<PAGE>

               (iii) ESI may terminate  this  Agreement by giving written notice
          to  Manchester  at any time  prior  to the  Closing  (A) in the  event
          Manchester or EAI has breached any material representation,  warranty,
          or covenant  contained in this Agreement in any material respect,  ESI
          has notified  Manchester  of the breach,  and the breach has continued
          without cure for a period of 10 days after the notice of breach or (B)
          if the Closing shall not have occurred on or before April 30, 1997, by
          reason of the failure of any  condition  precedent  under Section 7(b)
          hereof  (unless  the  failure  results  primarily  from ESI or Bitwise
          itself breaching any representation,  warranty,  or covenant contained
          in this Agreement).

     (b) Effect of Termination.  If any Party terminates this Agreement pursuant
to Section 9(a) above, all rights and obligations of the Parties hereunder shall
terminate  without any Liability of any Party to the other Party (except for any
Liability of any Party then in breach).

     10. Miscellaneous.

     (a) Press Releases and Public Announcements. No Party shall issue any press
release or make any public  announcement  relating to the subject matter of this
Agreement prior to the Closing  without the prior written  approval of the other
Party;  provided,  however,  that any Party may make any  public  disclosure  it
believes in good faith is required by  applicable  law or any listing or trading
agreement   concerning  its  publicly-traded   securities  (in  which  case  the
disclosing  Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure).

     (b) No  Third-Party  Beneficiaries.  This  Agreement  shall not  confer any
rights or remedies  upon any Person other than the Parties and their  respective
successors and permitted assigns.

     (c) Entire Agreement.  This Agreement  (including the documents referred to
herein)  constitutes the entire agreement between the Parties and supersedes any
prior understandings,  agreements, or representations by or between the Parties,
written or oral,  to the  extent  they have  related  in any way to the  subject
matter hereof.

     (d) Succession  and  Assignment.  This Agreement  shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted  assigns.  No Party may assign either this Agreement or any of its
rights,  interests,  or obligations hereunder without the prior written approval
of the other Party; provided, however, that Manchester may (i) assign any or all
of its rights and interests  hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder (in
any or all of which cases Manchester  nonetheless  shall remain  responsible for
the performance of all of its obligations hereunder).

 <PAGE>

     (e)   Counterparts.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  Each of  which  shall  be  deemed  an  original  but all of which
together will constitute one and the same instrument.

     (f) Headings. The section headings contained in this Agreement are inserted
for  convenience   only  and  shall  not  affect  in  any  way  the  meaning  or
interpretation of this Agreement.

     (g)  Notices.   All  notices,   requests,   demands,   claims,   and  other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if it is sent by (i)
registered or certified mail,  return receipt  requested,  postage prepaid,  and
shall be deemed  received  within  three  business  days of mailing  and (ii) by
overnight courier service addressed to the intended recipient as set forth below
and be deemed received on the next business day:

If to ESI or Bitwise:               Copy to: Goldstein & DiGioia LLP
Bitwise Designs, Inc.                        396 Lexington Avenue
Technology Center                            New York, NY  10017
Rotterdam Industrial Park                    Attn: Victor J. DiGioia, Esq.
Schenectady, NY  12306


If to Manchester or EAI:            Copy to: Kressel Rothlein & Roth, Esqs.
Manchester Equipment Co. Inc.               684 Broadway
50 Marcus Blvd.                             Massapequa, NY 11758
Hauppauge, NY 11788                         Attn: Joel Rothlein, Esq.
Attn: Joe Looney


     Any  Party  may  send  any  notice,   request,   demand,  claim,  or  other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request,  demand,
claim, or other communication shall be deemed to have been duly given unless and
until it actually is received by the  intended  recipient.  Any Party may change
the  address  to  which   notices,   requests,   demands,   claims,   and  other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.

 <PAGE>

     (h)  Governing  Law. This  Agreement  shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law  provision or rule (whether of the State of New
York or any other  jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.

     (i) Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by Manchester  and
ESI.  No  waiver by any Party of any  default,  misrepresentation,  or breach of
warranty or covenant  hereunder,  whether intentional or not, shall be deemed to
extend  to any  prior or  subsequent  default,  misrepresentation,  or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.

     (j)  Severability.  Any term or provision of this Agreement that is invalid
or  unenforceable  in any  situation  in any  jurisdiction  shall not affect the
validity or  enforceability  of the remaining terms and provisions hereof or the
validity or  enforceability  of the  offending  term or  provision  in any other
situation or in any other jurisdiction.

     (k)  Expenses.  Each  Party  will bear his or its own  costs  and  expenses
(including  legal fees and expenses)  incurred in connection with this Agreement
and the transactions contemplated hereby.

     (l) Construction.  The Parties have participated jointly in the negotiation
and drafting of this Agreement.  In the event an ambiguity or question of intent
or  interpretation  arises,  this  Agreement  shall be  construed  as if drafted
jointly  by the  Parties  and no  presumption  or  burden of proof  shall  arise
favoring  or  disfavoring  any Party by virtue of the  authorship  of any of the
provisions of this  Agreement.  Any reference to any federal,  state,  local, or
foreign  statute  or law  shall  be  deemed  also  to  refer  to all  rules  and
regulations promulgated thereunder,  unless the context requires otherwise.  The
word  "including"  shall  mean  including  without  limitation.  Nothing  in the
Disclosure  Schedule  shall be deemed  adequate to disclose  an  exception  to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with reasonable  particularity and describes the relevant facts in
reasonable  detail.  Without limiting the generality of the foregoing,  the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a  representation  or warranty  made herein
(unless the  representation  or  warranty  has to do with the  existence  of the
document or other item  itself).  The Parties  intend that Each  representation,
warranty, and covenant contained herein shall have independent significance.  If
any Party has  breached  any  representation,  warranty,  or covenant  contained
herein  in any  respect,  the fact that  there  exists  another  representation,
warranty,  or covenant  relating to the same subject  matter  (regardless of the
relative  levels of  specificity)  which the  Party has not  breached  shall not
detract  from or  mitigate  the fact  that the  Party is in  breach of the first
representation, warranty, or covenant.

     (m)  Incorporation  of Exhibits and  Schedules.  The Exhibits and Schedules
identified  in this  Agreement are  incorporated  herein by reference and made a
part hereof.
<PAGE>

     (n) Specific Performance.  Each of the Parties acknowledges and agrees that
the other Party would be damaged  irreparably in the event any of the provisions
of this  Agreement are not performed in accordance  with their specific terms or
otherwise are breached.  Accordingly,  Each of the Parties agrees that the other
Party shall be entitled to an injunction or injunctions  to prevent  breaches of
the provisions of this Agreement and to enforce  specifically this Agreement and
the terms and  provisions  hereof in any action  instituted  in any court of the
United States or any state thereof having  jurisdiction over the Parties and the
matter (subject to the provisions set forth in Section 10(o) below), in addition
to any other remedy to which it may be entitled, at law or in equity.

     (o)  Submission  to  Jurisdiction.  Each  of  the  Parties  submits  to the
jurisdiction of any state or federal court sitting in New York, New York, in any
action or  proceeding  arising out of or relating to this  Agreement  and agrees
that all  claims  in  respect  of the  action  or  proceeding  may be heard  and
determined in any such court.  Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of  inconvenient  forum to the  maintenance of
any action or  proceeding  so brought  and  waives  any bond,  surety,  or other
security  that might be required of any other Party with respect  thereto.  Each
Party agrees that a final  judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.

     (p) Tax  Liability.  Manchester  and EAI shall  indemnify and hold harmless
Bitwise and ESI from any and all additional  income tax liability up to $23,500,
if any, as a result of this transaction  being  consummated as an asset purchase
instead  of a sale  of the  stock  of ESI to  Manchester.  The  amount  of  such
liability  shall be  determined  by the  Albany,  New York  office  of KPMG Peat
Marwick.  Such amount shall be paid within 10 days of receipt of written  notice
from KPMG Peat Marwick.

     (q) Employee  Benefits  Matters.  Neither EAI nor Manchester  will adopt or
assume at and as of the Closing any of the  Employee  Benefit  Plans or deferred
compensation  plans (except the health,  medical and life insurance  plans) that
ESI  maintains or any trust,  insurance  contract,  annuity  contract,  or other
funding  arrangement  that ESI has  established  with respect  thereto.  ESI and
Bitwise will not transfer (or cause the plan  administrators to transfer) at and
as of the Closing any of the  corresponding  assets associated with the Employee
Benefit Plans.




REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
<PAGE>

     (r) Bulk Transfer Laws.  Manchester  acknowledges  that ESI will not comply
with the provisions of any bulk transfer laws of any  jurisdiction in connection
with the transactions  contemplated by this Agreement.  Manchester hereby agrees
to indemnify  and hold harmless ESI and Bitwise for any and all bulk sales taxes
to which ESI or Bitwise may become subject as a result of or in connection  with
any bulk transfer law of any jurisdiction.

                                    * * * * *

     IN WITNESS WHEREOF,  the Parties hereto have executed this Agreement on the
date first above written.

                                            ELECTROGRAPH SYSTEMS, INC.

                                            By: /s/ John Botti
                                            ------------------
                                               Name:  John Botti
                                               Title:  Chairman


                                            MANCHESTER EQUIPMENT CO., INC.


                                            By:/s/ Barry Steinberg
                                            ----------------------
                                               Name: Barry Steinberg
                                               Title: President

                                            BITWISE DESIGNS, INC.


                                            By:/s/ John Botti
                                            -----------------
                                               Name: John Botti
                                               Title:

                                            ELECTROGRAPH ACQUISITIONS INC.


                                            By: /s/ Barry Steinberg
                                            ------------------------
                                               Name: Barry Steinberg
                                               Title:

<PAGE>
                              April 15, 1997



Manchester Equipment Co., Inc.
Electrograph Acquisition, Inc.
50 Marcus Blvd.
Hauppauge, New York 11788

Re:  Electrograph Asset Purchase Agreement

Gentlemen:

     Reference is made to that certain Asset Purchase Agreement dated as of this
date  among  Manchester   Equipment  Co.,  Inc.   ("Manchester"),   Electrograph
Acquisition Inc. ("EAC"),  Bitwise Designs,  Inc. and Electrograph Systems, Inc.
("ESI").  This letter shall confirm our mutual agreement that neither Manchester
nor EACX shall  assume  any  liability  or  obligation  related  to the  general
insurance policies (such as general liability, real property,  casuality and the
like) of ESI. EAC shall assume the employee health, medical and life policies of
ESI.  ESI shall have the right to  terminate  all of such  policies  immediately
after the Closing.

     The parties  hereby agree that the definition of "Assumed  Liabilities"  as
set forth in the Asset Purchase  Agreement shall be deemed amended to effectuate
the terms of this letter.

ELECTROGRAPH SYSTEMS, INC.              BITWISE DESIGNS, INC.


By: /s/ John Botti, Chairman            By: /s/ John Botti, Chairman
----------------------------            ----------------------------
Name: John Botti                        Name:  John Botti

ACCEPTED AND AGREED:

MANCHESTER EQUIPMENT CO., INC.          ELECTROGRAPH ACQUISITION INC.

By: /s/ Barry Steinberg, President      By: /s/ Barry Steinberg
----------------------------------      -----------------------
Name: Barry Steinberg                   Name: Barry Steinberg