ACCESS BEYOND INC, 424B1, 1996-11-18

ACCESS BEYOND INC
424B1, 1996-11-18
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE> 1

ANNEX II

11,993,000 SHARES

ACCESS BEYOND, INC.

COMMON STOCK
(PAR VALUE $.01 PER SHARE)

This Prospectus is being furnished in connection with the contemplated
distribution in the form of a dividend (the "Distribution") by Penril DataComm
Networks, Inc. ("Penril") to holders of record of its Common Stock, par value
$.01 per share ("Penril Stock") as of the close of business on the record date
to be set by the Board of Directors of Penril (the "Record Date") (which is
expected to be on or about November 15, 1996) of all of the outstanding shares
of Common Stock, par value $.01 per share ("Company Stock"), of its subsidiary,
Access Beyond, Inc. (the "Company"). The Company will operate all businesses
owned by Penril immediately prior to the Distribution other than Penril's modem
business.

The Distribution will be made beginning on or about the Distribution Date
(defined below) to holders of record of Penril Stock as of the Record Date on
the basis of one share of Company Stock for each share of Penril Stock held. The
Distribution will be on the day prior to or the day of the merger discussed
below (the "Distribution Date") (which is expected to be on or about November
19, 1996). The Distribution is being undertaken in connection with, and the
consummation of the Distribution is conditioned upon the consummation of, the
merger of Penril with a subsidiary of Bay Networks, Inc. ("Bay") whereby Penril
stockholders will receive shares of common stock of Bay in exchange for their
Penril Stock (the "Merger"). No consideration will be required to be paid by
Penril stockholders for the shares of Company Stock to be received in the
Distribution. Although Penril is separately seeking approval by Penril
stockholders of the Merger and the Distribution, no additional action will be
required to be taken by Penril stockholders in order to receive the shares of
Company Stock. Neither Penril nor the Company will receive any proceeds from the
Distribution. The Company has applied to have the Company Stock listed for
trading on the Nasdaq National Market under the symbol "ACCB".

PENRIL STOCKHOLDERS WHO WILL RECEIVE SHARES OF COMPANY STOCK IN THE
DISTRIBUTION SHOULD CAREFULLY CONSIDER THE MATTERS SET FORTH UNDER THE CAPTION
"RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY SUCH STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

Stockholders of Penril with inquiries related to the Distribution should
contact Penril's Stockholder Relations Department, 1300 Quince Orchard
Boulevard, Gaithersburg, Maryland 20878. After the Distribution Date,
stockholders of the Company with inquiries related to the Distribution should
contact the Company or its transfer agent.

THE DATE OF THIS PROSPECTUS IS OCTOBER 17, 1996.
<PAGE> 2

Through December 14, 1996, all dealers effecting transactions in the
securities offered hereby may be required to deliver a copy of this Prospectus.
This is in addition to the obligations of the Company to deliver this Prospectus
at the time of the initial distribution of the securities.

No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to buy any
security other than the securities offered hereby, nor does it constitute an
offer to sell or a solicitation of an offer to buy the securities by anyone in
any jurisdiction in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so, or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any offer or sale made hereunder shall,
under any circumstances, create any implication that there has been no change in
the affairs of the Company since the date hereof.

AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-1 ("Form S-1")
with the Securities and Exchange Commission ("Commission") under the Securities
Act of 1933, as amended (the "Securities Act") with respect to the shares of
Company Stock being received by Penril stockholders in the Distribution. This
Prospectus does not contain all of the information set forth in the Form S-1 and
the exhibits and schedules thereto. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Form S-1, reference is made to such exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.

The Form S-1 and the exhibits and schedules thereto filed by the Company
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well
as at the Regional Offices of the Commission at Suite 1400, Citicorp Center, 500
West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center, Suite
1300, New York, New York 10048. Copies of such information can also be obtained
by mail from the Public Reference Branch of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The Commission's web site can be accessed at http://www.sec.gov. It is
anticipated that Company Stock will also be quoted on The Nasdaq Stock Market
("Nasdaq"). Following the Distribution, such reports, proxy statements and other
information to be filed by the Company can also be inspected at the offices of
the National Association of Securities Dealers, Inc., Market Listing Section,
1735 K Street, N.W., Washington, D.C. 20006.

The Company intends to furnish to holders of Company Stock each fiscal year
an annual report which contains consolidated financial statements prepared in
accordance with United States generally accepted accounting principles and
audited and reported on, with an opinion expressed by, an independent public
accounting firm, and such other reports as may be required by law.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.

ELECTRO-METRICS, ACCESS BEYOND, MULTIVERTER, FORSITE, MUX/ROUTER AND SUNUPS
ARE THE UNITED STATES TRADEMARKS, TRADENAMES AND SERVICEMARKS OWNED BY THE
COMPANY, PENRIL OR ONE OF PENRIL'S SUBSIDIARIES. THIS PROSPECTUS MAY ALSO
INCLUDE TRADEMARKS, TRADENAMES AND SERVICEMARKS WHICH ARE PROPERTY OF THEIR
RESPECTIVE OWNERS.

THIS PROSPECTUS MAY CONTAIN ESTIMATES, PROJECTIONS AND OTHER
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE SUBJECT TO CERTAIN RISKS,
TRENDS AND OTHER UNCERTAINTIES, INCLUDING THOSE DISCUSSED IN THIS PROSPECTUS
THAT COULD CAUSE ACTUAL RESULTS TO VARY FROM THOSE PROJECTED. STOCKHOLDERS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS, WHICH ARE
BASED ONLY ON CURRENT JUDGMENTS AND CURRENT KNOWLEDGE.

2
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION................................................................. 2
SUMMARY............................................................................... 5
Access Beyond, Inc............................................................... 5
Transactions..................................................................... 5
The Distribution................................................................. 6
Summary Consolidated Financial Data.............................................. 8
RISK FACTORS.......................................................................... 9
Stand Alone Company.............................................................. 9
Absence of Trading Market for Company Stock...................................... 9
Dependence on Key Management..................................................... 9
Technological Changes............................................................ 9
Competition...................................................................... 10
Product Protection and Intellectual Property..................................... 10
Certain Antitakeover Effects..................................................... 10
Important Considerations Related to Forward-Looking Statements................... 10
Dividends........................................................................ 11
Certain Tax Considerations....................................................... 11
Relationship with Penril......................................................... 11
THE DISTRIBUTION...................................................................... 11
Background of the Transfer and the Distribution.................................. 11
Manner of Effecting the Distribution............................................. 12
Listing and Trading of Company Stock............................................. 12
Certain Federal Income Tax Consequences of the Distribution...................... 13
Certain Consequences of the Distribution......................................... 14
Reason for Furnishing this Prospectus............................................ 14
CAPITALIZATION........................................................................ 15
SELECTED PROFORMA FINANCIAL DATA...................................................... 16
Proforma Balance Sheet........................................................... 16
Proforma Statements of Operations................................................ 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF PENRIL AND THE COMPANY........................................................... 19
General Business Developments.................................................... 19
New Accounting Pronouncements.................................................... 19
Results of Operations............................................................ 20
Liquidity and Capital Resources.................................................. 23
BUSINESS.............................................................................. 25
General.......................................................................... 25
Products......................................................................... 25
Discontinued Operations.......................................................... 26
Suppliers........................................................................ 27
Patents, Copyrights And Licenses................................................. 27
Backlog.......................................................................... 27
Competition...................................................................... 28
Sales and Marketing.............................................................. 28
Customer Support, Service and Warranty........................................... 28
Research and Development......................................................... 28
Properties....................................................................... 28
</TABLE>

3
<PAGE> 4

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Employees........................................................................ 29
Legal Proceedings................................................................ 29
MANAGEMENT............................................................................ 31
Directors and Executive Officers................................................. 31
Committees of the Board of Directors............................................. 33
Compensation of Directors........................................................ 33
Executive Compensation........................................................... 34
Employment and Consulting Agreements............................................. 35
Penril Benefit Plans............................................................. 36
Company Benefit Plans............................................................ 39
SECURITY OWNERSHIP.................................................................... 42
DESCRIPTION OF CAPITAL STOCK.......................................................... 44
Authorized Capital Stock......................................................... 44
Company Stock.................................................................... 44
Preferred Stock.................................................................. 45
Antitakeover Provisions of the Company Certificate and Company By-laws........... 45
COMPARISON OF RIGHTS OF STOCKHOLDERS OF THE COMPANY AND PENRIL........................ 47
Business Combinations............................................................ 48
Amendments to Charters........................................................... 48
Amendments to By-laws............................................................ 48
Redemption of Capital Stock...................................................... 49
Stockholder Action............................................................... 49
Special Stockholder Meetings..................................................... 49
Number and Election of Directors................................................. 49
Antitakeover Provisions.......................................................... 50
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY................ 50
General.......................................................................... 50
Elimination of Liability in Certain Circumstances................................ 50
Indemnification and Insurance.................................................... 51
CERTAIN TRANSACTIONS.................................................................. 53
Distribution Agreement........................................................... 53
Development and License Agreement................................................ 53
Technology License Agreement..................................................... 53
Sublease Agreement............................................................... 53
Transitional Services Agreement.................................................. 54
Indemnification Agreement........................................................ 54
LEGAL MATTERS......................................................................... 55
EXPERTS............................................................................... 55
</TABLE>

4
<PAGE> 5

SUMMARY

The following is a summary of certain information contained elsewhere in
this Prospectus and is qualified by the more detailed information set forth
elsewhere in this Prospectus which should be read in its entirety. Unless the
context otherwise indicates, all references to the operations of the Company in
this Prospectus shall include the operations of the Remote Access Business (as
hereinafter defined) by Penril prior to the Distribution and assumes that the
actions set forth under "The Distribution" have taken place. Capitalized terms
used in this Summary but not defined in this Summary have the respective
meanings ascribed to them elsewhere in this Prospectus.

ACCESS BEYOND, INC.

The Company is a wholly owned subsidiary of Penril, organized by Penril for
the sole purpose of effecting the Distribution and the Merger. The Company was
incorporated on July 23, 1996. The mailing address of the Company's principal
executive offices is currently 1300 Quince Orchard Boulevard, Gaithersburg,
Maryland 20878, and the phone number is (301) 921-8600.

TRANSACTIONS

Penril has entered into a Plan and Agreement of Merger dated as of June 16,
1996, as amended on August 5, 1996 (the "Merger Agreement") among Penril, Bay
and a subsidiary of Bay, pursuant to which, upon the terms and subject to the
conditions set forth therein, Penril will be merged with the subsidiary of Bay,
with Penril surviving as a wholly-owned subsidiary of Bay. Prior to consummation
of the Merger, the Board of Directors of Penril will declare a distribution in
the form of a dividend to holders of Penril Stock, as of the close of business
on the Record Date, on the basis of one share of Company Stock for each share of
Penril Stock held on the Record Date. The shares to be distributed will
constitute all of the issued and outstanding shares of Company Stock immediately
following the Distribution. Following the Distribution, the Company will be an
independent company and the Company Stock will be publicly traded on Nasdaq. See
"The Distribution" and "Description of Capital Stock." The Distribution is
intended to be tax-free to Penril stockholders for federal income tax purposes.

Pursuant to the Merger Agreement, at the effective time of the Merger (the
"Effective Time"), each issued and outstanding share of Penril Stock (other than
shares of Penril Stock that are owned by Penril as treasury stock and other than
any shares of Penril Stock that are owned beneficially by Bay or any wholly
owned subsidiary of Bay, which will be automatically cancelled without
consideration) will be converted into the number of shares of common stock, par
value $.01 per share, of Bay (the "Bay Stock") equal to a specified ratio
determined by dividing $10 by the average closing price for Bay Stock for a
specified period prior to the Effective Time. Each of the options to purchase
Penril Stock outstanding at the Effective Time will be assumed by Bay and,
immediately after the Effective Time, will be deemed to constitute, without any
action on the part of the holder thereof, an option to acquire, as of the
Effective Time, Bay Stock on the same terms and conditions as were applicable
under such option at the Effective Time, subject to adjustment of the number of
shares and the exercise price for the conversion ratio referred to above. The
terms of the Merger are as described under "The Merger Agreement -- The Merger"
in the Proxy Statement/Prospectus of Penril and Bay (the "Proxy
Statement/Prospectus") to which this Prospectus is Annex II.

Immediately prior to the Distribution, Penril will transfer (the
"Transfer") to the Company substantially all of its assets and liabilities other
than assets and liabilities related to Penril's modem business (the "Modem
Business"). In addition, the Company and Penril have agreed to indemnify each
other after the Distribution with respect to certain losses, damages, claims and
liabilities arising primarily from their respective businesses. See "Certain
Transactions -- Indemnification Agreement."

The foregoing is a brief summary of certain terms of the Merger affecting
Penril. A more complete description of the Merger and the Merger Agreement may
be found in the Proxy Statement/Prospectus. The Distribution Agreement between
Penril and the Company is more fully described herein under "Certain
Transactions -- Distribution Agreement."

5
<PAGE> 6

THE DISTRIBUTION

<TABLE>
<S> <C>
Distributing Company.................. Penril DataComm Networks, Inc., a Delaware corporation
("Penril").

Distributed Company................... Access Beyond, Inc., a Delaware corporation (the "Com-
pany"). The Company will engage in the development and
marketing of network access devices which enable
local, remote or mobile users to access network
resources located at remote sites, central sites or
any other point in the network (the "Remote Access
Business"). In addition, Penril is currently in the
process of selling one of its subsidiaries,
Electro-Metrics, Inc. ("EMI"), a manufacturer of
sophisticated high frequency instrumentation
equipment. It is unlikely that EMI will be sold prior
to the Transfer. In the event EMI is not sold prior to
the Transfer, the assets and liabilities of EMI will
be transferred to the Company as part of the Transfer.
See "Business -- Discontinued Operations."

Shares to be Distributed.............. 11,993,000 shares of Company Stock based on 11,993,000
shares of Penril Stock expected to be outstanding on
the Record Date. See "Description of Capital Stock."
Such shares will constitute all of the issued and
outstanding shares of Company Stock immediately
following the Distribution.

Distribution Ratio.................... One share of Company Stock for each share of Penril
Stock held on the Record Date. See "The
Distribution -- Manner of Effecting the Distribution."

Risk Factors.......................... Stockholders should consider certain factors discussed
under the heading "Risk Factors" beginning on page 9.
Relationship with Penril
After the Distribution.............. As of the Distribution Date, the Company and Penril
will enter into several agreements to define their
ongoing relationships. These agreements relate to the
provision of certain administrative services by the
Company to Penril, the license of certain trademarks,
trade names and service marks for use in the business
of the Company, indemnification for various claims and
development of certain technology. See "Certain
Transactions."
</TABLE>

6
<PAGE> 7
<TABLE>
<S> <C>
Federal Income Tax Consequences....... The Board of Directors of Penril has received an
opinion from its tax counsel to the effect that, on
the basis of the facts, representations and
assumptions set forth in the opinion, for federal
income tax purposes, it is more likely than not that
(i) the Distribution will qualify as a tax-free
spin-off pursuant to Section 355 of the Internal
Revenue Code of 1986, as amended (the "Code") and (ii)
the Merger will qualify as a reorganization within the
meaning of Section 368(a)(1)(B) of the Code. If the
tax-free nature of the Merger in invalidated, it would
reduce the likelihood that the Distribution will
qualify as a tax-free spin-off pursuant to Section 355
of the Code. No ruling from the Internal Revenue
Service ("IRS") has been or will be sought with
respect to any aspect of the Distribution. For a more
detailed discussion of the federal income tax conse-
quences of the Distribution to the Penril
stockholders, see "Risk Factors -- Certain Tax
Considerations" and "The Distribution -- Certain
Federal Income Tax Consequences of the Distribution."

Post-Distribution Dividend Policies... The Company does not anticipate paying dividends for
the foreseeable future.

Company Stock Listing................. The Company has applied to have the Company Stock
listed for trading on Nasdaq under the symbol "ACCB."

Record Date........................... It is expected that the Record Date will be on or
immediately after receipt of approval by the Penril
stockholders of the Merger, the Transfer and the
Distribution.

Distribution Agent, Transfer Agent
and Registrar....................... Continental Stock Transfer & Trust Company

Distribution Date..................... It is expected that the Distribution Date will be on
or about November 19, 1996. As soon as practicable
thereafter, Penril will commence mailing certificates
representing shares of Company Stock. Holders of
Penril Stock will not be required to make any payment
or take any action, including tendering stock
certificates, in order to receive Company Stock. See
"The Distribution -- Manner of Effecting the
Distribution."
</TABLE>

7
<PAGE> 8

SUMMARY CONSOLIDATED FINANCIAL DATA

The following Summary Consolidated Financial Data of Penril should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Penril and the Company" included elsewhere herein
and Penril's consolidated financial statements and the notes thereto included
herein. The statement of operations data for the years ended July 31, 1996,
1995, 1994, 1993 and 1992 and the balance sheet data as of the same dates have
been derived from the audited consolidated financial statements of Penril.

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PENRIL -- HISTORICAL STATEMENT OF OPERATIONS
DATA:
Net revenues(1)................................ $39,435 $52,611 $61,838 $44,108 $32,966
Net income (loss)
Continuing operations(2)..................... (20,668) (4,614) 2,345 1,027 188
Discontinued operations...................... 404 (1,661) (828) (896) 906
Loss on disposal of discontinued
operations................................ (640) (1,400) -- -- --
Earnings (loss) per share
Continuing operations........................ (2.14) (0.61) 0.30 0.15 0.03
Discontinued operations...................... .04 (0.22) (0.11) (0.13) 0.13
Loss on disposal............................. (.07) (0.19) -- -- --
Cash dividends per share....................... -- -- 0.02 -- 0.02
PENRIL -- HISTORICAL BALANCE SHEET DATA:
Total assets(3)................................ $33,780 $44,387 $51,061 $49,178 $28,689
Long-term debt................................. 905 5,681 8,890 10,217 1,875
Stockholders' equity........................... 18,215 21,723 28,580 27,501 22,177
<FN>
- ---------------

(1) Included in net revenues are the following net revenues relating to the
Modem Business, including $4.5 million paid in the fourth quarter of fiscal
1996 to Penril for a license agreement with Bay:
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31,
---------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net revenues............................... $19,519 $18,974 $22,828 $21,768 $16,789
<FN>
(2) Net income from continuing operations for fiscal 1996 includes a charge of
$9.7 million for restructuring costs and $500,000 for costs incurred through
July 31, 1996 related to the Merger.

(3) Included in total assets are the following net assets relating to the
discontinued operations (Technipower, Inc. ("Technipower"), a subsidiary the
assets of which were sold by Penril on October 11, 1996, and EMI):
</TABLE>

8
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RISK FACTORS

Holders of Penril Stock should be aware that the Distribution and ownership
of Company Stock involves certain risks, including those described below, which
could adversely affect the value of their holdings of Company Stock. Neither
Penril nor the Company makes, nor have they authorized any other person to make,
any representation about the future market value of Company Stock.

STAND ALONE COMPANY

The Company was recently incorporated for the purpose of effecting the
Distribution and the Merger and, as a corporation, does not have any operating
history. However, the Remote Access Business, as conducted by Penril prior to
the Distribution, has an operating history consisting of the development and
sales of local area network ("LAN") and host access products (the "LAN and Host
Access products") and the development of a new product family called Access
Beyond. See "Business -- Products."

ABSENCE OF TRADING MARKET FOR COMPANY STOCK

There is currently no established public trading market nor has there been
any established public trading market for Company Stock. The Company has applied
to have the Company Stock listed for trading on Nasdaq. There can be no
assurance as to the prices at which Company Stock will trade after the
Distribution Date. Until Company Stock is fully distributed and an orderly
trading market develops (if one does), the prices at which such stock trades may
fluctuate significantly. Prices for Company Stock will be determined in the
marketplace and may be influenced by many factors, including the operating
performance of the Company, the depth and liquidity of the market for Company
Stock, investor perception of the Company and general economic and market
conditions.

DEPENDENCE ON KEY MANAGEMENT

If the Company is to be successful, its success will be due in large part
to the performance of Ronald A. Howard, the Company's President and Chief
Executive Officer, and, to a lesser extent, of other key management personnel.
The loss of Mr. Howard's services could adversely affect the Company's ability
to achieve profitability and growth. Although the Company anticipates it will
have an employment contract with Mr. Howard which will provide for his continued
employment, no assurance can be given that the Company will be able to retain
the services of Mr. Howard or any other key management personnel. See
"Management -- Executive Compensation" and "Management -- Employment and
Consulting Agreements."

TECHNOLOGICAL CHANGES

The market for networking products is subject to rapid technological
change, evolving industry standards and frequent new product introductions, and
therefore requires a high level of expenditures for research and development.
The Company may be required to incur significant expenditures to develop new
integrated product offerings. There can be no assurance that customer demand for
products integrating network connectivity and remote access technologies will
grow at the rate expected by the Company, that the Company will be successful in
developing, manufacturing and marketing new products or product enhancements
that respond to these customer demands or to evolving industry standards and
technological change, that the Company will not experience difficulties that
could delay or prevent the successful development, introduction, manufacture and
marketing of these products (especially in light of the increasing design and
manufacturing complexities associated with the integration of technologies), or
that its new products and product enhancements will adequately meet the
requirements of the marketplace and achieve market acceptance. The Company's
business, operating results and financial condition may be materially and
adversely affected if the Company encounters delays in developing or introducing
new products or product enhancements or if such product enhancements do not gain
market acceptance. In order to maintain a competitive position, the Company must
also continue to enhance its existing products and there is no assurance that it
will be able to do so. A major portion of future revenues is expected to come
from new products and services. The Company cannot determine the ultimate effect
that new products will have on its revenues or earnings.

9
<PAGE> 10

COMPETITION

The networking industry is highly competitive and competition is expected
to intensify. There are numerous companies competing in various segments of the
network management and remote access markets. Competitors include Ascend
Communications, Shiva Corporation, Cisco Systems, Inc., U.S. Robotics, Inc.,
Microcom, Inc. and Bay, among others. Many of the Company's competitors have
greater name recognition, more extensive engineering, manufacturing and
marketing capabilities and greater financial, technological and personnel
resources than those available to the Company. In addition, certain companies in
the networking industry have expanded their product lines or technologies in
recent years as a result of acquisitions. There can be no assurance that the
Company will be able to compete successfully in the future with existing or new
competitors.

PRODUCT PROTECTION AND INTELLECTUAL PROPERTY

The Company, like many other companies in the network access industry,
anticipates it will rely upon rights granted through licenses from third parties
for a substantial amount of proprietary information used to develop its
products; however, some companies may determine not to grant such licenses and
may seek to protect their proprietary rights in such technological information.
Accordingly, there can be no assurance that the Company will be able to continue
obtaining additional rights to utilize proprietary technological information
necessary to develop its products. Because of the existence of a large number of
patents in the networking field and the rapid rate of issuance of new patents,
it is not economically practical to determine in advance whether a product or
any of its components infringe patent rights of others. In the event of any
infringement, the Company believes that, based upon industry practice, necessary
licenses or rights under such patents may be obtained on terms that should not
have a material adverse effect on the Company's consolidated financial position
or results of operations. However, there can be no assurance in this regard.

CERTAIN ANTITAKEOVER EFFECTS

The Company's Restated Certificate of Incorporation (the "Company
Certificate") includes certain provisions that are intended to prevent or delay
the acquisition of the Company by means of a tender offer, proxy contest or
otherwise. Specifically, the Company Certificate provides for a classified Board
of Directors, classified into three classes with terms of three years each. In
addition, the Company Certificate authorizes the Board of Directors of the
Company to issue preferred stock without further stockholder approval, which
could have dividend, redemption, liquidation, conversion, voting or other rights
that could adversely affect the voting power or other rights of the holders of
Company Stock. Finally, the Company is subject to Section 203 of the Delaware
General Corporation Law (the "DGCL") which limits transactions between a
publicly held company and "interested stockholders" (generally those
stockholders who, together with their affiliates and associates, own 15% or more
of a company's outstanding capital stock). Any one of, or a combination of, the
above anti-takeover provisions could discourage a third party from attempting to
acquire control of the Company. See "Description of Capital Stock." The
Company's 1996 Long-Term Incentive Plan and the Company's 1996 Non-Employee
Directors' Stock Option Plan will provide for acceleration of stock options upon
a change in control of the Company, which will have the effect of making an
acquisition of control of the Company more expensive. See "Management -- Company
Benefit Plans." These plans may also inhibit a change in control of the Company.
In addition, certain Company officers will have severance compensation
agreements with the Company that will provide for substantial cash payments and
acceleration of other benefits in the event of specified corporate changes
related to the Company, including a change in control of the Company. See
"Management -- Employment and Consulting Agreements."

IMPORTANT CONSIDERATIONS RELATED TO FORWARD-LOOKING STATEMENTS

With the exception of historical information, the matters discussed in this
document may include forward-looking statements that involve risks and
uncertainties. The Company wishes to caution readers that a number of important
factors, including those identified in this section as well as factors discussed
elsewhere in this filing and in other filings with the Commission, could affect
the Company's actual results and cause actual results to differ materially from
those in the forward-looking statements.

10
<PAGE> 11

DIVIDENDS

The Company does not anticipate paying dividends for the foreseeable
future.

CERTAIN TAX CONSIDERATIONS

As described below, the Board of Directors of Penril has received an
opinion from its tax counsel to the effect that, on the basis of the facts,
representations and assumptions set forth in the opinion, for federal income tax
purposes, it is more likely than not that (i) the Distribution will qualify as a
tax-free spin-off pursuant to Section 355 of the Code and (ii) the Merger will
qualify as a reorganization within the meaning of Section 368(a)(1)(B) of the
Code. No ruling from the IRS to that effect has been or will be sought. If the
tax-free nature of the Merger is invalidated, it would reduce the likelihood
that the Distribution will qualify as a tax-free spin-off pursuant to Section
355 of the Code. See "The Distribution -- Certain Federal Income Tax
Consequences of the Distribution." If the Distribution were not to qualify for
tax-free treatment under Section 355 of the Code, then, in general, although not
entirely free from doubt, for federal income tax purposes it is likely that each
Penril stockholder would be required to recognize income or gain on the receipt
of Company Stock in the Distribution in an amount up to the fair market value of
the shares of Company Stock received in the Distribution. Each member of the
Penril consolidated group (including the Company and its subsidiaries) would
remain jointly and severally liable for any tax liability of Penril or its
subsidiary incurred prior to the Merger.

RELATIONSHIP WITH PENRIL

The Company does not have an operating history as an independent public
company. The operations of the Company historically have relied on the rest of
Penril for certain necessary administrative services. As of the Distribution
Date, Penril and the Company will enter into several agreements for purposes of
governing certain of the ongoing relationships between the two companies
following the Distribution, including indemnification obligations. Pursuant to
the Indemnification Agreement to be entered into between Penril and the Company
in connection with the Transfer (the "Indemnification Agreement"), the Company
will agree to indemnify Penril against all expenses and liabilities resulting
from (i) the operation of the Company from and after the Distribution, (ii)
Penril's operations prior to the Transfer other than those based upon, arising
out of or in connection with (a) the Modem Business, (b) the Merger and
transactions relating to the Merger or (c) the tax consequences of the
Distribution, (iii) the termination of employment of employees (other than those
employees identified as remaining with Penril after the Transfer) by Penril or
(iv) information furnished by Penril or the Company relating to the Company
contained in the Registration Statement filed by Bay in connection with the
Proxy Statement/Prospectus. Included within the potential liabilities against
which the Company will indemnify Penril are those referred to in "Business-Legal
Proceedings". Although the Company is not aware of any pending or threatened
material liability for which the Company anticipates becoming obligated to make
payments in connection with its obligation to indemnify Penril except for
possible payments resulting from the termination of employment of certain
employees (which payments management anticipates will not exceed approximately
$400,000), there can be no assurance that such indemnification obligations could
not arise or that such indemnification obligations would not be material to the
Company. These agreements were negotiated while the Company was owned by Penril
and consequently are not the result of arm's-length negotiations between
independent parties. Nonetheless, the Company believes that the agreements are
fair to the parties and contain terms which are generally comparable to those
which would result from arm's-length negotiations, although there can be no
assurance thereof.

THE DISTRIBUTION

BACKGROUND OF THE TRANSFER AND THE DISTRIBUTION

Because the Modem Business was all that Bay desired to acquire, Penril
determined to effect the Distribution, which is intended to be tax-free to
Penril stockholders for federal income tax purposes and which was a condition to
Bay's willingness to enter into the Merger Agreement. Penril believes the
Distribution will enable Penril stockholders to participate in the values and
prospects of the assets and business of the Company.

11
<PAGE> 12

Although the Transfer and Distribution will not be effected unless the
Merger is approved and is about to occur, the Transfer and Distribution are
separate from the Merger and the Company Stock to be received by holders of
Penril Stock in the Distribution does not constitute a part of the consideration
to be received in the Merger.

Until shortly before the Merger, the Company will own no material assets
and will conduct no significant business activity. Prior to the Merger, Penril
and the Company will enter into a Distribution Agreement and an Indemnification
Agreement pursuant to which agreements Penril will transfer to the Company as a
capital contribution all of Penril's right, title and interest in the Remote
Access Business and all of the other assets of Penril unrelated to the Modem
Business, as well as a portion of Penril's total net operating loss
carryforward; and the Company will (a) assume, pay, perform and discharge all of
the liabilities of Penril other than (i) liabilities relating to the Modem
Business; and (ii) the bank debt of Penril (which may not exceed $4,000,000 at
the Effective Time); and (b) indemnify Penril for any and all claims and
liabilities arising as a result of or in connection with the sale by Penril of
Technipower or EMI. At the time of the Transfer, Penril will own all of the
Company's outstanding stock. See "Certain Transactions."

MANNER OF EFFECTING THE DISTRIBUTION

Pursuant to the Distribution, Penril will distribute as a dividend to its
stockholders of record as of the Record Date ("Holders") one share of Company
Stock for each share of Penril Stock then held. On the Distribution Date, Penril
will deliver to Continental Stock Transfer & Trust Company, as distribution
agent, certificates evidencing all of the issued and outstanding shares of
Company Stock owned by Penril, which will represent all of the issued and
outstanding shares of Company Stock. All shares of Company Stock distributed
will be fully paid, nonassessable and free of preemptive rights.

As a result of the Distribution, all of the issued and outstanding shares
of Company Stock will be distributed to Holders. The Record Date is expected to
be on or about November 15, 1996 and the Distribution Date will be on or about
November 19, 1996. It is presently anticipated that certificates representing
Company Stock will be mailed to Holders on or about the Distribution Date. After
the Distribution Date, Holders will hold their Penril Stock (until converted
into Bay Stock) as well as Company Stock. The Distribution will not affect the
number of, or the rights attaching to, outstanding shares of Penril Stock.

No Holder will be required to pay any cash or other consideration for the
shares of Company Stock received in the Distribution nor will any action be
required to be taken by any Holder, including tendering stock certificates, in
order to receive shares of Company Stock. Penril has accounted for the
Distribution as a dividend and has reduced its stockholders' equity by the net
book value of the Company Stock distributed.

IN ORDER TO BE ENTITLED TO RECEIVE THE DISTRIBUTION OF COMPANY STOCK, A
PENRIL STOCKHOLDER RECEIVING THIS PROSPECTUS MUST HAVE BEEN A HOLDER OF RECORD
OF PENRIL STOCK ON THE RECORD DATE.

LISTING AND TRADING OF COMPANY STOCK

The Company has applied to have the Company Stock listed for trading on
Nasdaq under the symbol "ACCB". The transfer agent and registrar for the Company
Stock is Continental Stock Transfer & Trust Company.

No current public trading market for the Company Stock exists, although a
"when-issued" market could develop several days prior to the Distribution Date.
The extent of the market for the Company Stock and the prices at which the
Company Stock may trade prior to or after the Distribution cannot be predicted.
See "Risk Factors -- Absence of Trading Market for Company Stock."

The Company Stock distributed to Holders will be freely transferable,
except for Company Stock received by persons who may be deemed to be
"affiliates" of the Company under the Securities Act. Persons who may be deemed
to be affiliates of the Company after the Distribution generally include
individuals or entities that control, are controlled by or are under common
control with the Company and may include certain officers and directors of the
Company as well as principal stockholders of the Company. Persons who

12
<PAGE> 13

are affiliates of the Company will be permitted to sell their Company Stock only
pursuant to an effective registration statement under the Securities Act or an
exemption from the registration requirements of the Securities Act, such as the
exemptions provided by Section 4(2) of the Securities Act or Rule 144
thereunder. It is not expected that Rule 144 will be available for the sale of
Company Stock by affiliates of the Company until at least 90 days after the
effectiveness of the Company's registration statement registering Company Stock
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). See
"Description of Capital Stock -- Company Stock."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION

General. The following is a summary of the material federal income tax
consequences of the Distribution to the holders of shares of Penril Stock. The
federal income tax discussion set forth below is for general information only
and may not apply to particular categories of holders of shares of Penril Stock
subject to special treatment under the Code, including without limitation,
foreign holders and holders whose Penril securities were acquired pursuant to
the exercise of any employee stock option or otherwise as compensation. EACH
HOLDER OF SHARES OF PENRIL STOCK AND PENRIL OPTIONS IS URGED TO CONSULT HIS TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE DISTRIBUTION,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND
OTHER TAX LAWS.

Consequences of Proposed Transaction. As described in the Summary, the
Distribution is being made in preparation for, and in conjunction with, the
Merger. The Board of Directors of Penril has received an opinion from its
counsel Benesch, Friedlander, Coplan & Aronoff P.L.L. ("Counsel") to the effect
that, on the basis of the facts, representations and assumptions set forth in
the opinion, for federal income tax purposes, it is more likely than not that
(i) the Distribution will qualify as a tax-free spin-off pursuant to Section 355
of the Code and (ii) the Merger will qualify as a reorganization within the
meaning of Section 368(a)(1)(B) of the Code. If the tax-free nature of the
Merger is invalidated, it would reduce the likelihood that the Distribution will
qualify as a tax-free spin-off pursuant to Section 355 of the Code.

The representations (among others) relied upon by Counsel in giving its
opinion contain statements or agreements to the effect that: the Modem Business
and Remote Access Business have each been actively conducted for five years and
will continue to be conducted as separate, active businesses after the proposed
transactions; certain transactions between Penril and Bay in effect prior to the
closing of the Distribution and the Merger are fair market value transactions
entered into for valid business reasons independent of the Merger, and all of
the transactions between the Company and Bay or Penril in effect after the
closing of the Distribution and the Merger (other than certain contributions
made to the Company by Penril prior to the Distribution) will also be fair
market value transactions entered into for valid business reasons; the transfer
of certain cash and liquid assets to the Company (and the retention of certain
debt by Penril) is necessitated by the ongoing business needs of the Company;
the liquid assets being received by the Company will be used in the operation of
its Remote Access Business and will not be used to make distributions to, or
redeem the shares of Company Stock held by stockholders of the Company; Penril
will be maintained as a separate corporation by Bay; and Bay owns no Penril
Stock and has no intention to reacquire any stock issued in the Merger.

The favorable tax treatment of both the Distribution and the Merger also
depends upon the historic stockholders of Penril maintaining a so-called
"continuity of interest" in both the Bay Stock received in the Merger and the
Company Stock received in the Distribution. Under Revenue Procedures issued by
the IRS, continuity of interest is maintained in each transaction if the
historic stockholders of Penril continue to maintain at least one-half their
stock investment in Penril in the modified form of each of the Company Stock and
Bay Stock received by them in the proposed transactions. Penril has represented
that it knows of no plan or intent by any stockholder to sell more than one-half
of his Bay Stock or Company Stock received in the proposed transactions. There
are no court cases or published rulings by the Service giving guidance on how to
measure the continuity of interest of historic stockholders in publicly owned
corporations, such as Penril, where 5% stockholders own, in the aggregate, less
than 50% of the stock of the corporation. However, Counsel is of the opinion,
based upon Penril's representations regarding the plans and intentions of its
stockholders,

13
<PAGE> 14

that both the Distribution and the Merger meet the continuity of interest
requirement. It should be noted that Penril has not sought representations (as
required by the IRS from taxpayers seeking private letter rulings in
reorganizations) from each of its 5% stockholders as to their plans and
intentions with respect to their Penril Stock or the Bay Stock and the Company
Stock to be received in the proposed transactions.

Consequences of the Distribution to Penril Stockholders. If the
distribution qualifies as a tax-free spin-off for federal income tax purposes:

1. A Penril stockholder will not recognize any income, gain or loss in
connection with the Distribution.

2. Following the Distribution, a Penril stockholder will apportion the
tax basis for his shares of Penril Stock between such Penril Stock and the
Company Stock received in the Distribution in proportion to the relative
fair market values of such Penril Stock and Company Stock on the
Distribution Date. A Penril stockholder's holding period for the Company
Stock received or deemed received in the Distribution will include the
period during which such stockholder held the Penril Stock with respect to
which the Company Stock was received or deemed received, provided that such
Penril Stock is held as a capital asset by such stockholder as of the time
of the Distribution.

Counsel's opinion with respect to the Distribution is based upon certain
representations and assumptions and represents Counsel's best legal judgment,
and is not binding upon the IRS or the courts. If any representation or
assumption relied upon in rendering Counsel's opinion is inaccurate, or if the
IRS were to challenge successfully the federal income tax treatment of the
Distribution set forth in Counsel's opinion, then, in general, although not
entirely free from doubt, for federal income tax purposes it is likely that each
Penril stockholder would be required to recognize income or gain on the receipt
of the shares of Company Stock in the Distribution in an amount up to the fair
market value of the shares of Company Stock received in the Distribution. In
such event (a) the tax basis of the shares of Company Stock received by a Penril
stockholder in the Distribution would be the fair market value of such shares on
the date the Distribution is consummated and (b) the holding period for such
shares of Company Stock would begin the day after the date the Distribution is
consummated.

Current treasury regulations require that each Penril stockholder who
receives Company Stock pursuant to the Distribution attach to his federal income
tax return for the year in which the Distribution occurs a detailed statement
setting forth such information as may be appropriate in order to demonstrate the
applicability of Section 355 of the Code to the Distribution. Penril or its
successor, Bay, will convey the appropriate information to each Penril
stockholder of record as of the Record Date.

CERTAIN CONSEQUENCES OF THE DISTRIBUTION

After the Distribution, Penril stockholders of record as of both the Record
Date and the Effective Time will own two securities (shares of Penril Stock,
until they are converted into shares of Bay Stock, and shares of Company Stock)
and will be able to increase or decrease their respective holdings in either Bay
or the Company without affecting their holdings in the other company. The
Company will be an independent, publicly traded company, owning and operating
the Remote Access Business and, if not disposed of prior to the Distribution,
Technipower and EMI.

REASON FOR FURNISHING THIS PROSPECTUS

This Prospectus is being prepared in order to provide information for
Holders, each of whom will receive shares of Company Stock in the Distribution.
It is not to be construed as an inducement or encouragement to buy or sell any
securities of Penril, the Company or any other corporation. The information
contained herein is provided as of the date of this Prospectus unless otherwise
indicated. Neither Penril nor the Company will update the information contained
in this Prospectus to effect any changes that may occur subsequent to the date
hereof, except in the normal course of their respective public disclosure
practices.

14
<PAGE> 15

CAPITALIZATION

The capitalization of the Company following the Distribution will reflect
the net book value of the assets transferred to and the liabilities assumed by
the Company from Penril in connection with the Transfer. The following table
sets forth the proforma adjusted capitalization of the Company at July 31, 1996.
This table has been prepared based upon the historical consolidated balance
sheet of Penril as of July 31, 1996 giving effect to the Transfer and the
Distribution. This table also reflects adjustments to the proforma
capitalization, as referred to in the note following the table. This table does
not reflect results of operations from and after July 31, 1996. This table
should be read in conjunction with the unaudited proforma consolidated financial
statements and notes thereto included elsewhere herein (dollars in thousands).

<TABLE>
<CAPTION>
AS
PROFORMA ADJUSTMENTS ADJUSTED
-------- ----------- --------
<S> <C> <C> <C>
Long-term debt (capitalized lease obligations)............ $ 633 $ 633
======= =======
Stockholders' equity:
Common stock, par value $.01 per share, 30,000,000
authorized, 11,993,000 outstanding................... $ 109 $ 11(1) $ 120
Additional paid-in capital.............................. 39,837 6,240(1) 46,077
Retained earnings....................................... (21,581) (21,581)
-------- --------
Total stockholders' equity................................ $ 18,365 $ 24,616
======= =======
Total capitalization...................................... $ 18,998 $ 25,249
======= =======
<FN>
- ---------------

(1) Adjustment for the issuance of 1,143,000 shares as a result of the exercise
of employee and non-employee director stock options with a value of
$6,251,000 that the Company assumes will be exercised from July 31, 1996 to
the Transfer.
</TABLE>

15
<PAGE> 16

SELECTED PROFORMA CONSOLIDATED FINANCIAL DATA

While the Transfer and the Distribution will take place as described above,
the following unaudited pro forma consolidated financial statements have been
prepared from Penril's historical consolidated financial statements to show the
Modem Business being sold to Bay as a pro forma adjustment and the Company, on a
proforma basis, as the continuing entity.

With the exception of historical information, the matters discussed in this
section include forward-looking statements that involve risks and uncertainties.
The Company wishes to caution readers that a number of important factors,
including those identified in this section as well as factors discussed in "Risk
Factors" and elsewhere in this Prospectus, could affect the Company's actual
results and cause actual results to differ materially from those in the
forward-looking statements.

PROFORMA BALANCE SHEET

The following unaudited proforma consolidated balance sheet for the Company
has been prepared based upon the historical consolidated balance sheet for
Penril as of July 31, 1996 and giving effect to the Transfer and the
Distribution and the events that are directly attributable to those
transactions. In the opinion of Penril's management, all material adjustments
necessary to reflect the effects of the Transfer and the Distribution have been
made. Such unaudited proforma information should be read in conjunction with the
historical consolidated financial statements of Penril, including the notes
thereto, which are included elsewhere in this Prospectus, and the notes to this
unaudited proforma consolidated balance sheet.

The unaudited proforma consolidated balance sheet has been prepared based
upon assumptions deemed appropriate by the management of Penril, does not
purport to represent what the actual financial position would have been if the
Transfer and the Distribution had been consummated at July 31, 1996, may not be
indicative of actual results and does not purport to represent the future
financial position of the Company.

16
<PAGE> 17

UNAUDITED PROFORMA CONSOLIDATED BALANCE SHEET AS OF JULY 31, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
PENRIL ADJUSTMENTS AS ADJUSTED
AS -- MODEM -- THE
REPORTED BUSINESS COMPANY
-------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents.......................... $ 4,237 $ $ 4,237
Accounts receivable, net........................... 7,044 3,099(1) 3,945
Inventories........................................ 9,684 4,261(2) 5,423
Deferred income taxes.............................. 1,700 1,700(3) --
Net assets of discontinued operations.............. 7,337 -- 7,337
Other current assets............................... 249 75(2) 174
------- ------- -------
TOTAL CURRENT ASSETS............................ 30,251 9,135 21,116
Property and Equipment, net.......................... 2,457 346(2) 2,111
Other Assets......................................... 1,072 197(2) 875
------- ------- -------
TOTAL ASSETS......................................... $33,780 $ 9,678 $24,102
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings.............................. $ 4,000 $ 4,000(4) $ --
Current portion of long-term debt.................. 272 272
Accounts payable................................... 6,076 2,673(5) 3,403
Accrued compensation and commission................ 1,347 121(2) 1,226
Other accrued expenses............................. 1,758 251(2) 1,507
------- ------- -------
TOTAL CURRENT LIABILITIES....................... 13,453 7,045 6,408
Long-Term Debt, net of current portion............... 633 -- 633
Other Noncurrent Liabilities......................... 1,479 -- 1,479
------- ------- -------
TOTAL LIABILITIES.................................... 15,565 7,045 8,520
Stockholders' Equity
Common stock....................................... 109 -- 109
Additional paid-in capital......................... 39,837 -- 39,837
Retained earnings (deficit)........................ (21,581 ) 2,633 (24,214)
------- ------- -------
18,365 2,633 15,732
Equity adjustment from foreign currency
translation..................................... (150 ) -- (150)
------- ------- -------
TOTAL STOCKHOLDERS' EQUITY........................... 18,215 2,633 15,582
------- ------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY............................................. $33,780 $ 9,678 $24,102
======= ======= =======
<FN>
- ---------------

(1) Adjustments to eliminate estimated Modem Business receivables as of July 31,
1996 based on assumed turnover of receivables to sales.

(2) Adjustments to eliminate specifically identified Modem Business related
assets and liabilities to remain with Penril after the Transfer and the
Distribution.

(3) Adjustments to eliminate deferred income taxes and other tax benefits to
remain with Penril after the Transfer and the Distribution.

(4) Adjustments to eliminate the bank debt to remain with Penril after the
Transfer and the Distribution.

(5) Adjustments to eliminate Modem Business related trade payables to remain
with Penril after the Transfer and the Distribution.
</TABLE>

PROFORMA STATEMENTS OF OPERATIONS

The following unaudited proforma consolidated statement of operations for
the Company has been prepared from the historical results of operations of
Penril. The proforma adjustments have been computed assuming the Transfer and
the Distribution had been consummated August 1, 1995. This statement should be
read in conjunction with the historical consolidated financial statements of
Penril including the notes thereto,

17
<PAGE> 18

which are included elsewhere in this Prospectus, the unaudited proforma
consolidated balance sheet appearing above and the notes to this unaudited
proforma consolidated statement of operations.

The unaudited proforma consolidated statement of operations has been
prepared based upon an identification of those costs that could be directly
attributed to the Modem Business. Expenses which were not specifically
identified with either the Modem Business or the Remote Access Business remain
with the Company; consequently the expenses shown for the Company are in excess
of those that would have been incurred had the Company been a stand alone
company. This statement does not purport to represent what the actual results of
operations would have been for the Company had the Transfer and the Distribution
been consummated at the beginning of the period, is not indicative of actual
results and does not purport to represent what the results of operations of the
Company may be for future periods.

UNAUDITED PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31, 1996
----------------------------------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
PENRIL, ADJUSTMENTS AS ADJUSTED
AS -- MODEM -- THE
REPORTED BUSINESS(1) COMPANY
-------- ----------- -----------
<S> <C> <C> <C>
Net Revenues from Continuing Operations.............. $39,435 $ 19,519(2) $ 19,916
Cost and Expenses:
Cost of revenues................................... 22,409 9,869(2) 12,540
Selling, general and administrative................ 18,611 2,321(6) 15,917
373(7)
Product development and engineering................ 7,389 370(3) 5,624
176(4)
1,219(5)
Amortization of cost over net assets acquired...... 734 734
Provision for restructuring costs.................. 9,718 9,718
Merger related expenses............................ 500 500
------ ------ ------
59,361 14,328 45,033
Operating Income (Loss) from Continuing Operations... (19,926) 5,191 (25,117)
Other Expenses:
Interest expenses.................................. (698) (698)
Other, net......................................... (44) (44)
------ ------ ------
(742) -- (742)
Income (Loss) from Continuing Operations Before
Income Taxes....................................... (20,668) 5,191 (26,859)
Benefit from Income Taxes............................ -- -- --
------ ------ ------
Income (Loss) from Continuing Operations............. $(20,668) $ 5,191 $ (26,859)
====== ====== ======
Net income (loss) per common and equivalent shares... $ (2.78)
======
Shares used in per share calculations................ $ 9,650
======
<FN>
- ---------------

(1) The adjustments for the Modem Business are only for those items that can be
directly attributed to the Modem Business.

(2) Adjustments to exclude the Modem Business revenues and associated costs of
sales. Modem Business revenues includes $4.5 million reflecting payment
under a license agreement between Penril and Bay entered into in the fourth
quarter of fiscal 1996. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations of Penril and the Company --
Results of Operations -- Fiscal 1996 Compared to Fiscal 1995."

(3) Adjustments to eliminate rent expense related to Modem Business product
development and engineering.

(4) Adjustments to eliminate Modem Business related depreciation, amortization
and other operating costs.

(5) Adjustments to eliminate Modem Business related engineering labor.

(6) Adjustments to exclude expenses of Penril DataComm, Ltd. and Penril
International Ltd. which are attributable to the Modem Business.

(7) Adjustments to exclude marketing and advertising relating to the Modem
Business.
</TABLE>

18
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF PENRIL AND THE COMPANY

GENERAL BUSINESS DEVELOPMENTS

Beginning in fiscal year 1994, Penril began to focus its business on remote
access connectivity products. Out of this strategy came Penril's new Remote
Access Business. The first phase of the new Remote Access Business includes the
Ram Rack and the Access Beyond 1000 Remote Access Server.

As part of this strategy, Penril's Board of Directors made the decision to
sell EMI and consequently, EMI has been classified as a discontinued business.
Penril continues to operate EMI and expects EMI to operate at least at a
break-even level through the anticipated disposition date, which Penril's
management believes will be completed by December 31, 1996. Prior to the end of
fiscal 1996, Penril entered into an agreement, subject to certain contingencies,
to sell Technipower. The sale was completed on October 11, 1996, with Penril
receiving approximately $1.5 million in cash on that date and approximately $2.8
million to be paid pursuant to the agreement on or prior to December 31, 1996.
Penril recorded a charge of $640,000 in the fourth quarter of fiscal 1996 for
the estimated loss on disposal of both these businesses. No assurance can be
given that EMI will be sold or that the timing or terms of any such sale will be
favorable to and as anticipated by Penril.

On June 16, 1996, as amended August 5, 1996, Penril entered into the Merger
Agreement with Bay and a subsidiary of Bay. Under the terms of the Merger
Agreement, Penril will transfer all of its Remote Access Business and any other
assets unrelated to the Modem Business to the Company and then distribute all of
the shares of Company Stock to Penril's stockholders. Following the Transfer and
the Distribution, the subsidiary of Bay will merge with and into Penril, whose
primary remaining operations will consist of the Modem Business, with Penril
becoming a wholly owned subsidiary of Bay.

As a result of all of the above items, in the fourth quarter of fiscal
1996, Penril took actions to strategically restructure the business to focus on
the remote access connectivity products, to reduce costs and to improve
competitiveness for the long term. This restructuring plan includes the
elimination of the VCP and BRX product lines and the introduction of the new
Remote Access Business. The decision to restructure and refocus is not dependent
upon consummation of the Merger. As a result of this decision to restructure the
business, Penril recorded a charge in the fourth quarter of fiscal 1996 of $9.7
million. This charge consisted of a write-down of costs in excess of net assets
acquired ($5.0 million), a provision for costs associated with contractual
obligations for leased facilities in Hong Kong and Carlstadt, New Jersey ($1.0
million), a provision for the write-down of purchased technology ($1.0 million),
a provision for the write-down of inventories and fixed assets ($2.3 million),
and a provision for costs associated with termination of approximately 90
employees ($400,000).

On an annualized basis this plan is expected to reduce labor costs by
approximately $3 million, reduce amortization and depreciation expenses by
approximately $700,000, and reduce facilities expenses by approximately
$300,000. The Company anticipates completion of the employee terminations and
consolidation of leased facilities by the end of the second quarter of fiscal
1997, and does not anticipate any additional costs associated with this
restructuring plan.

NEW ACCOUNTING PRONOUNCEMENTS

During fiscal 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of",
which requires the Company to review long-lived assets, certain identifiable
intangibles, and goodwill related to those assets for impairment whenever events
or changes in circumstances indicate that the

19
<PAGE> 20

carrying amount of an asset may not be recoverable. As a result of events
occurring in the fourth quarter of fiscal 1996, the Company decided to
restructure and refocus its remaining businesses. Due to these events, the
Company determined that the excess of costs over net assets acquired would not
be recoverable, and a charge of $5.0 million was taken in the fourth quarter of
fiscal 1996 against the carrying value of this asset. This charge was the
remaining balance in the account "Excess of Cost over Fair Value of Net Assets
Acquired."

During fiscal 1996, Statement of Financial Accounting Standard No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation," which establishes a
fair value based method for stock-based compensation plans, was issued. SFAS 123
includes both recognition and measurement provisions and disclosure requirements
for stock-based compensation. The Company has elected not to adopt the
recognition and measurement provisions of SFAS 123. The effect of adopting this
statement in fiscal 1997 is not deemed to be material.

RESULTS OF OPERATIONS

As a result of the Merger Agreement with Bay and the spin-off of the LAN
and Host Access products business in the Transfer, the following discussion is
based on the Penril historical financial statements, with revenues and expenses
which could be specifically identified with the modem products shown separately
from the LAN and Host Access products. All revenues and expenses which could not
be specifically identified with the modem products were included with the LAN
and Host Access products, consequently the expenses for the LAN and Host Access
products are in excess of those that would have been incurred had the Company
been a stand alone company. As noted above, Technipower and EMI are classified
as discontinued operations and are not included in this discussion unless
otherwise noted. Dollar amounts are reported in thousands.

FISCAL 1996 COMPARED TO FISCAL 1995

<TABLE>
<CAPTION>
JULY JULY
31, 31,
1996 1995 CHANGE
------- ------- --------
<S> <C> <C> <C>
Revenues:
LAN and Host Access products......................... $19,916 $33,637 $(13,721)
Modem products....................................... 19,519 18,974 545
------- ------- --------
$39,435 $52,611 $(13,176)
======= ======= ========
</TABLE>

The decrease in revenues for Penril's LAN and Host Access products was
primarily attributable to the continued decline in market demand for terminal
servers and multiplexers which resulted in lower volumes and more competitive
pricing. The Company intends to phase out these products, which represent older
technology, and introduce its new Remote Access Business. The new Remote Access
Business is designed to meet the growing demand for remote access technology.
The Company believes that its new Remote Access Business has a unique product
architecture that combines both remote access and internetworking capabilities
which will offer expanded and fully compatible capabilities to the existing
customer base as well as offering new customers a product line which will be
state of the art in remote access. The Company believes that this new Remote
Access Business will be competitively priced and will generate revenues over the
next fiscal year to offset the decline in revenue from its older LAN and Host
Access products.

In the fourth quarter of fiscal 1996, Penril and Bay entered into a License
Agreement whereby Bay acquired a license to certain intellectual property rights
related to Penril's modem technology, and Penril was paid $4.5 million. Revenues
for the Modem Business without this license agreement would have been $15.0
million in fiscal 1996 compared with $19.0 million in fiscal 1995. The decrease
in revenue from the sale of modem products was due to slower than expected sales
of Penril's V.34 modems, and a decline in sales of older modem products. Penril
believes that more competitive pricing of its new V.34 modems will result in
higher revenues for fiscal 1997 compared to fiscal 1996, and that these higher
revenues should offset the continued decline in sales of older modem products.

Exports represented 44% of Penril's total revenues in fiscal 1996 and 45%
of Penril's revenues in fiscal 1995. Approximately 60% of Penril's exports
related to modem products in both fiscal 1996 and fiscal 1995. Revenues from
Penril's foreign subsidiaries, which are primarily sales and marketing
operations (in England

20
<PAGE> 21

and Hong Kong), represented 7% of Penril's total revenues in fiscal 1996 and 5%
of Penril's total revenues in fiscal 1995, and over 95% of those revenues were
generated from the subsidiary in England. Due to the growing demand worldwide
for data communications products, Penril believes it will continue to generate
revenue from exports of both its LAN and Host Access products and its modem
products. Because of the location of its primary foreign subsidiary, Penril does
not believe it has any significant exposure to exchange rate risk.

In the three years ended July 31, 1996, foreign operations have generated
net losses after eliminations of $401,000, $49,000 and $625,000 respectively,
while domestic operations generated net losses of $20.3 million in fiscal 1996,
net losses of $5.1 million in fiscal 1995, and net income of $2.5 million in
fiscal 1994. Penril's foreign operations are sales and distribution locations
dealing primarily with modem products and performing no manufacturing. The net
losses from foreign operations are due to greater price competitiveness, which
has caused a decline in gross profit margins. In addition, Penril has pursued an
expansion in its foreign operations sales force resulting in an increase in
operating expenses. The net losses from Penril's domestic operations in fiscal
1996 included a restructuring charge of $9.7 million and merger related expenses
of $500,000. The net losses from Penril's domestic operations in fiscal 1996 and
1995 were due to lower sales volumes and higher absorption of manufacturing
variances and other fixed charges related to Penril's domestic manufacturing
operation, compared to fiscal 1994. Penril's domestic manufacturing operations
perform all manufacturing for Penril and consequently must absorb all of the
unfavorable manufacturing variances resulting from the lower sales volumes.

As a result of the Merger Agreement with Bay, Penril's foreign operations
related to the modem products will remain with Penril. Therefore, Penril's
management believes that following the Transfer and the Distribution, the
Company's foreign operations will be significantly reduced.

As a result of the restructuring plan, the Hong Kong subsidiary will be
phased out in fiscal 1997, and sales and marketing operations will be performed
from the U.S. Penril does not anticipate that the restructuring plan will have a
material effect on revenues for either the modem products or the LAN and Host
Access products.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1996 1995 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Gross Profit Margin:
LAN and Host Access products.......................... 37% 46% (9%)
Modem products........................................ 49% 41% 8%
</TABLE>

The decrease in the gross profit margins for LAN and Host Access products
was due to reductions in product pricing in order to remain competitive in the
market place, and increases in manufacturing inefficiencies due to lower sales
volumes. As noted above, Penril entered into a License Agreement with Bay in the
fourth quarter of fiscal 1996 for $4.5 million. Gross profit margins without
this License Agreement would have been 34% in fiscal 1996 compared to 41% in
fiscal 1995. The decrease in gross profit margins for modem products was due to
higher costs of materials in the V.34 modem product line as well as pricing
competition and lower manufacturing efficiencies related to the lower sales
volume.

<TABLE>
<CAPTION>
JULY JULY
31, 31,
1996 1995 CHANGE
------- ------- -----
<S> <C> <C> <C>
Selling, general and administrative expenses:
LAN and Host Access products............................ $16,417 $16,479 $ (62)
Modem products.......................................... 2,694 2,286 408
------- ------- -----
$19,111 $18,765 $ 346
======= ======= =====
</TABLE>

Selling, general and administrative expenses decreased for the LAN and Host
Access products primarily from lower commissions paid due to lower sales volume.
There was also a reduction in personnel costs as a result of eliminating several
administrative positions in Penril's Gaithersburg, Maryland facilities during
fiscal 1995. This reduction was partially offset by a charge of $500,000 during
the fourth quarter of fiscal 1996, for costs incurred related to the Merger. All
expenses which could not be specifically identified with the modem

21
<PAGE> 22

products were included with the LAN and Host Access products, consequently the
expenses for the LAN and Host Access products are in excess of those that would
have been incurred had the Company been a stand alone company.

<TABLE>
<CAPTION>
JULY JULY
31, 31,
1996 1995 CHANGE
------ ------ -----
<S> <C> <C> <C>
Product development expenses:
LAN and Host Access products.............................. $5,624 $5,520 $ 104
Modem products............................................ 1,765 1,918 (153)
------ ------ -----
$7,389 $7,438 $ (49)
====== ====== =====
</TABLE>

Product development expenses for the LAN and Host Access products increased
because of an increase in personnel costs related to development of the new
Remote Access Business. Modem product development expenses decreased because of
reductions in personnel costs as a result of Penril's cost reduction efforts in
fiscal 1995. All expenses which could not be specifically identified with the
modem products were included with the LAN and Host Access products, consequently
the expenses for the LAN and Host Access products are in excess of those that
would have been incurred had the Company been a stand alone company.

<TABLE>
<CAPTION>
JULY JULY
31, 31,
1996 1995 CHANGE
---- ------ -----
<S> <C> <C> <C>
Interest expense............................................. $698 $1,228 $(530)
</TABLE>

During fiscal 1996, Penril sold Penril Stock in private placements which
generated approximately $14.7 million in cash. A portion of the proceeds was
used to repay all term debt during fiscal 1996, which resulted in decreased
interest expense.

FISCAL 1995 COMPARED TO FISCAL 1994

<TABLE>
<CAPTION>
JULY JULY
31, 31,
1995 1994 CHANGE
------- ------- -------
<S> <C> <C> <C>
Revenues:
LAN and Host Access products.......................... $33,637 $39,011 $(5,374)
Modem products........................................ 18,974 22,827 (3,853)
------- ------- -------
$52,611 $61,838 $(9,227)
======= ======= =======
</TABLE>

The decrease in revenues for Penril's LAN and Host Access products was
primarily attributable to the declining market for terminal servers and
multiplexers as these products were reaching the end of the product life cycle,
and to a decrease in orders from some of Penril's OEM customers. The decrease in
revenues from modem products was due to unexpected delays in shipment of the
V.34 and V.34bis modems. Part of this delay resulted in a decline in total
exports to $23.6 million in fiscal 1995 from $25.6 million in fiscal 1994.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1995 1994 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Gross Profit Margin:
LAN and Host Access products........................ 46% 54% (8%)
Modem products...................................... 41% 45% (4%)
</TABLE>

The decrease in gross profit margins for LAN and Host Access products was due to
lower manufacturing efficiencies. The decrease in gross profit margins for modem
products was due to costs associated with the initial production of the V.34
modem product line, lower manufacturing efficiencies and pricing competition
related to the decrease in sales.

22
<PAGE> 23

<TABLE>
<CAPTION>
JULY JULY
31, 31,
1995 1994 CHANGE
------- ------- -----
<S> <C> <C> <C>
Selling, general and administrative expenses:
LAN and Host Access products.......................... $16,479 $16,965 $(486)
Modem products........................................ 2,286 1,850 436
------- ------- -----
$18,765 $18,815 $ (50)
======= ======= =====
</TABLE>

Selling, general and administrative expenses decreased for LAN and Host
Access products primarily because of a reduction in personnel costs as a result
of eliminating several administrative positions in Penril's Gaithersburg,
Maryland facilities during fiscal 1995 as part of Penril's cost reduction
program. Selling, general and administrative expenses for modem products
increased primarily due to additional allowances for bad debts.

<TABLE>
<CAPTION>
JULY JULY
31, 31,
1995 1994 CHANGE
------ ------ -------
<S> <C> <C> <C>
Product development expenses:
LAN and Host Access products........................... $5,520 $6,797 $(1,277)
Modem products......................................... 1,918 2,020 (102)
------ ------ -------
$7,438 $8,817 $(1,379)
====== ====== =======
</TABLE>

Product development expenses decreased because of reductions in personnel
costs as a result of Penril's cost reduction efforts in fiscal 1995 and 1994.

<TABLE>
<CAPTION>
JULY 31, JULY 31,
1995 1994 CHANGE
-------- -------- ------
<S> <C> <C> <C>
Interest expense...................................... $1,228 $908 $320
</TABLE>

Interest expense increased because of the increase in the prime rate from
7% in fiscal 1994 to 9% in fiscal 1995, and because the rate charged Penril by
its principal bank was raised from prime plus 1/2% to prime plus 2%.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal 1996, Penril sold 2,607,000 shares of Penril Stock in two
unrelated series of private placements which generated aggregate proceeds of
$14.7 million. The aggregate proceeds were used to repay all of Penril's bank
term debt and all its outstanding subordinated debt, which together totaled $4.8
million, and to fund general working capital needs including the loss of $11.1
million (excluding restructuring charges) for fiscal 1996.

As a result of the strategic business plan to restructure Penril, Penril
recorded a restructuring charge of $9.7 million in the fourth quarter of fiscal
1996. This restructuring charge included non-cash items for the write-down of
costs in excess of net assets acquired ($5.0 million), a provision for the
write-down of purchased technology ($1.0 million) and a provision for the
write-down of inventory ($2.2 million). This restructuring charge also included
items that will require future cash expenditures by the Company for employee
severance ($400,000) and obligations for leased facilities ($1.0 million). The
severance payments to employees will occur in the fiscal 1997 second quarter and
the payments under the leased facilities obligations will occur over the
remaining life of the lease with $282,000 due in fiscal 1997, $289,000 due in
fiscal 1998 and $440,000 due after fiscal 1998.

As a result of lower than expected sales and the buildup of inventory to
support the new Remote Access Business, inventory levels of Penril increased
$1.3 million during the first nine months of fiscal 1996. Consequently, Penril
started a program to reduce inventories that resulted in a fourth quarter
reduction of approximately $750,000. In addition, as noted above, Penril
recorded an inventory write-down provision of $2.2 million as part of the
restructuring charge. These actions resulted in Penril's inventory levels
declining to $9.7 million at July 31, 1996, or a reduction of $1.7 million below
the July 31, 1995 inventory level of $11.4 million.

23
<PAGE> 24

Contributing to Penril's cash flow in fiscal 1996 was a reduction in
accounts receivable of $6.5 million. This reduction was the result of the lower
sales volumes in fiscal 1996 compared to fiscal 1995 and an aggressive
collection effort that reduced the average collection time from 94 days in
fiscal 1995 to 65 days in fiscal 1996.

Penril's accounts payable declined by $2.1 million, also as a result of the
lower level of business.

As part of the Transfer, the Company is to receive all the cash and cash
equivalents of Penril. As of September 25, 1996, Penril had cash and cash
equivalents of approximately $3.8 million. In addition, Penril is expected to
generate cash from several non-operating sources. These anticipated sources
include the following:

Penril settled a law suit with Standard Micro Systems Corp. on
September 24, 1996. Pursuant to the settlement agreement, Penril is to
receive, in October 1996, $3.5 million in cash after all related expenses
have been paid.

On October 11, 1996, Penril sold the assets of Technipower for $4.3
million. Penril received approximately $1.5 million in cash on that date,
with the remaining $2.8 million payment being due, pursuant to the terms of
the agreement, on or prior to December 31, 1996.

Penril is in discussions with a potential buyer of EMI. Although there
can be no assurance that a sale of EMI will occur, Penril's management
believes that the sale of EMI will be completed by December 31, 1996 with
expected net cash proceeds of $3.0 million to $3.5 million after
transaction expenses.

As part of the Merger Agreement with Bay, the Company will receive $1.5
million at the closing pursuant to the Transitional Services Agreement with
Penril.

Between September 25, 1996 and the Distribution, Penril also expects to
receive approximately $5 million from the exercise of employee and non-employee
director stock options. Of this amount, approximately $4.6 million was received
between September 25, 1996 and October 11, 1996. The cash generated from the
exercises is expected to be used for the expenditures related to the Merger and
the Transfer. These expenditures include legal and accounting fees of
approximately $650,000, investment banker fees of approximately $1.3 million and
change of control payments due to certain officers of Penril of $1.3 million.

Penril currently has a line of credit with its principal bank. The
agreement provides a maximum working capital facility of $5.5 million with
borrowing based on qualified accounts receivable and secured by substantially
all of Penril's assets. Interest accrues at the bank's prime rate plus 2% with a
commitment fee of 3/8% on the unused portion of the facility. In the event the
facility is canceled prior to its expiration, there is a fee due the bank equal
to 3% of the total facility. As of July 31, 1996, Penril had borrowed $4 million
under the line and had utilized another $90,000 in connection with a standby
letter of credit. Pursuant to the Merger Agreement, after the Merger Penril will
retain bank debt up to a maximum of $4 million.

Currently there are discussions with lending institutions regarding a line
of credit for the Company after the Transfer. Management believes the Company
will be able to secure a line of credit after the Transfer, although there can
be no assurances that a line of credit will be secured, and if secured will be
on economic terms favorable to the Company.

Penril's management believes that during the first 12 months following the
Distribution the Company will have cash expenditures of approximately $2.2
million for fixed assets and capitalized technology purchases and $700,000
related to the employee severance and lease obligations noted above.

Immediately following the Distribution, management believes the Company
will have $7.8 million in cash as well as the right to receive a payment of $2.8
million from the sale of Technipower and possibly proceeds from the sale of EMI.
Based on the Company's expectation with respect to product development and
production, the Company's cash from operations alone will not satisfy the
Company's cash requirements during the first 12 months following the
Distribution. However, the Company expects that cash on hand as noted above,
cash from operations and cash from the sources discussed above, will satisfy the
Company's cash requirements during the first 12 months after the Distribution.
There can be no assurance that product development will proceed at the expected
pace, that the Company's sales will achieve expected levels, that

24
<PAGE> 25

staffing and facilities required will be able to be maintained at the reduced
levels expected under the restructuring plan referred to above, or that other
competitive factors will not result in cash from operations being less than
expected by management. However, the Company has the ability to defer product
development and marketing expenditures if necessary, to match with cash flow.
The deferral of these expenditures could have a negative impact on future sales
of the Company's products. The Company believes, based on its expected cash on
hand, cash from operations, cash from the sources discussed above and the
anticipated bank line of credit, that there will be adequate cash flow to fund
the Company's operations.

BUSINESS

GENERAL

The Company, which is a wholly-owned subsidiary of Penril, was recently
formed by Penril solely for the purpose of effecting the Merger and the
Distribution. Until shortly before the Merger, the Company will own no material
assets and will not conduct any business activities other than in connection
with the Distribution and the Merger. Prior to the Merger, Penril will transfer
to the Company, as a capital contribution, all of the right, title and interest
in all of Penril's Remote Access Business and all other businesses and assets
and corresponding liabilities of Penril unrelated to the Modem Business. Upon
consummation of the Merger, a subsidiary of Bay will merge with and into Penril,
Penril will become a wholly-owned subsidiary of Bay, and the Company will
continue with its own separate corporate existence unaffiliated with Penril.

While the Company is a newly formed corporate entity, the Remote Access
Business to be contributed to the Company by Penril has an operating history
consisting of the development and sales of LAN and Host Access products and the
development of a new product family called Access Beyond. In connection with the
Remote Access Business, the Company engages in the development and marketing of
network access devices which enable local, remote or mobile users to access
network resources located at remote sites, central sites or any other point in
the network.

PRODUCTS

The Company's product line consists largely of products which serve the LAN
and Host Access markets and a new product family called Access Beyond, serving
the remote access market.

The LAN and Host Access products currently sold by the Company include
statistical multiplexers and host access servers (VCX), Ethernet terminal
servers (CSX), Ethernet local and remote bridge routers (BRX), and a line of
CSU/DSU wide area products. The Company's new Access Beyond product family is
targeted at the remote access market, providing a scaleable, modular platform
into which a variety of connectivity options are expected to be offered, and
allowing room for growth and investment protection. The Access Beyond family of
products is expected to replicate the function of most of the LAN and Host
Access products, allowing the Company to phase out LAN and Host Access products
models in favor of new Access Beyond models. Each of the LAN and Host Access
products provides the Company with an existing revenue stream as well as an
installed base. Sales of LAN and Host Access products will initially provide a
significant portion of the revenues of the Company.

The VCX product line of multiplexers ranges from 4-port remote site
multiplexers to enterprise solutions providing up to 304 ports or 36 trunk lines
and multipurpose communication servers that combine both wide area network
("WAN") and LAN capabilities. These products can function as a data PBX, X.25
PAD, statistical multiplexer, terminal server or any combination of these.
Although the market for these products is in decline, the Company continues to
serve the installed base and fulfill customer applications.

The CSX Ethernet communications server family provides local and dialup
access to Ethernet LANs. Available as either 8-port or 16-port stand alone units
or as a modular chassis based solution, the CSX server provides terminal and
dialup access for TCP/IP networks. The BRX family includes modular switching
routers that provide up to 16 LAN ports and 2 WAN ports. A key element to the
BRX product line is in the Constellation software which provides a scaleable
router/switching solution. The Company believes that the Constellation software,
which uses an architecture called Logical Bridge Routing, enables network
managers

25
<PAGE> 26

to optimize bridge/router port configurations for efficient high performance.
The Constellation software is one of the key elements in the new Access Beyond
product line.

The Company anticipates that a wide range of Access Beyond models will be
available to meet varying site requirements, with chassis sizes ranging from
small 4-port units to completely modular 196-port units, thus allowing the user
to customize the chassis-based units to provide a unique mix of LAN and WAN
interfaces that meet the specific demands of its network environment. Interface
options are expected to include: Ethernet backbone and end user ports,
integrated WAN interfaces, analog modems, digital modems, CSU/DSU and ISDN
interfaces. The modularity and scaleability of the Access Beyond product family
is intended to give the customer flexibility in network configuration and
expansion potential.

The first phase of Access Beyond includes Ram Rack, a high density modem
product and Access Beyond 1000 Remote Access Servers, which are now being
shipped to customers. These products provide remote users with competitively
priced remote access to Novell, TCP/IP and Appletalk networks. The next phase of
the Access Beyond rollout is expected to include the Access Beyond 2400 and
Access Beyond 4400 modular chassis systems. These products are designed to
expand the flexibility of the product line with optional interfaces for direct
terminal connections, integrated V.34 modems and integrated ISDN terminal
adapters, along with LAN and high speed WAN (T1/E1/PRI) connectivity.

The Company anticipates that future enhancements to its remote access
software will provide integration of the remote access capabilities with full
multi-protocol routing. This combination is expected to provide additional
connectivity options and reduced access costs for corporate remote access
networks by allowing a single Access Beyond server to replace several separate
competitive devices. The software features of Access Beyond are and will be
focused on solving the problems of corporate remote LAN access. With the growth
of the Internet and the World Wide Web, corporate telecommuters and traveling
employees now require simultaneous support for multiple networking protocols
allowing access to a wide variety of applications. Networking security is
provided via a collection of security options.

All Access Beyond products will be monitored and configured with a
graphical, menu-driven Windows-based management tool that provides real-time
management control over the Access Beyond products. This management tool will be
based on the industry standard SNMP protocol to ensure interoperability with
equipment and management systems from other vendors.

The Company expects that it will deliver the industry's first unified
approach to remote access, with one comprehensive product line that can supply
both LAN and WAN technologies required in a single architecture, with complete
management control, and new levels of investment protection for end users.
Existing applications will be changed from dedicated services to faster, lower
cost and more flexible services such as Frame Relay and Ethernet. Access Beyond
is intended to provide a migration path from these older networks to the remote
access networks of the future.

DISCONTINUED OPERATIONS

Technipower. Technipower, a wholly-owned subsidiary of Penril, manufactures
uninterruptible power supplies and power regulating equipment. In July 1995, the
Penril Board decided to focus more of Penril's resources on its main business of
data communications and therefore determined to treat Technipower as a
discontinued operation. On July 16, 1996, Penril announced it had entered into
an agreement to sell Technipower subject to certain contingencies. On October
11, 1996, Penril sold the assets of Technipower for $4.3 million. On that date,
Penril received approximately $1.5 million in cash, with approximately $2.8
million to be paid pursuant to the agreement prior to December 31, 1996. All
liabilities related to Technipower which otherwise would be the obligations of
Penril will, from and after the Transfer, be the obligations of the Company.

EMI. Another wholly-owned subsidiary of Penril, EMI, specializes in the
production of sophisticated high frequency electronic instrumentation equipment.
The Penril Board of Directors determined to sell EMI and therefore EMI has been
classified as a discontinued operation. Penril is in the process of selling EMI.

26
<PAGE> 27

However, because it is unlikely that EMI will be sold prior to consummation of
the Distribution, it is anticipated that the assets and liabilities of EMI will
be contributed to the Company as part of the Transfer.

SUPPLIERS

Material and components for the Company's products are purchased from
outside suppliers. While most components are available from several suppliers, a
few are provided from sole-source vendors. The Company believes that in most
cases alternative sources of supply could be obtained within a reasonable time
period; however, an interruption in the supply of such components could have a
temporary adverse effect on the Company's operations.

PATENTS, COPYRIGHTS AND LICENSES

The Company owns, or is licensed or otherwise possesses legally enforceable
rights to use, several patents, patent applications, trademarks, trade names,
service marks, copyrights, schematics, technology, know-how, computer software
programs or applications, and tangible or intangible proprietary information or
material essential and necessary to the business of the Company. The Company may
desire in the future to obtain additional licenses related to its products and
believes, based on industry practice, that any necessary licenses could be
obtained. The costs of such licenses may vary significantly depending on the
nature of the technology involved.

The patents owned by EMI include patents entitled "Fiber Optic Connector"
and "Guard Time Elimination in a Time-Division Multiplexed, Active Star-coupled,
Half-duplex Mode, Synchronous Communications Network." The United States
trademarks, tradenames and service marks owned by EMI includes ELECTRO-METRICS.
These patents, trademarks, tradenames and service marks are currently intended
to be sold as part of the assets of EMI. If the sale of that subsidiary is not
consummated prior to the Transfer, these patents, trademarks, tradenames, and
service marks will be contributed to the Company as part of EMI.

The United States trademarks, tradenames and service marks owned by the
Company include ACCESS BEYOND, MULTIVERTER, FORSITE, MUX/ROUTER and SUNUPS.

The Company currently licenses technology including integrated access
software; CSU/DSU technology; frame relay assembler disassembler technology;
PC/TCP SNMP technology; terminal emulation software; remote access software;
router card technology and software; network management software; and basic
frame relay software for LAN interconnect products.

On June 16, 1996, Penril and Bay entered into a Development and License
Agreement on behalf of the Company whereby Bay licensed to Penril, on behalf of
the Company certain intellectual property, software, and technical know-how
relating to certain 24-port Digital Modem Cards. The agreement contemplates that
Bay will develop a 24-port Digital Modem Card for the Company, train the
Company's personnel in the underlying technology, and provide technical
assistance where necessary to permit the Company to market this digital
technology.

In connection with the Transfer, Penril and the Company will enter into a
Technology License Agreement whereby Penril will license to the Company certain
intellectual property, software and technical know-how, including those relating
to a patent jointly owned by Penril and the University of Maryland. The
Technology License Agreement will also obligate Penril to use its best efforts
to obtain for the Company all rights obtained by Penril pursuant to cross
licensing agreements involving such jointly owned patent.

BACKLOG

A significant portion of data communications revenues are based on customer
purchase orders with immediate shipment requirements. Backlog, which tends not
to be significant in data communications products, is a result of the occasional
customer order with future scheduled shipment requirements or misalignment of
demand and production of a particular product. Because data communications
revenues constitute such a significant portion of the revenues of the Company,
the Company believes that the dollar amount of backlog at any given time is not
indicative of the actual level of revenues which will ultimately be

27
<PAGE> 28

realized during future periods. Consequently, the Company believes that the
amount of backlog is not a material consideration in understanding the Company's
business operations.

COMPETITION

The Company encounters substantial competition in the marketing of its
products and many of its competitors have greater financial, marketing and
technical resources. Important competitive factors in the markets for the
Company's products are established customer base, product performance and
features, service and support as well as price. The Company believes that it
competes favorably with respect to these factors. There can be no assurance that
the Company's products will compete successfully with competitive products that
may be offered in the future or that aggressive pricing will not negatively
impact the profitability of the Company.

SALES AND MARKETING

The Company's distribution channel is composed of value-added resellers
(VARs), original equipment manufacturers (OEMs) and distributors in more than 40
countries. Sales to end-user customers account for less than 10% of the
Company's revenues. This multi-channel strategy allows the Company to meet
specific customer needs while giving coverage to the worldwide markets.

Value Added Resellers. VARs integrate the Company's products with products
of other vendors, into networking systems that are sold directly to end-users.
VARs also sell the Company's products as stand-alone units. Sales to VARs are
made at discounts based on purchase volumes and other incentive programs.

Original Equipment Manufacturers. The Company also customizes its product
for sale through OEMs. This customization may range from simple private labeling
of existing products to complete customization of software and/or hardware to
fit the product lines of the OEM.

Distributors. The Company also sells its products to distributors who
generally resell to VARs and other dealers. Distributors generally provide a
minimal level of systems integration. The Company offers sales and marketing
programs to assist distributors in promoting, selling and supporting the
Company's products.

Many of the Company's VARs and distributors carry products which are
complementary to, or compete with, those of the Company, and may choose to give
higher priority to products of other suppliers or competitors of the Company.

CUSTOMER SUPPORT, SERVICE AND WARRANTY

The Company services, repairs and provides technical support for its
products. A large portion of these support activities, provided through a 24
hour United States support center, are related to software and hardware
configuration. The Company sells products with end-user warranty periods of up
to sixty months. Following the expiration of the warranty period, if any, the
Company offers services on a time and materials basis, or under maintenance
contracts.

RESEARCH AND DEVELOPMENT

Under its own sponsorship, the Company is continuously engaged in the
development of new products as well as the development and enhancement of its
existing products. The Company expensed approximately $5,624,000 (28% of
consolidated revenues) for product development and engineering during fiscal
1996 compared to $5,520,000 (16% of consolidated revenues) in fiscal 1995 and
$6,797,000 (17% of consolidated revenues) in fiscal 1994.

PROPERTIES

The Company's executive offices will be located in Gaithersburg, Maryland
in facilities which the Company will sublease from Penril. The overlease between
Penril and Real Estate Income Partners III is for 54,874 square feet and expires
on September 30, 1999. The sublease between Penril and the Company will

28
<PAGE> 29

commence on the date of the Distribution, or upon the Company's occupancy of the
property, whichever is earlier, and will provide for the sublease of all the
premises with an expiration date of September 30, 1999. The Company will assume
all costs and expenses under the overlease including rental payments. The
Company's monthly payment for rent and additional charges will be approximately
$66,219. See "Certain Transactions -- Sublease Agreement".

The Company will lease a research and development facility in Carlstadt,
New Jersey. The lease is for approximately 44,403 square feet and expires in
September 2001. In addition to the facilities mentioned above, the Company will
also lease several sales offices throughout the United States. The Company
believes its properties will be adequate for its needs.

In addition, EMI is a party to a lease for a manufacturing facility located
in Johnstown, New York containing approximately 40,400 square feet (the "EMI
Lease"). The EMI Lease expires in August 2005. In the event EMI is not sold
prior to the Distribution, the aforementioned lease obligations of EMI will be
contributed by Penril to Access Beyond as part of the Transfer. Technipower is a
party to a lease for a manufacturing facility located in Danbury, Connecticut
containing approximately 30,000 square feet (the "Technipower Lease"). The
Technipower Lease expires in February 1998. The Company may remain contingently
obligated under the terms of the Technipower Lease. See "-- Discontinued
Operations".

EMPLOYEES

It is expected that the Company will employ approximately 160 employees as
of the Distribution Date. The Company believes that its future success will
depend largely on its ability to retain certain key personnel and to recruit and
retain additional highly skilled employees who are in great demand. The Company
will have employment contracts with certain officers, but does not have
employment contracts with its other employees. See "Management -- Employment and
Consulting Agreements".

LEGAL PROCEEDINGS

Penril is involved in various claims and lawsuits incidental to its
business. The Company has assumed the liabilities which may arise out of certain
lawsuits to which Penril is a party, the more significant of which lawsuits are
discussed below. All costs, expenses, liabilities and obligations of the
litigation discussed below have been assumed by the Company and all recoveries
from such litigation will be realized by the Company. In the opinion of
management, the Company is adequately reserved against such claims and lawsuits,
and any ultimate liability arising out of such claims and lawsuits will not have
a material adverse effect on the financial condition or operations of the
Company.

On June 1, 1993 Penril initiated a lawsuit against Standard Microsystems
Corp. ("SMC"), SMC Massachusetts, Inc., Ashraf M. Dahad and Kwabena Akufo (the
"SMC Defendants") in the Circuit Court of Maryland for Montgomery County for
breach of contract including, among other things, failure to transfer
technology, unfair competition and false representations. Penril sought relief
in an aggregate amount of approximately $50 million. The SMC Defendants
subsequently brought a counterclaim alleging fraud and breach of contract and
seeking recovery of amounts due under the contract which are alleged to be
approximately $1,650,000 in compensatory damages plus unspecified punitive
damages. In September 1996, Penril and the SMC Defendants agreed to drop the
fraud charges and to settle the contractual dispute. Penril will receive from
SMC, in settlement of the litigation, $3.5 million, net of legal fees, in the
first quarter of fiscal 1997.

On December 24, 1994, Penril filed a complaint against Network Systems
Corporation of Minneapolis, Minnesota ("NSC") in the Circuit Court of Maryland
for Montgomery County. The litigation arises out of a contract in which Penril
agreed to develop certain computer hardware and software to NSC's
specifications. Penril alleges breach of contract, fraudulent inducement and
defamation and is seeking specific performance, compensatory damages of
$2,000,000 and punitive damages of $5,000,000. On March 28, 1995, NSC filed an
answer and counterclaim in which NSC alleges negligent misrepresentation, fraud
and breach of contract by Penril. NSC is seeking rescission of the contract,
restitution of monies paid by NSC to Penril, compensatory

29
<PAGE> 30

damages of $5,000,000 and punitive damages in an unspecified amount. As of
September 30, 1996, the litigation was in the discovery stage.

Digital Equipment Corporation ("DEC") has claimed, through a series of
written communications, that Penril has violated DEC patents related to DEC LAT
technology. Penril has taken the position that Datability, Inc., prior to its
acquisition by Penril, had a relationship with DEC that involved the development
of LAT for which Datability has not collected. Both DEC and Penril have taken
the position that it is in the best interests of both parties to work toward a
fair resolution. As of September 30, 1996 no formal claims have been filed.

30
<PAGE> 31

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

Pursuant to the Company Certificate and the Company's By-laws ("By-laws"),
the Board of Directors of the Company (the "Board of Directors") is divided into
three classes with each director serving a three year term (after the initial
term). The following table sets forth certain information as to persons who will
serve as directors and executive officers of the Company after the Distribution.
The directors of Class I will hold office until the first scheduled annual
meeting of stockholders in 1997, the directors of Class II will hold office
until the annual meeting of stockholders in 1998 and the director of Class III
will hold office until the annual meeting of stockholders in 1999. Thereafter,
stockholders will elect the directors of each Class at the appropriate
succeeding annual meeting of stockholders.

Directors

<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION
- ------------ --------------------------------
<S> <C>
Class I -- Term Expiring at 1997
Annual Meeting
Barbara Perrier, 41 Ms. Perrier has served as Chief Financial Officer of
Communication Systems Technology, Inc., a developer
of software and hardware communications and control
equipment, since March 1996. Ms. Perrier served as
President of VideoGrafects, Inc., a multimedia
communications company specializing in the
production of video and computer based material,
from its founding in August 1992 until the Company
was sold to French Bray in March 1996. Prior to
founding VideoGrafects, Inc., Ms. Perrier was a
special (investing) partner with New Enterprise
Associates, a venture capital firm.

Paul Schaller, 48 Mr. Schaller has served as President of Schaller
Associates, a management consulting firm, since
March, 1996. From September, 1995 to March 1996, Mr.
Schaller was Vice President of Business Development
with the LAN Switching Division of FORE Systems,
Inc., a provider of ATM switching solutions. From
August 1993 to August 1995, Mr. Schaller was the
Vice President of Marketing at Alantec, Inc., a
provider of routing switches for the internetworking
market. Mr. Schaller was Vice President of Sales and
Marketing at Harmonic Lightwaves, Inc., a fiber
optic equipment provider from 1992 to 1993. From
1982 to 1991 Mr. Schaller was Vice President of
Sales and Marketing and General Manager of the
Digital Division of Vitalink Corporation, a provider
of remote internetworking equipment.
</TABLE>

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<PAGE> 32

<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION INFORMATION
- ------------ --------------------------------
<S> <C>
Class II -- Term Expiring at 1998
Annual Meeting
John Howard, 43 Mr. Howard has served as Chief Executive Officer of
Gryphon Capital Partners Corporation, an investment
firm, since January 1996. He served as Co-Chief
Executive Officer of Vestar Capital Partners, a
leveraged buyout firm, from 1990 to December 1995.
Mr. Howard is also a director of Celestial
Seasonings, Inc., a manufacturer of herbal teas,
Dyersburg Fabrics, Inc., a textile manufacturer, and
Clark Schwebel Inc., a fiberglass and Kevlar weaver.
Mr. Howard is the brother of Ronald A. Howard.
Arthur Samberg, 55 Mr. Samberg has served as President of
Dawson-Samberg Capital Management, Inc., a
registered investment advisor, since 1985. Mr.
Samberg is a General Partner and senior portfolio
manager of Pequot Partners Fund, L.P., Pequot
International Fund Inc. and Pequot Endowment Fund,
L.P.
Class III -- Term Expiring at 1999
Annual Meeting
Ronald A. Howard, 40, Prior to the Distribution, Mr. Howard will be named
Chairman of the Board, Chairman of the Board, President and Chief Executive
President and Chief Officer of the Company. Mr. Howard has served as
Executive Officer President of the Datability Networks Division of
Penril since 1994, and as Co-President of the
Division from May 1993 until November 1994. He has
held the position of Executive Vice President of
Penril from May 1993. Mr. Howard was President of
Datability Inc. from its founding in 1977 until it
was acquired by Penril in May 1993.
</TABLE>

Executive Officers (other than Directors)

<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL POSITION PRINCIPAL OCCUPATION INFORMATION
- -------------------------------- --------------------------------
<S> <C>
Richard D. Rose, 41, Mr. Rose was named Senior Vice President, Chief
Senior Vice President, Chief Financial Officer and Treasurer of the Company in
Financial Officer and Treasurer August 1996 after having served as Senior Vice
President and Chief Financial Officer of Penril
since April 1996 and as Chief Financial Officer of
Penril since November 1994. He held the position of
Vice President Finance of Penril from February 1994
until April 1996 and Corporate Controller from 1988
until February 1994. Mr. Rose was named Vice
President-Controller and Principal Accounting
Officer of Penril in December 1990 and served in
said capacity until February 1994.
John Clary, 50, Mr. Clary was named Vice President of Strategic
Senior Vice President and Chief Planning of Penril in August 1996. From May 1995
Operating Officer until joining Penril, he was President and
co-founder of Outsource Solutions, Inc., an
electronics manufacturing services company. For more
than five years prior to May 1995, Mr. Clary held
several senior level management positions, most
recently as Senior Vice President, Product
Operations, with Network Equipment Technologies, a
WAN equipment manufacturing company.
</TABLE>

32
<PAGE> 33

<TABLE>
<CAPTION>
NAME, AGE AND PRINCIPAL POSITION PRINCIPAL OCCUPATION INFORMATION
- -------------------------------- --------------------------------
<S> <C>
James P. Gallagher, 52, Mr. Gallagher was named Vice President -- Sales of
Vice President -- Sales the Penril Datability Networks Division of Penril in
November 1994. From May 1993, when Penril acquired
Datability, Inc, until November 1994, Mr. Gallagher
was Vice President, North and South American Sales
of the Datability Networks Division. At Datability,
Inc, he was Vice President of Sales from April 1990
until May 1993.
Mark Silverman, 34, Mr. Silverman has been employed for more than five
Vice President -- Research and years by either the Datability Networks Division of
Development Penril or Datability, Inc. In January 1996, he was
named Vice President, Product Development for
Internetworking Products. His prior positions with
Penril and Datability, Inc. included Director of
Product Development from September 1992 to January
1996, Manager of Hardware Development from March
1990 to September 1992 and Hardware Engineer from
October 1987 to March 1990.
</TABLE>

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established an Audit Committee and a
Compensation Committee.

The general functions of the Audit Committee include selecting the
independent auditors (or recommending such action to the Board of Directors),
evaluating the performance of the independent auditors and their fees for
services, reviewing the scope of the annual audit with the independent auditors
and the results of the audit with management and the independent auditors,
consulting with management, internal auditors and the independent auditors as to
the systems of internal accounting controls, and reviewing the nonaudit services
performed by the independent auditors and considering the effect, if any, on
their independence. The members of the Audit Committee will be outside directors
and will be determined by the full Board of Directors of the Company.

The Compensation Committee is authorized and directed to (i) review and
approve the compensation and benefits of the Company's executive officers, (ii)
review and approve the annual salary plans, (iii) review management organization
and development, (iv) review and advise management regarding the benefits,
including bonuses, and other terms and conditions of employment of other
employees, (v) administer the Incentive Plan (defined below) and the granting of
options under that plan, the Directors' Plan (defined below) and any other plans
that may be established, (vi) review and recommend for the approval of the Board
of Directors of the Company the compensation of directors, and (vii) determine
the compensation and benefits of the Chief Executive Officer and review and
approve, or modify if appropriate, the recommendations of the Chief Executive
Officer with respect to compensation and benefits of other executive officers.
The members of the Compensation Committee will be outside directors and will be
determined by the full Board of Directors.

COMPENSATION OF DIRECTORS

Members of the Board of Directors of the Company who are also employees of
the Company will not receive any additional compensation for service on the
Board of Directors or any committees of the Board of Directors. Members of the
Board of Directors of the Company who are not employees will receive an annual
retainer of $5,000 plus a stipend of $1,000 for each Board meeting attended.
Non-employee directors will receive additional stipends for service on
committees of the Board of Directors of the Company of $1,000 per committee
meeting not held on the same day as a Board meeting.

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<PAGE> 34

EXECUTIVE COMPENSATION

The following tables show information with respect to the annual
compensation for services in all capacities to Penril for the fiscal years ended
July 31, 1996, 1995 and 1994 of those persons who will be at the Distribution
Date, (i) the chief executive officer and (ii) the other four most highly
compensated executive officers of the Company (the "named executive officers")
who were employed by Penril during fiscal 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION AWARDS
COMPENSATION -----------------------------------
NAME AND ----------------- STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY OPTIONS(1) COMPENSATION(2)
----------------------------------- ---- -------- --------------- ---------------
<S> <C> <C> <C> <C>
Ronald A. Howard................... 1996 $221,877 250,000 $ 784
Chairman of the Board, 1995 $200,000 30,000 $ 5,458
President and Chief 1994 $203,333 -- $ 250
Executive Officer
John Clary (3)..................... -- -- -- --
Senior Vice President
and Chief Operating Officer
Richard D. Rose.................... 1996 $153,768 30,000 $ 4,746
Senior Vice President and 1995 $125,848 20,000 $ 4,547
Chief Financial Officer 1994 $115,335 5,000 $ 4,311
James Gallagher.................... 1996 $188,293 20,000 $ 300
Vice President -- Worldwide Sales 1995 $167,786 10,000 $ 250
1994 $168,858 -- $ 250
Mark Silverman..................... 1996 $109,577 15,000 $ 300
Vice President -- Research 1995 $105,674 5,000 $ 250
and Development 1994 $101,923 -- $ 250
<FN>
- ---------------

(1) Number of shares granted under the 1986 Incentive Plan of Penril. The
options are exercisable at prices ranging from $2.31 to $8.00 per share, the
fair market value at the date of grant. Penril does not grant SARs.

(2) Includes for fiscal 1996, $300 paid for the benefit of each of the named
executives pursuant to the Company's 401(k) Plan. Also includes $274 each
for Mr. Howard and Mr. Rose, under the Company's Split-Dollar Life Insurance
Program and for Mr. Howard and Mr. Rose, $210 and $3,172 respectively, paid
to the Exec-U-Care Medical Insurance Trust.

(3) Mr. Clary joined Penril on August 5, 1996, as Vice President of Strategic
Planning, at an annual salary of $150,000.
</TABLE>

34
<PAGE> 35

PENRIL OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF ANNUAL RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION FOR
GRANTED TO OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE OR MARKET PRICE ON ----------------------
GRANTED(1) FISCAL YEAR(1) BASE PRICE DATE OF GRANT EXPIRATION DATE 5% 10%
---------- -------------- ----------- --------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald A. Howard....... 250,000 44.3% $ 7.875 $ 7.875 09/08/2005 $1,238,136 $3,137,680
Richard D. Rose........ 20,000 3.5% 6.440 6.440 04/09/2006 $ 81,002 $ 205,274
Richard D. Rose........ 10,000 1.8% 5.690 5.690 11/03/2005 $ 35,784 $ 90,684
James Gallagher........ 10,000 1.8% 6.440 6.440 04/09/2006 $ 40,501 $ 102,637
James Gallagher........ 10,000 1.8% 7.875 7.875 09/08/2005 $ 49,525 $ 125,507
Mark Silverman......... 10,000 1.8% 6.440 6.440 04/09/2006 $ 40,501 $ 102,637
Mark Silverman......... 5,000 0.9% 8.000 8.000 12/19/2005 $ 25,156 $ 63,750
<FN>
- ---------------

(1) Reflects only options; Penril does not grant SARs.

(2) Assumed annual appreciation rates are set by the Commission and are not a
forecast of future appreciation. The actual realized value depends on the
market value of Penril Common Stock on the exercise date, and no gain to the
optionees is possible without an increase in the price of Penril Common
Stock. All assumed values are pre-tax and do not include dividends.
</TABLE>

AGGREGATED PENRIL OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL 1996 YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
UNEXERCISED OPTIONS PER SHARE OPTIONS AT
AT FISCAL YEAR-END EXERCISE PRICE OF FISCAL YEAR-END
SHARES ACQUIRED VALUE EXERCISABLE/ UNEXERCISED OPTIONS EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE(1) AT FISCAL YEAR-END UNEXERCISABLE(1)(2)
- ---------------------- --------------- -------- ------------------- ------------------- --------------------
<S> <C> <C> <C> <C> <C>
Ronald A. Howard...... 99,000 $520,875 271,000/-- $2.875-$7.875 $ 1,393,605/--
Richard D. Rose....... 96,667 $571,852 0/0 -- --
James Gallagher....... 12,000 $ 43,820 36,000/27,000 $2.310-$7.875 $ 303,375/$181,690
Mark Silverman........ 8,000 $ 14,440 13,500/18,500 $4.125-$8.000 $ 111,817/$114,818
<FN>
- ---------------

(1) Reflects only stock options; Penril does not grant SARs.

(2) Based on the Year-End per share closing price of $12.63 (as reported on
Nasdaq on July 31, 1996). Represents the difference between the per share
option exercise price and $12.63.
</TABLE>

EMPLOYMENT AND CONSULTING AGREEMENTS

Upon consummation of the Distribution, the Company anticipates that it will
enter into an employment contract with Mr. Howard for Mr. Howard to serve as
Chairman of the Board, President and Chief Executive Officer (the "Howard
Employment Agreement"). It is anticipated that the Howard Employment Agreement
will provide, among other things, a two year term of employment, an annual
salary of $175,000, an opportunity for bonus compensation pursuant to a plan to
be established by the Board of Directors, and benefits consistent with those
normally provided by the Company to its executive employees including, without
limitation, a $5,000,000 term life insurance policy. It is anticipated that the
Howard Employment Agreement will also provide that options to purchase 300,000
shares of Company Stock are to be granted to Mr. Howard and that, upon a change
of control of the Company, Mr. Howard will receive a payment equal to two and
one-half times his last full annual compensation, including bonus.

Also upon consummation of the Distribution, the Company anticipates that it
will enter into an employment agreement with Mr. Rose for Mr. Rose to serve as
Senior Vice President, Chief Financial Officer and Treasurer (the "Rose
Employment Agreement"). It is anticipated that the Rose Employment Agreement
will provide for Mr. Rose to serve as the Company's Chief Financial Officer at
an annual salary of $150,000. It is anticipated that the Rose Employment
Agreement also will provide that options to purchase 75,000 shares

35
<PAGE> 36

of Company Stock which will be granted to Mr. Rose, a payment of between .5 to
1.0 times Mr. Rose's base salary in the event of a change in control of the
Company, between four and twelve months notice of termination and the ability to
participate in any executive bonus plan and other benefits consistent with those
normally provided by the Company to its executive officers.

Upon consummation of the Distribution, an employment agreement between the
Company and Mr. Clary ("Clary Employment Agreement") will become effective. The
agreement will provide for a salary at the rate of $150,000 plus an opportunity
for bonus compensation of up to $150,000 pursuant to a plan to be established by
the Board of Directors. The term of this agreement will be terminable by either
party at will and will provide that options to purchase 125,000 shares of
Company Stock are to be granted to Mr. Clary. The agreement also will provide
for reimbursement of certain living expenses and travel expenses.

Effective as of the Distribution, Henry D. Epstein will be a consultant to
the Company under the terms of a consulting agreement (the "Epstein Agreement")
between the Company and Ideonics, a financial and technology consulting firm
owned by Mr. Epstein. The Epstein Agreement will provide, among other things,
for a four year consulting term with an annual consulting fee of $137,500. In
addition, pursuant to the Epstein Agreement, the Company will provide Ideonics
with office space, secretarial assistance and health care benefits for Mr.
Epstein. Mr. Epstein is Chairman of the Board of both Penril and the Company
until the Merger and the Distribution, respectively.

Pursuant to change of control provisions contained in current Penril
employment agreements, Penril will pay Mr. Howard, Mr. Rose and Mr. Epstein,
$562,500, $150,000 and $550,000, respectively, upon the consummation of the
Merger. The Distribution Agreement to be entered into by Penril and the Company
will confirm Penril's obligation to make these payments at or immediately prior
to the Merger.

PENRIL BENEFIT PLANS

Retirement and Savings Plan. Penril's Retirement and Savings Plan ("401(k)
Plan") is a defined contribution plan including provisions of Section 401(k) of
the Internal Revenue Code. Employees of Penril who have completed 90 days of
eligibility service ("Participants") are eligible to participate in the 401(k)
Plan. The 401(k) Plan permits, but does not require Penril to make matching
contributions. In addition, Penril may make discretionary contributions to the
401(k) Plan which will be allocated to each Participant based on the ratio of
such Participant's eligible compensation to the total of all Participants'
eligible compensation. Amounts contributed by Penril vest as to 30% after 1 year
of eligible service, 60% after 2 years of eligible service and 100% after 3
years of eligible service. Participants may elect to direct the investment of
their contributions in accordance with the provisions of the 401(k) Plan. As a
part of the Transfer, the 401(k) Plan will be transferred to the Company and
active participation in the 401(k) Plan will be limited to eligible employees of
the Company. The Company intends to split up the 401(k) Plan so that the portion
of the plan representing the benefits of participants not employed by the
Company can be terminated and distributed to participants. Pursuant to the terms
of the Distribution Agreement, the Company will indemnify Penril for any and all
liabilities, costs or expenses for the 401(k) Plan. See "Certain
Transactions -- Distribution Agreement."

The 1986 Incentive Plan of Penril. On October 8, 1986, the Board of
Directors of Penril adopted the 1986 Incentive Plan of Penril (the "1986 Plan").
The 1986 Plan is intended to encourage officers and other key employees of
Penril to acquire or increase their ownership of Penril Stock.

The 1986 Plan authorizes the grant to officers and key employees of awards
("Awards") consisting of "incentive stock options," as that term is defined
under the provisions of Section 422 of the Code, non-qualified stock options (or
a combination of the two) and restricted stock awards. There are 1,587 shares of
Penril Stock available for granting Awards under the 1986 Plan. The Stock
Option/Compensation Committee of the Board of Directors of Penril (the "Penril
Committee") administers the 1986 Plan and has sole discretion to determine those
employees to whom Awards will be granted, the number of Awards granted, the
provisions applicable to each Award and the time periods during which Awards may
be exercisable.

36
<PAGE> 37

The exercise price of each incentive stock option may not be less than the
fair market value of Penril Stock at the date of grant. Under the 1986 Plan,
fair market value is generally the closing price of Penril Stock on the last
business day prior to the date on which the value is to be determined. Unless
the Penril Committee determines otherwise, the option price per share of any
non-qualified stock option shall be the fair market value of the shares of
Penril Stock on the date the option is granted. The exercise price of each
incentive stock option granted to any stockholder possessing more than 10% of
the combined voting power of all classes of capital stock of Penril, or, if
applicable, a parent or subsidiary of Penril, on the date of grant must not be
less than 110% of the fair market value on that date, and no such option may be
exercisable more than five years after the date of grant.

Options granted are exercisable for a term of not more than ten years from
the date of grant. No employee may be granted an incentive stock option to the
extent the aggregate fair market value, as of the date of grant, of the stock
with respect to which incentive stock options are first exercisable by such
employee during any calendar year exceeds $100,000.

Restricted stock awards are rights granted by the Penril Committee to
receive shares of Penril Stock subject to forfeiture and other restrictions
determined by the Penril Committee. Until the restrictions with respect to any
restricted stock award lapse, the shares will be held by Penril and may not be
sold or otherwise transferred by the employee. Except as otherwise determined by
the Penril Committee, until the restrictions lapse, the shares will be forfeited
if the employee's employment is terminated for any reason other than a "change
in control" or "trigger event," death, disability or retirement on or after the
employee's attainment of 65 years of age. Except as otherwise determined by the
Penril Committee, all restrictions will lapse upon the earliest of the death,
disability or retirement of the recipient employee on or after the employee's
attainment of 65 years of age. Unless the Penril Committee determines otherwise,
30% of the shares subject to a restricted stock award will vest on the first
anniversary of the date of the grant, 60% on the second anniversary and 100% on
the third anniversary of the grant.

Awards granted under the 1986 Plan are subject to adjustment upon a
recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend or other similar event affecting Penril
Stock such as the Distribution. An Award will not be transferable, other than by
will or the laws of descent and distribution or, in certain circumstances,
pursuant to a qualified domestic relations order, and an Award may be exercised,
during the lifetime of the holder of the Award, only by the holder, or the
holder's personal representative in the event of disability.

In the case of a "change in control" of Penril or a "trigger event," an
option holder will generally have the right, commencing at least five days prior
to the "change in control" or "trigger event" and subject to any other
limitation on the exercise of the option in effect on the date of exercise, to
immediately exercise any options in full to the extent they previously have not
been exercised, without regard to any vesting limitations. On July 2, 1996, the
Penril Committee took action which caused all of the outstanding Penril options
held by directors and executive officers of Penril to vest and on September 19,
1996 the Penril Committee took action which caused all the remaining outstanding
unvested Penril options to vest.

The 1986 Plan will terminate on October 8, 1996, and Awards will not be
granted under the 1986 Plan after that date although the terms of any Award may
be amended in accordance with the 1986 Plan at any date prior to the end of the
term of such Award. Any Awards outstanding at the time of termination of the
1986 Plan will continue in full force and effect according to the terms and
conditions of the Award and the 1986 Plan.

The 1986 Plan may be amended by the Board of Directors of Penril, provided
that stockholder approval will be necessary as required under Section 422 of the
Code or Rule 16b-3 of the regulations of the Exchange Act, and provided further
the no amendment may impair any rights of any holder of an Award previously
granted under the 1986 Plan without the holder's consent.

The 1995 Long-Term Incentive Plan of Penril. On December 13, 1995, Penril
adopted the 1995 Long-Term Incentive Plan of Penril (the "1995 Plan"). The 1995
Plan is intended to encourage officers and other key employees of Penril and its
subsidiaries to acquire or increase their ownership of Penril Stock.

37
<PAGE> 38

The 1995 Plan authorizes the grant to officers and key employees of awards
("Awards") consisting of "incentive stock options," as that term is defined
under the provisions of Section 422 of the Code, non-qualified stock options and
restricted stock awards. There are 930,000 shares of Penril Stock available for
granting Awards under the 1995 Plan. The Penril Committee administers the 1995
Plan and has sole discretion to determine those employees to whom Awards will be
granted, the number of Awards granted, the provisions applicable to each Award
and the time periods during which Awards may be exercisable.

The Penril Committee may grant incentive stock options, non-qualified stock
options, or a combination of the two. The exercise price of each incentive stock
option may not be less than the fair market value of Penril Stock at the date of
grant. Under the 1995 Plan, fair market value is generally the closing price of
Penril Stock on the last business day prior to the date on which the value is to
be determined. Unless the Penril Committee determines otherwise, the option
price per share of any non-qualified stock option will be the fair market value
of the shares of Penril Stock on the date the option is granted. The exercise
price of each incentive stock option granted to any stockholder possessing more
than 10% of the combined voting power of all classes of capital stock of Penril,
or, if applicable, a parent or subsidiary of Penril, on the date of grant must
not be less than 110% of the fair market value on that date, and no such option
may be exercisable more than five years after the date of grant.

Options granted will be exercisable for a term of not more than ten years
from the date of grant. In addition, no employee may be granted an incentive
stock option to the extent the aggregate fair market value, as of the date of
grant, of the stock with respect to which incentive stock options are first
exercisable by such employee during any calendar year, exceeds $100,000.

Restricted stock awards are rights granted by the Penril Committee to
receive shares of Company Stock subject to forfeiture and other restrictions
determined by the Penril Committee. Until the restrictions with respect to any
restricted stock award lapse, the shares will be held by Penril and may not be
sold or otherwise transferred by the employee. Except as otherwise determined by
the Penril Committee, until the restrictions lapse, the shares will be forfeited
if the employee's employment is terminated for any reason other than death,
disability or retirement on or after the employee's attainment of 65 years of
age. Except as otherwise determined by the Penril Committee, all restrictions
will lapse upon the earliest of the death, disability or retirement of the
recipient employee on or after the employee's attainment of 65 years of age.
Unless the Penril Committee determines otherwise, 30% of the shares subject to a
restricted stock award will vest on the first anniversary of the date of grant,
60% on the second anniversary and 100% on the third anniversary of the grant.

Awards granted under the 1995 Plan will be subject to adjustment upon a
recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend, or other similar event affecting Penril
Stock. An Award will not be transferable, other than by will or the laws of
descent and distribution or, in certain circumstances, pursuant to a qualified
domestic relations order, and an Award may be exercised, during the lifetime of
the holder of the Award, only by the holder, or the holder's personal
representative in the event of disability.

In the case of a "change in control" of Penril, an option holder will
generally have the right, commencing at least five days prior to the "change in
control" and subject to any other limitation on the exercise of the option in
effect on the date of exercise, to immediately exercise any options in full to
the extent they previously have not been exercised, without regard to any
vesting limitations. On July 2, 1996 the Penril Committee took action which
caused all of the outstanding Penril options held by directors and executive
officers of Penril to vest and on September 19, 1996, the Penril Committee took
action which caused all the remaining outstanding unvested Penril options to
vest.

Penril, in its sole discretion, may establish procedures, subject to
certain restrictions, whereby an option holder, subject to the requirements of
Rule 16b-3, Regulation T, and certain other laws, may exercise an option or a
portion thereof without making a direct payment of the option price to Penril,
without regard to any vesting limitations.

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<PAGE> 39

The 1995 Plan will terminate on December 13, 2005, and Awards may not be
granted under the 1995 Plan after that date, although the terms of any Award may
be amended in accordance with the 1995 Plan at any date prior to the end of the
term of such Award. Any Awards outstanding at the time of termination of the
1995 Plan will continue in full force and effect according to the terms and
conditions of the Award and the 1995 Plan.

The 1995 Plan may be amended by the Board of Directors of Penril, provided
that stockholder approval will be necessary as required under the Section 422 of
the Code or Rule 16b-3 of the regulations of the Exchange Act, and provided
further that no amendment may impair any rights of any holder of an Award
previously granted under the 1995 Plan without the holder's consent.

COMPANY BENEFIT PLANS

The Company's 1996 Long-Term Incentive Plan. It is expected that the Board
of Directors of the Company will adopt the Company's 1996 Long-Term Incentive
Plan (the "Company Incentive Plan"), subject to approval by the Company's
stockholders. The Company Incentive Plan will be intended to encourage ownership
of Company Stock by officers and other key employees of the Company, to
encourage their continued employment with the Company and to provide them with
additional incentives to promote the success of the Company.

The Company Incentive Plan will authorize the grant to officers and key
employees of options ("Options") consisting of "incentive stock options," as
that term is defined under the provisions of Section 422 of the Code and
non-qualified stock options. There will be 2,000,000 shares of Company Stock
available for granting Options under the Company Incentive Plan. The
Compensation Committee of the Board of Directors of the Company (the
"Committee") will administer the Company Incentive Plan and will have sole
discretion to determine those employees to whom Options will be granted, the
number of Options granted, the provisions applicable to each Option and the time
periods during which Options may be exercisable; provided, however, that no
employee may receive Options to acquire more than 500,000 shares of Company
Stock during any given year.

The Committee may grant incentive stock options, non-qualified stock
options, or a combination of the two. The exercise price of each incentive stock
option may not be less than the fair market value of the Company Stock at the
date of grant. Under the Company Incentive Plan, fair market value generally
will be the closing price of the Company Stock on Nasdaq on the last business
day prior to the date on which the value is to be determined; provided, however,
with respect to options granted on or before the Distribution Date, fair market
value means the average of the daily closing price of the Company Stock for the
first ten consecutive trading days that Company Stock is traded on Nasdaq other
than on an "as issued" or "when issued" basis, calculated to the nearest cent,
as determined by the Company. Unless the Committee determines otherwise, the
option price per share of any non-qualified stock option will be the fair market
value of the shares of Company Stock on the date the option is granted. The
exercise price of each incentive stock option granted to any stockholder
possessing more than 10% of the combined voting power of all classes of capital
stock of the Company, or, if applicable, a parent or subsidiary of the Company,
on the date of grant must not be less than 110% of the fair market value on that
date, and no such option may be exercisable more than five years after the date
of grant.

Options granted will be exercisable for a term of not more than ten years
from the grant. Unless the Committee determines otherwise, Options may be
exercised as to 30% of the shares subject to an Option at any time after the
first anniversary of the date of grant, as to 60% of the shares subject to an
Option at any time after the second anniversary of the date of grant and as to
all shares subject to an Option at any time after the third anniversary of the
date of grant. In addition, no employee may be granted an incentive stock option
to the extent the aggregate fair market value, as of the date of grant, of the
stock with respect to which incentive stock options are first exercisable by
such employee during any calendar year exceeds $100,000.

Options granted under the Company Incentive Plan will be subject to
adjustment upon a recapitalization, stock split, stock dividend, merger,
reorganization, liquidation, extraordinary dividend or other similar event
affecting the Company Stock. An Option will not be transferable, other than by
will or the laws of descent and

39
<PAGE> 40

distribution or, in certain circumstances, pursuant to a qualified domestic
relations order, and an Option may be exercised, during the lifetime of the
holder of the Option, only by the holder, or the holder's personal
representative in the event of disability.

In the case of a "change in control" of the Company, each Option granted
under the Company Incentive Plan will terminate 90 days after the occurrence of
such "change in control" and an option holder will generally have the right,
commencing at least five days prior to the "change in control" and subject to
any other limitation on the exercise of the Option in effect on the date of
exercise, to immediately exercise any options in full to the extent they
previously have not been exercised.

The Company Incentive Plan will terminate ten years after adoption and
Options will not be granted under the Company Incentive Plan after that date
although the terms of any Option may be amended in accordance with the Company
Incentive Plan at any date prior to the end of the term of such Option. Any
Options outstanding at the time of termination of the Company Incentive Plan
will continue in full force and effect according to the terms and conditions of
the Option and the Company Incentive Plan.

The Company Incentive Plan may be amended by the Board of Directors of the
Company, provided that stockholder approval will be necessary as required under
Section 422 of the Code or Rule 16b-3 of the regulations of the Exchange Act,
and provided further that no amendment may impair any rights of any holder of an
Option previously granted under the Company Incentive Plan without the holder's
consent.

The Company's 1996 Non-Employee Directors' Stock Option Plan. It is
expected that the Board of Directors of the Company will adopt the 1996
Non-Employee Directors' Stock Option Plan (the "Directors' Plan").

The Directors' Plan is intended to encourage non-employee directors of the
Company to acquire or increase their ownership of Company Stock on reasonable
terms, and to foster a strong incentive to put forth maximum effort for the
continued success and growth of the Company. The Directors' Plan provides for
the granting of non-qualified stock options to purchase 250,000 shares of
Company Stock to current and future non-employee directors of the Company. As of
the Distribution Date, the non-employee directors eligible to receive stock
options under the Directors' Plan will be Arthur Samberg, Barbara Perrier, John
Howard and Paul Schaller.

Each of the directors identified above as being eligible to receive stock
options under the Directors' Plan will be granted an option on or immediately
prior to the Distribution Date to purchase 25,000 shares of Company Stock. Each
non-employee director who subsequently joins the Board of Directors will be
granted, on the first business day following the first day of his term, an
option to purchase 25,000 shares of Company Stock. On the fifth business day
after the Company's Annual Report on Form 10-K is filed with the Commission for
each fiscal year that the Directors' Plan is in effect, each person who is a
non-employee Director on such date will receive an additional option to purchase
5,000 shares of Company Stock. If the number of shares available for grant under
the Directors' Plan on a scheduled date of grant is insufficient to make all the
grants, then each eligible director will receive an option to purchase a pro
rata number of the available shares.

The option price per share will be the fair market value of the shares of
Company Stock on the date of grant. Under the Directors' Plan, fair market value
is generally the closing price of the Company Stock on Nasdaq on the last
business day prior to the date on which the value is to be determined; provided,
however, that with respect to the initial option grants, fair market value means
the average of the daily closing price of the Company Stock for the first ten
consecutive trading days that Company Stock is traded on Nasdaq other than on an
"as issued" or "when issued" basis calculated to the nearest cent, as determined
by the Company.

The options granted under the Directors' Plan will be exercisable for a
term of ten years from the date of grant, subject to earlier termination, and
may be exercised as follows: (a) any options granted as of the effective date of
the Directors' Plan or as of the first day of a Director's initial term on the
Board of Directors of the Company may be exercised as to 30% of the shares
subject to such option at any time after the first anniversary of the date of
grant, as to 60% of the shares subject to such option at any time after the
second

40
<PAGE> 41

anniversary of the date of grant, and as to all shares subject to such option at
any time after the third anniversary of the date of grant and (b) any other
options may be exercised at any time after the third anniversary of the date of
grant.

In the event that a director ceases to be a member of the Board of
Directors of the Company (other than by reason of death or disability), an
option may be exercised by the director (to the extent the director was entitled
to do so at the time he ceased to be a member of the Board of Directors of the
Company) at any time within seven months after he ceases to be a member of the
Board of Directors of the Company, but not beyond the term of the option. If the
director dies or becomes disabled while he is a member of the Board of Directors
of the Company or within seven months thereafter, an option may be exercised (to
the extent the director shall have been entitled to exercise the option as of
the date of his death or the termination of his directorship by reason of his
disability) by a legatee of the director under his will, or by him or his
personal representative or distributees, as the case may be, at any time within
12 months after his death or disability, but not beyond the term of the option.
The Directors' Plan will be administered by the Committee.

Options granted under the Directors' Plan will be subject to adjustment
upon a recapitalization, stock split, stock dividend, merger, reorganization,
liquidation, extraordinary dividend or other similar event affecting the Company
Stock. Options will not be transferable other than by will or pursuant to the
laws of descent and distribution or pursuant to a qualified domestic relations
order, and will be exercisable during the lifetime of an option holder only by
such holder or his personal representative in the event of disability.

Upon a "change in control" of the Company (as defined in the Directors'
Plan), each option granted under the Directors' Plan will terminate on the later
of (i) 90 days after the occurrence of the "change in control" and (ii) seven
months following the date of grant of each option, and an option holder will
have the right, commencing at least five days prior to the "change in control"
and subject to any other limitation on the exercise of the option in effect on
the date of exercise, to immediately exercise any options in full, to the extent
they have not previously been exercised.

The Directors' Plan will terminate on the tenth anniversary of the
Distribution Date and options may not be granted under the Directors' Plan after
that date, although the terms of any option may be amended in accordance with
the Directors' Plan at any date prior to the end of the term of that option. Any
options outstanding at the time of termination of the Directors' Plan will
continue in full force and effect according to the terms and conditions of the
option and the Directors' Plan.

The Directors' Plan may be amended by the Board of Directors of the
Company, provided that stockholder approval will be necessary if required under
Rule 16b-3 of the General Rules and Regulations of the Exchange Act, and no
amendment may impair any of the rights of any holder of an option previously
granted under the Directors' Plan without the holder's consent.

The principal terms of the option grants are fixed in the Directors' Plan.
Therefore, the Committee will have no discretion to select which directors
receive options, the number of shares of Company stock included in any grant, or
the exercise price of options.

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<PAGE> 42

SECURITY OWNERSHIP

All of the outstanding Company Stock will be held by Penril until the
Distribution. The following table sets forth the projected beneficial ownership
of the Company Stock immediately following the Distribution by each director and
executive officer of the Company at that time and all directors and executive
officers of the Company at that time as a group, as well as by any person
projected to own beneficially more than 5% of the Company Stock, based upon such
person's reported ownership of Penril Stock in filings made with the Commission
pursuant to Sections 13(d) and 13(g) of the Exchange Act as of October 11, 1996.
The information in this table was based in part on information supplied by the
named individuals. Various members of management of the Company have indicated
that they may purchase shares of Company Stock in the open market after the
Distribution Date.

<TABLE>
<CAPTION>
SHARES OF COMPANY STOCK PROJECTED TO BE
BENEFICIALLY OWNED
----------------------------------------
AMOUNT AND
NAME AND ADDRESS NATURE OF BENEFICIAL PERCENTAGE
OF BENEFICIAL OWNER OWNERSHIP(1) OWNERSHIP
- --------------------------------------------------- -------------------- ---------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Ronald A. Howard 925,603 7.8%
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
John Howard -- --
80 Irving Place
New York, NY 10003
Barbara Perrier(2) 3,000 --(4)
8975 Guilford Road
Columbia, MD 21046
Arthur Samberg(3) 1,925,000 16.2%
354 Pequot Avenue
Southport, CT 06490
Paul Schaller -- --
6 Applewood Lane
Portola Valley, CA 94028
Richard D. Rose 46,667 --(4)
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
James Clary -- --
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
James P. Gallagher 63,000 --(4)
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
Mark Silverman 32,000 --(4)
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (9 2,995,270 24.8%
PERSONS)
</TABLE>

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<PAGE> 43

SHARES OF COMPANY STOCK PROJECTED TO BE
BENEFICIALLY OWNED
NAME AND ADDRESS ----------------------------------------
OF BENEFICIAL OWNER AMOUNT AND
- --------------------------------------------------- NATURE OF BENEFICIAL PERCENTAGE
FIVE PERCENT SHAREHOLDERS OWNERSHIP(1) OWNERSHIP
- --------------------------------------------------- -------------------- ---------
<S> <C> <C>
Henry D. Epstein 823,029 6.9%
1300 Quince Orchard Boulevard
Gaithersburg, MD 20878
Pequot Partners Fund, L.P.,(3) 1,925,000 16.2%
Pequot Endowment Fund, L.P. and
Pequot International Fund, Inc.
354 Pequot Avenue
Southport, CT 06490
Cramer Partners, L.P.(5) 1,131,250 9.5%
56 Beaver Street, Suite 701
New York, NY 10004
<FN>
- ---------------

(1) Includes, in certain instances, shares held in the name of an executive
officer's or director's spouse or minor children, the reporting of which is
required by applicable rules of the Commission, but as to which shares the
executive officer or director may have disclaimed beneficial ownership.

(2) Ms. Perrier and her husband, John Dreyer, will have shared voting and
dispositive power with respect to these shares.

(3) Includes 86,500 shares of Common Stock to be owned by Dawson-Samberg Capital
Management, Inc., of which Mr. Samberg is President, 787,100 shares of
Common Stock to be owned by Pequot Partners Fund, L.P., a Delaware limited
partnership whose general partner and investment manager is Pequot General
Partners, a Connecticut general partnership ("General Partners"), 352,900
shares of Common Stock to be owned by Pequot Endowment Fund, L.P., a
Delaware limited partnership whose general partner and investment manager is
Pequot Endowment Partners, L.P., a Delaware limited partnership ("Endowment
Partners") and 698,500 shares of Common Stock to be owned by Pequot
International Fund Inc., a British Virgin Islands corporation, whose
investment manager is DS International Partners, L.P., a Delaware limited
partnership ("International Partners"). (Pequot Partners Fund, L.P., Pequot
Endowment Fund, L.P. and Pequot International Fund Inc. are collectively
referred to as the "Funds"). Mr. Samberg is a General Partner and senior
portfolio manager of each of the Funds. General Partners, Endowment Partners
and International Partners (collectively, the "Partners") are to be the
beneficial owners, as such term is used in Rule 13d-3 of the Exchange Act,
of the shares of Common Stock to be owned by the Fund for which they act as
investment manager, respectively. The Partners may be deemed to constitute a
group as such term is used in Section 13(d) (3) of the Exchange Act. Each of
the Partners disclaims beneficial ownership of the Common Stock to be
beneficially owned by the other partners. On September 22, 1995, the Funds
purchased from Penril in a private placement an aggregate of 1,465,000
shares of Penril Stock for an aggregate payment of $7,325,000.

(4) Less than 1%.

(5) James J. Cramer, President of J.J. Cramer & Co. and Karen Cramer, Vice
President of J.J. Cramer & Co. will have shared voting and dispositive power
with respect to the shares to be held by the Partnership.
</TABLE>

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<PAGE> 44

DESCRIPTION OF CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

The authorized capital stock of the Company consists of 30,000,000 shares
of Company Stock, and 3,000,000 shares of preferred stock, $.01 par value per
share ("Company Preferred Stock"). Immediately after the Distribution, it is
estimated that 11,993,000 shares of Company Stock will be issued and
outstanding.

COMPANY STOCK

The holders of Company Stock are entitled to one vote for each share held
of record on all matters submitted to the vote of stockholders, including the
election of directors. The holders of Company Stock do not have cumulative
voting rights. Subject to any preferential rights held by holders of the Company
Preferred Stock, the holders of Company Stock are entitled to receive ratably
such dividends as may be declared from time to time by the Company's Board of
Directors out of funds legally available therefor. In the event of the
liquidation, dissolution or winding up of the Company, holders of Company Stock
will be entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of outstanding Company Preferred
Stock, if any. Holders of Company Stock do not have preemptive, conversion or
redemption rights. All the issued and outstanding shares of Company Stock are
duly authorized, validly issued, fully paid and nonassessable.

No current public trading market for the Company Stock exists, although the
Company intends to list the Company Stock on Nasdaq. The extent of the market
for the Company Stock and the prices at which the Company Stock may trade cannot
be predicted. Until the Company Stock is distributed and an orderly market
develops, the trading price may be volatile.

After the Distribution, the Company will be an independent, publicly-traded
company, owning, among other things, the Remote Access Business. The number and
identity of stockholders of the Company immediately after the Distribution
cannot currently be determined with certainty because it will be based on the
number and identity of stockholders of Penril on the Distribution Date. However,
based on the number of record stockholders and outstanding shares of Penril
Stock as of the close of business on October 11, 1996, the anticipated exercise
of outstanding Penril options and the distribution ratio of one share of Company
Stock for every one share of Penril Stock, the Company expects to have
approximately 920 holders of record of Company Stock and approximately
11,993,000 shares of Company Stock issued and outstanding immediately after the
Distribution and no holders of record of Company Preferred Stock or shares of
Company Preferred Stock issued and outstanding immediately after the
Distribution. In addition, as provided for in the Company Incentive Plan and the
Directors' Plan, it is anticipated that the total number of shares of Company
Stock with respect to which options may be granted and restricted stock may be
awarded under the Company Incentive Plan and the Directors' Plan will not exceed
2,250,000 shares, 250,000 of which would be allocated strictly to the Directors'
Plan, subject to adjustment (together with the exercise price of options and the
purchase price, if any, of restricted stock) to reflect any change in the
Company's outstanding shares of Company Stock by reason of stock dividends,
stock splits, recapitalizations, mergers, consolidations or other similar events
affecting the number or kind of outstanding shares. It is believed that
directors and executive officers of the Company will own, in the aggregate, less
than twenty-six percent (26%) of the outstanding shares of Company Stock
immediately after the Distribution. See "Security Ownership."

The Company Stock distributed to Penril stockholders will be freely
transferable, except for shares received by any persons who may be deemed to be
"affiliates" of the Company under the Securities Act. Persons who may be deemed
to be affiliates of the Company after the Distribution generally include
individuals or entities that control, are controlled by, or are under common
control with the Company and may include certain officers and directors of the
Company as well as principal stockholders of the Company. Persons who are
affiliates of the Company will be permitted to sell their shares of Company
Stock only pursuant to an effective registration statement under the Securities
Act or an exemption from the registration requirements of the Securities Act,
such as the exemption provided by Section 4(1) of the Securities Act or Rule 144
thereunder. The Section 4(1) exemption allows the sale of unregistered shares by
a person who is not an issuer, an underwriter or a dealer. Rule 144 provides
persons who are not issuers with objective

44
<PAGE> 45

standards for selling restricted securities and securities held by affiliates
without registration. The rule requires that (1) current public information be
available concerning the issuer; (2) restricted stock generally be held two
years or more; (3) volume limitations are placed on sales during any three-month
period; and (4) affiliates comply with certain manner of sale restrictions. The
amount of Company Common Stock which could be sold by a person (or persons whose
shares are aggregated) under Rule 144 during a three month period cannot exceed
the greater of (1) one percent of the shares of Company Common Stock outstanding
as shown by the most recent report or statement published by the Company, or (2)
the average weekly trading volume for the shares for a four-week period prior to
the date that notice of the sale is filed with the Commission.

The transfer agent and registrar for the Company Stock is Continental Stock
Transfer & Trust Company.

PREFERRED STOCK

The Board of Directors of the Company, without further approval or action
by the stockholders, is authorized to issue shares of Company Preferred Stock in
one or more series and to fix as to any such series the dividend rate,
redemption prices, preferences on liquidation or dissolution, sinking fund
terms, if any, conversion rights, voting rights and any other preference or
special rights and qualifications. Issuances of Company Preferred Stock may
adversely affect the rights of holders of Company Common Stock. Holders of
Company Preferred Stock might, for example, be entitled to preference in
distributions to be made to stockholders upon the liquidation, dissolution or
winding up of the Company. In addition, holders of Company Preferred Stock might
enjoy voting rights that limit, qualify or adversely affect the voting rights of
holders of Company Stock. Such rights of the holders of one or more series of
Company Preferred Stock might include the right to vote as a class with respect
to the election of directors, major corporate transactions or otherwise, or the
right to vote together with the holders of Company Stock with respect to any
such matter. The holders of Company Preferred Stock might be entitled to cast
multiple votes per share. The issuance of Company Preferred Stock could have the
effect of delaying, deferring, or preventing a change in control of the Company
without further action by the stockholders. The Company has no present plans to
issue any shares of Preferred Stock.

ANTITAKEOVER PROVISIONS OF THE COMPANY CERTIFICATE AND COMPANY BY-LAWS

Penril, as sole stockholder of the Company, has approved a Company
Certificate and Company By-laws. Such Company Certificate and Company By-laws
(i) provide for a Classified Board of Directors of the Company from which
directors may only be removed by Stockholders for cause; (ii) generally provide
that only a majority of the Board of Directors of the Company shall have the
authority to fill vacancies on the Board of Directors; (iii) restrict the right
to amend certain provisions of the Company Certificate and Company By-laws; (iv)
restrict the right of stockholders to call special meetings; (v) establish an
advance notice procedure regarding the nomination of directors by stockholders
and stockholder proposals to be brought before an annual meeting; and (vi)
authorize the Company's Board of Directors to issue Company Preferred Stock
without further stockholder approval. These provisions are designed to encourage
any person who desires to take control of and/or acquire the Company to enter
into negotiations with the Board of Directors of the Company, thereby making
more difficult the acquisition of the Company by means of a tender offer, a
proxy contest or other non-negotiated means. In addition to encouraging any
person intending to attempt a takeover of the Company to negotiate with the
Board of Directors of the Company, these provisions also curtail such person's
use of a dominant equity interest to control any negotiations with the Board of
Directors of the Company. Under such circumstances, the Board of Directors of
the Company may be better able to make and implement reasoned business decisions
and protect the interests of all of the Company's stockholders. A copy of the
Company Certificate and Company By-laws are each filed as an exhibit to the
Registration Statement of which this Prospectus is a part.

Classified Board of Directors. The Company Certificate provides for the
Board of Directors of the Company to be divided into three classes serving
staggered terms so that directors' initial terms will expire at the 1997, 1998
or 1999 annual meeting of stockholders. Starting with the 1997 annual meeting of
the

45
<PAGE> 46

Company's stockholders, one class of directors will be elected each year for a
three-year term. See "Management -- Directors and Executive Officers." The
classes will be as nearly equal in number as possible. The classification of
directors makes it more difficult for a significant stockholder to change the
composition of the Board of Directors of the Company in a relatively short
period of time and, accordingly, provides the Board of Directors of the Company
and stockholders time to review any nomination that a significant stockholder
may make and to pursue alternative courses of action which it believes are fair
to all the stockholders of the Company.

Removal of and Filling Vacancies on the Board of Directors of the
Company. The Company Certificate provides that, subject to any rights of the
holders of any class or series of the capital stock of the Company entitled to
vote generally in the election of directors, only a majority vote of the members
of the Board of Directors then in office, although less than a quorum, shall
have the authority to fill any vacancies on the Board of Directors of the
Company, including vacancies created by an increase in the authorized number of
directors. Moreover, because the Company Certificate provides for a classified
board, Delaware law provides that the stockholders may remove a member of the
Board of Directors of the Company only for cause and the Company Certificate
requires the affirmative vote of the holders of at least 80% of the voting power
of all the then-outstanding shares of the voting stock of the Company, voting
together as a single class, to remove a member of the Board of Directors. These
provisions relating to removal and filling of vacancies on the Board of
Directors of the Company preclude stockholders from enlarging the Board of
Directors of the Company or removing incumbent directors and filling vacancies
with their own nominees.

Amendment of the Company Certificate and Company By-laws. The Company
Certificate contains provisions requiring the affirmative vote of the holders of
at least 80% of the voting power of the Company Stock entitled to vote generally
in the election of directors to amend certain provisions of the Company
Certificate and Company By-laws (including certain of the provisions discussed
above). These provisions make it more difficult for stockholders to make changes
in the Company Certificate or Company By-laws, including changes designed to
facilitate the exercise of control over the Company.

Special Meetings. The Company By-laws provide that special meetings of
stockholders can be called only by the Chairman of the Board, the Vice Chairman
of the Board, the President or any Vice President, the Secretary or by the Board
of Directors of the Company. Stockholders are not permitted to call a special
meeting but may, upon a written request by stockholders owning a majority in
amount of the entire capital stock of the Company issued and outstanding and
entitled to vote, require that any of the foregoing call a special meeting of
stockholders. These provisions prohibit a significant stockholder from
authorizing stockholder action without a meeting at which all stockholders would
be entitled to participate.

Nominations of Directors and Stockholder Proposals. The Company By-laws
establish an advance notice procedure with regard to the nomination other than
by, or at the direction of, the Board of Directors of the Company of candidates
for election as directors (the "Nomination Procedure") and with regard to
stockholder proposals to be brought before an annual meeting of stockholders
(the "Business Procedure"). The Nomination Procedure provides that only persons
who are nominated by, or at the direction of, the Board of Directors of the
Company, or by a stockholder of the Company entitled to vote for the election of
directors who has given timely written notice to the Secretary of the Company
prior to the meeting at which directors are to be elected, are eligible for
election as directors of the Company. The Business Procedure provides that to be
properly brought before an annual meeting, business must be specified in the
notice of the annual meeting given by or at the direction of the Board of
Directors of the Company or brought before the meeting by, or at the direction
of, the Board of Directors of the Company or by a stockholder who has given
timely written notice to the Secretary of the Company of such stockholder's
intention to bring such business before such meeting. To be timely, notice for
nominations or stockholder proposals must be received by the Company not less
than 60 days prior to the annual meeting; provided, however, that in the event
that less than 70 days notice or prior public disclosure of the date of the
annual meeting is given or made to stockholders, notice by a stockholder, to be
timely, must be received no later than the close of business on the tenth day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made, whichever first occurs. In addition
to the foregoing requirements, the proxy rules under the Exchange Act set

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<PAGE> 47

forth certain requirements, including stockholder eligibility, timing and
attendance requirements, which must be satisfied in order for a stockholder
proposal to be included in the Company's proxy statement and form of proxy.
These requirements under the Exchange Act may differ from those set forth under
the Nomination Procedure or the Business Procedure.

Under the Nomination Procedure, notice to the Company from a stockholder
who proposes to nominate a person at an annual meeting for election as a
director must contain certain information about that person so nominated,
including age, business and residence addresses, principal occupation, the class
and number of shares of Company Stock beneficially owned, and such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee, and certain information about
the stockholder proposing to nominate that person. Under the Business Procedure,
notice relating to a stockholder proposal must contain certain information about
such proposal and about the stockholder who proposes to bring the proposal
before the meeting, including the class and number of shares of Company Stock
beneficially owned by such stockholder. If the officer of the Company presiding
at the meeting determines that a person was not nominated in accordance with the
Nomination Procedure, or that other business was not brought before the meeting
in accordance with the Business Procedure, such person is not eligible for
election as a director, or such business is not to be conducted as such meeting,
as the case may be.

The purpose of the Nomination Procedure is, by requiring advance notice of
nomination by stockholders, to afford the Board of Directors of the Company a
meaningful opportunity to consider the qualifications of the proposed nominees
and, to the extent deemed necessary or desirable by the Board of Directors of
the Company, to inform stockholders about such qualifications. The purpose of
the Business Procedure is, by requiring advance notice of stockholder proposals,
to provide a more orderly procedure for conducting annual meetings of
stockholders and, to the extent deemed necessary or desirable by the Board of
Directors of the Company, to provide the Board of Directors of the Company with
a meaningful opportunity to inform stockholders, prior to such meetings, of any
proposal to be introduced at such meetings, together with any recommendation as
to the Board of Directors of the Company's position or belief as to action to be
taken with respect to such proposal, so as to enable stockholders better to
determine whether they desire to attend such meeting or grant a proxy to the
Board of Directors of the Company as to the disposition of any such proposal.
Although the Company By-laws do not give the Board of Directors of the Company
any power to approve or disapprove stockholder nominations for the election of
directors or any other proposal submitted by stockholders, the Company By-laws
may have the effect of precluding a nomination for the election of directors or
precluding the conducting of business at a particular stockholder meeting if the
proper procedures are not followed, and may discourage or deter a third party
from conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of the Company, even if the conduct of
such solicitation or such attempt might be beneficial to the Company and its
stockholders.

Issuance of Company Preferred Stock. The Company Certificate authorizes
the Board of Directors of the Company to issue Company Preferred Stock, without
further stockholder approval, which could have dividend, redemption,
liquidation, conversion, voting or other rights that could adversely affect the
voting power and other rights of holders of Company Stock. The ability of the
Board of Directors of the Company to issue Company Preferred Stock could have
the effect of delaying, deferring, or preventing a change in control of the
Company without further action by the stockholders.

COMPARISON OF RIGHTS OF STOCKHOLDERS
OF THE COMPANY AND PENRIL

Following the Distribution, holders of Penril Stock will become holders of
Company Stock and the rights of such holders will be governed by the Company
Certificate and the Company By-laws. The rights of Company stockholders differ
in certain respects from the rights of Penril stockholders. Certain of the
differences are summarized below. This summary is qualified in its entirety by
reference to the full text of such documents.

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<PAGE> 48

BUSINESS COMBINATIONS

Generally, under the DGCL, the approval by the affirmative vote of the
holders of a majority of the outstanding stock (or, if the certificate of
incorporation provides for more or less than one vote per share, a majority of
the votes of the outstanding stock) of a corporation entitled to vote on the
matter is required for a merger or consolidation or sale, lease or exchange of
all or substantially all of the corporation's assets to be consummated.

The Company Certificate does not contain provisions regarding business
combinations and does not impose requirements in addition to or different from
those imposed by the DGCL.

Penril's Amended and Restated Certificate of Incorporation (the "Penril
Certificate") provides that, subject to certain exceptions, the affirmative vote
of the holders of at least 80% of the voting power of all the then-outstanding
shares of capital stock of Penril entitled to vote generally in the election of
directors is required to approve every "Business Combination" (defined to
include mergers, consolidations, sales of assets of Penril having a fair market
value of $1,000,000 or more, issuances or transfers by Penril of any securities
of Penril having a fair market value of $1,000,000 or more, and certain other
transactions) between Penril and any "Interested Stockholder" (generally defined
to mean any beneficial owner of more than 10% of the voting power of the
outstanding Penril voting stock). Such 80% vote is not required if the Business
Combination is approved by a majority of the Continuing Directors (generally
defined to mean the directors who were members of the Penril Board on December
13, 1983 or a person designated as a Continuing Director by a majority of the
Continuing Directors) or if the Business Combination satisfies certain price and
procedural conditions. With respect to business combinations other than with
Interested Stockholders, the Penril Certificate does not impose requirements in
addition to or different from those imposed by the DGCL.

AMENDMENTS TO CHARTERS

Under the DGCL, unless otherwise provided in the certificate of
incorporation, a proposed amendment to the certificate of incorporation requires
an affirmative vote of a majority of the outstanding stock entitled to vote
thereon. If any such amendment would adversely affect the rights of any holders
of shares of a class or series of stock, the vote of the holders of a majority
of all outstanding shares of the class or series, voting as a class, is also
necessary to authorize such amendment. The Company Certificate provides that no
amendment to the Company Certificate shall amend, alter, change or repeal the
super majority voting provisions relating to the division of the Board of
Directors of the Company into classes; the number and removal of members of the
Board of Directors of the Company; term of office of members of the Board of
Directors of the Company; and the filling of vacancies on the Board of Directors
of the Company unless the amendment, alteration, change or repeal shall have
received the affirmative vote of the holders of at least 80% of the outstanding
shares of capital stock entitled to vote thereon. The Company Certificate
otherwise comports with the DGCL.

The Penril Certificate provides that no amendment to the Penril Certificate
shall amend, alter, change or repeal any of the supermajority voting provisions
relating to business combinations; division into classes, number, removal of
members, term of office and the filling of vacancies on the Penril Board of
Directors; and Stockholder action at Stockholder meetings unless the amendment
effecting such amendment, alteration, change or repeal shall have received the
affirmative vote of the holders of at least 80% of the outstanding shares of
capital stock entitled to vote thereon. The Penril Certificate otherwise
comports with the DGCL.

AMENDMENTS TO BY-LAWS

Under the DGCL, the power to adopt, alter and repeal the by-laws is vested
in the stockholders, except to the extent that the certificate of incorporation
vest it in the board of directors. The Company By-laws provide that the Company
By-laws, or any one of them, may be supplemented, amended or repealed by the
Board of Directors, or by the vote of a majority in interest of the stockholders
represented and entitled to vote thereon at any meeting at which a quorum is
present; provided, however, that the affirmative vote of the holders of at least
80% of the voting power of the then-outstanding shares of the Company voting
stock, voting together as a single class, is required to amend, alter or repeal
the sections of the Company By-Laws which have the same effect as those
provisions of the Company Certificate governing (i) division of the Company
Board of

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<PAGE> 49

Directors into three classes serving staggered three year terms; (ii) the number
of directors; (iii) term of office of directors; (iv) removal of directors and
(v) the filling of vacancies on the Board of Directors.

The Penril By-laws provide that the Penril By-laws, or any of them, may be
supplemented, amended or repealed by the Penril Board of Directors, or by the
vote of a majority in interest of the stockholders represented and entitled to
vote thereon at any meeting at which a quorum is present; provided, however,
that the affirmative vote of the holders of at least 80% of the voting power of
all the then-outstanding shares of the Penril voting stock, voting together as a
single class, is required to amend, alter or repeal the sections of the Penril
By-laws governing (i) action of stockholders without a meeting; (ii) the number
of directors; (iii) term of office of directors; (iv) quorum and voting of
directors or (v) amendment of the Penril By-laws.

REDEMPTION OF CAPITAL STOCK

Under the DGCL, subject to certain limitations, a corporation's stock may
be made subject to redemption by the corporation at its option, at the option of
the holders of such stock or upon the happening of a specified event. The DGCL
prohibits the purchase or redemption of stock when the capital of a corporation
is or would become impaired; but shares entitled to dividend or liquidation
preference may be purchased or redeemed out of capital if such shares are
retired and capital is reduced in accordance with legal requirements. The
Company Certificate does not contain any provisions relating to the right to
redeem outstanding shares of capital stock. The Penril Certificate grants the
Penril Board of Directors the authority to adopt amendments to the Penril
Certificate to provide for redemption of shares of capital stock of Penril, but
the Penril Certificate does not contain any provisions governing the right to
redeem outstanding shares of capital stock.

STOCKHOLDER ACTION

Under the DGCL, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken at a meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a written consent or consents setting forth the action taken is signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote upon such action were present and voted. The
Company Certificate and the Company By-laws provide that all elections and
questions put to stockholders shall be decided by the vote of a majority in
interest of the stockholders present in person or represented by proxy and
entitled to vote at the meeting, except as otherwise permitted or required by
the DGCL, the Company Certificate or the Company By-Laws. The Penril Certificate
provides that any action required or permitted to be taken by stockholders must
be effected at an annual meeting of stockholders and may not be effected by any
consent in writing by such stockholders.

SPECIAL STOCKHOLDER MEETINGS

The DGCL provides that a special meeting of stockholders may be called by
the board of directors or by such person or persons as may be authorized by the
certificate of incorporation or by the by-laws. The Company By-laws provide that
special meetings may be called by the Chairman of the Board, the Vice Chairman
of the Board, the President, any Vice President or by the Board of Directors and
shall be called by any of the foregoing at the request in writing of
stockholders owning a majority in amount of the entire capital stock of the
Company issued and outstanding and entitled to vote. The Penril Certificate and
By-laws provide that meetings of stockholders may be called only by the Penril
Board of Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors.

NUMBER AND ELECTION OF DIRECTORS

The DGCL permits the certificate of incorporation or the by-laws of a
corporation to contain provisions governing the number and terms of directors.
However, if the certificate of incorporation contains provisions fixing the
number of directors, such number may not be changed without amending the
certificate of incorporation. The Company Certificate provides that the number
of directors shall be fixed from time to time pursuant to a resolution adopted
by a majority of the entire Board of Directors. The Penril Certificate provides

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<PAGE> 50

that the number of directors shall be fixed from time to time exclusively by the
Penril Board of Directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist any vacancies
in previously authorized directorships at the time any such resolution is
presented for adoption).

The DGCL permits the certificate of incorporation of a corporation or the
by-laws to provide that directors be divided into one, two or three classes. The
term of office of one class of directors shall expire each year with the terms
of office of no two classes expiring the same year. The Board of Directors
consists of 5 individuals divided into three classes with each director serving
a three year term (after the initial term). The Penril Certificate divides
Penril's Board of Directors into three classes with each director serving a
three year term.

ANTITAKEOVER PROVISIONS

The Company Certificate requires the affirmative vote of the holders of at
least 80% of the votes which all stockholders would be entitled to cast at any
annual election of directors or class of directors to amend or repeal, or to
adopt any provision inconsistent with certain provisions of the Company
Certificate. The provisions of the Company Certificate subject to the 80% vote
requirement include the provisions which divide the Board of Directors into
three classes serving staggered three year terms, establish the term of office
of directors and the standards for removal of directors and the filling of
vacancies on the Board of Directors. The Company Certificate also authorizes the
Board of Directors to issue Company Preferred Stock, without further stockholder
approval, which could have dividend, redemption, liquidation, conversion, voting
or other rights that could adversely affect the voting power or other rights of
holders of Company Stock. In addition, the Company By-laws contain certain
antitakeover provisions which establish an advance notice procedure regarding
the nomination of directors by stockholders and stockholder proposals to be
brought before an annual meeting and provisions which restrict the right of
stockholders to call special meetings.

The Penril Certificate requires the affirmative vote of the holders of at
least 80% of the votes which all stockholders would be entitled to cast at any
annual election of directors or class of directors to amend or repeal, or to
adopt any provision inconsistent with certain provisions of Penril's Certificate
of Incorporation. The provisions of the Penril Certificate subject to the 80%
vote requirement include those provisions which (i) divide the Penril Board of
Directors into three classes serving staggered three year terms and establish
the standards for the number, term of office, removal of directors and the
filling of vacancies on the Penril Board of Directors; (ii) prohibit
stockholders from acting by written consent in lieu of a meeting; (iii) provide
that special meetings of stockholders may be called only by the Penril Board of
Directors pursuant to a resolution adopted by a majority of the total number of
authorized directors; and (iv) require an 80% vote to approve "Business
Combinations" with "Interested Directors".

LIABILITY AND INDEMNIFICATION OF
OFFICERS AND DIRECTORS OF THE COMPANY

GENERAL

Officers and directors of the Company will be covered by certain provisions
of the DGCL, the Company Certificate, certain indemnification agreements with
the Company and insurance policies which serve to limit and/or indemnify them
against certain liabilities which they may incur in such capacities. These
various provisions and policies are described below.

ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES

Under the DGCL, corporations are permitted to limit or eliminate the
personal liability of directors to corporations and their stockholders for
monetary damages for, among other things, breach of directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations now authorized
by such legislation, directors are accountable to corporations and their

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stockholders for monetary damages for conduct constituting negligence or gross
negligence in the exercise of their duty of care. Although the statute does not
change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or recision. The Company
Certificate limits the liability of directors to the Company or its stockholders
to the fullest extent permitted by the DGCL. Specifically, no director of the
Company can be held personally liable for monetary damages for breach of such
director's fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the DGCL or (iv)
for any transaction from which the director derived an improper personal
benefit.

INDEMNIFICATION AND INSURANCE

Under the DGCL, the Company has the power, under specified circumstances
generally requiring the director or officer to act in good faith and in a manner
he reasonably believes to be in or not opposed to the Company's best interests,
to indemnify its directors and officers in connection with actions, suits or
proceedings brought against them by a third party or in the name of the Company,
by reason of the fact that they were or are such directors or officers, against
expenses, judgments, fines and amounts paid in settlement in connection with any
such action, suit or proceeding.

The Company Certificate provides that the Company shall indemnify the
directors and officers of the Company to the fullest extent permitted by
Delaware law.

Specifically, the Company Certificate provides that the Company shall
indemnify any person who is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company), by reason of the fact that he (i) is or was a
director or officer of the Company, or (ii) is or was a director or officer of
the Company and is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Company
or, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.

The Company Certificate provides that the Company shall indemnify any
person who is or was a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that he is or
was a director or officer of the Company or is or was a director or officer of
the Company and is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
of the State of Delaware or such other court shall deem proper.

The Company Certificate provides that any indemnification under the
provisions described in the two paragraphs set forth above of a director,
officer, former director or former officer (unless ordered by a court)

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<PAGE> 52

shall be made by the Company only as authorized in the specific case upon a
determination that indemnification of the director or officer is proper in the
circumstances because he has met the applicable standard of conduct set forth in
the above two paragraphs. Such determination shall be made (i) by the Board of
Directors of the Company by a majority vote consisting of directors who were not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors or if such directors so direct, by
independent legal counsel in a written opinion or (iii) by the stockholders of
the Company.

The Company Certificate also provides, only as authorized in the sole
discretion of the Company, for indemnification of any employee, agent, former
employee or former agent of the Company who is or was a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding or in connection with the defense or settlement of
such action, suit or proceeding to the same extent as set forth in the first two
paragraphs of this section with respect to officers and directors of the
Company. The authorization of the Company to so indemnify such employees and/or
agents shall be made (i) by a majority vote of the directors who are not parties
to such action, suit or proceeding, even though less than a quorum, or (ii) if
there are no such directors, or if such directors so direct, by independent
legal counsel in a written opinion or (iii) by the stockholders.

The Company Certificate provides that to the extent that a director or
officer or employee or agent of the Company has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to above, or in
defense of any claim, issue or matter therein, the Company shall indemnify him
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith, without the necessity of authorization in the
specific case.

The Company Certificate further provides that expenses incurred by a
director or officer in defending or investigating a threatened or pending
action, suit or proceeding may be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Company as authorized in the Company Certificate. Such indemnification and
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board of Directors of the Company deems
appropriate.

The Company Certificate provides that the indemnification and advancement
of expenses provided by, or granted pursuant to, the Company Certificate is not
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or pursuant to the direction of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office. The
indemnification provided in the Company Certificate shall not be deemed to
preclude the indemnification of, and advancement of expenses to, any person who
is not specified in the Company Certificate, but whom the Company has the power
and obligation to indemnify under the provisions of the DGCL or otherwise.

The Company intends to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Company, or
is or was a director, officer, employee or agent of the Company serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against any liability asserted against him or incurred by him in any
such capacity, or arising out of his status as such, whether or not the Company
would have the power or the obligation to indemnify him against such liability
under the Company Certificate.

The Company will enter into indemnification agreements with each of the
Company's directors and officers. The indemnification agreements require, among
other things, the Company to indemnify the directors and officers to the fullest
extent permitted by law, and to advance to such directors and officers all
related expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. The indemnification agreements will require
that the Company also indemnify and advance all expenses incurred

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<PAGE> 53

by such directors and officers seeking to enforce their rights under the
indemnification agreements, and cover directors and officers under the Company's
directors' and officers' liability insurance. Although such indemnification
agreements will offer substantially the same scope of coverage afforded by
provisions in the Company Certificate, they provide greater assurance to
directors and officers that indemnification will be available because an
indemnification agreement, as a contract, cannot be modified unilaterally in the
future by the Board of Directors of the Company or by the stockholders to
eliminate the rights provided therein.

CERTAIN TRANSACTIONS

On or prior to the Distribution Date, the Company and Penril will enter
into certain agreements, described below, which will govern their ongoing
relationships. These agreements were structured and negotiated while the Company
was owned by Penril and consequently are not the result of arms-length
negotiations between independent parties. Nonetheless, the Company and Penril
believe that the terms are fair to the parties and contain terms which are
generally comparable to those which would result from arms-length negotiations.
In each case, the terms of these agreements have been reviewed by individuals
who will be included at a senior management level of the Company.

The agreements summarized below are filed as exhibits to the Registration
Statement. The following descriptions do not purport to be complete and are
qualified in their entirety by reference to the agreements as filed.

DISTRIBUTION AGREEMENT

Prior to the Merger, Penril and the Company will enter into a Distribution
Agreement pursuant to which Penril will, among other things, (a) transfer to the
Company as a capital contribution all of Penril's right, title and interest in
the Remote Access Business and all of the other assets of Penril unrelated to
the modem business and (b) agree to make certain change of control payments in
the aggregate amount of $1,262,500 to three Penril officers prior to or at the
Effective Time; and the Company will (a) assume, pay, perform and discharge
substantially all of the liabilities of Penril other than (i) liabilities
relating to the modem business and (ii) the bank debt of Penril (which may not
exceed $4,000,000 at the Effective Time); and (b) indemnify Penril for any and
all liabilities, costs or expenses for the 401(k) Plan. At the time of the
capital contributions, Penril will own all of the Company's outstanding stock.

DEVELOPMENT AND LICENSE AGREEMENT

On June 16, 1996, Penril and Bay entered into a Development and License
Agreement on behalf of the Company whereby Bay licensed to Penril, on behalf of
the Company, certain intellectual property, software and technical know-how
relating to certain 24-port Digital Modem Cards. The agreement contemplates that
Bay will develop a 24-port Digital Modem Card for the Company, train the
Company's personnel in the underlying technology, and provide technical
assistance where necessary to permit the Company to market this digital
technology. Penril will assign all of its rights under this Development and
License Agreement to the Company.

TECHNOLOGY LICENSE AGREEMENT

SUBLEASE AGREEMENT

The Company will conduct most of its operations from its corporate
headquarters located in Gaithersburg, Maryland. The Company will sublease this
facility from Penril (the "Sublease"). Penril leases this

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property pursuant to a lease with Real Estate Income Partners III (the
"Overlease") dated March 31, 1989 as amended pursuant to a Letter Agreement
dated May 14, 1990. The Overlease provides for the rental of approximately
54,874 square feet of office space at a current monthly payment for rent and
additional charges of approximately $66,219. The Overlease expires on September
30, 1999; however, Penril has one option to extend the term of the Overlease for
a period of 119 months.

The Sublease will provide for the rental by the Company of the entire
facility at the monthly rental specified in the Overlease. The term of the
Sublease will commence on the date of the Distribution, or upon the Company's
occupancy of the property, whichever is earlier, and will expire on September
30, 1999. The Company will have no right to renew or extend the Sublease. The
Sublease will be subject and subordinate to the terms of the Overlease and to
all amendments, modifications, renewals, extensions and replacements of or to
the Overlease. Pursuant to the Sublease, the Company will covenant and agree
that it will perform and observe all of the provisions contained in the
Overlease to be performed and observed by Penril, and will be bound by all of
the terms, covenants and conditions of the Overlease binding upon Penril, with
the same force and effect as if such terms, covenants and conditions were set
forth in the Sublease.

TRANSITIONAL SERVICES AGREEMENT

The Company and Penril will enter into a Transitional Services Agreement
(the "Services Agreement") which will provide that the Company will provide
Penril with certain services (the "Services") for one year from and after the
Transfer in exchange for which Penril will pay the Company $1,500,000 upon
execution of the Services Agreement (the "Fee"), plus reimbursement for certain
expenses. The Fee is intended to cover the costs incurred by the Company in
providing the Services, including, but not limited to, salary and other
administrative costs and expenses. The Services include, among other things, (i)
assisting in the preparation of federal, state, local and foreign tax returns,
(ii) certain accounting, treasury and other financial services, (iii) assistance
in the preparation for shipping of certain equipment and inventories and (iv)
certain specified administrative, clerical and operational services.

INDEMNIFICATION AGREEMENT

Simultaneous with the consummation of the Distribution, Penril and the
Company will enter into an Indemnification Agreement between Penril and the
Company (the "Indemnification Agreement"). The Indemnification Agreement will
obligate the Company to indemnify and save harmless Penril and its directors,
officers, employees, agents and/or affiliates from any and all costs, expenses,
losses, damages and liabilities incurred or suffered, directly or indirectly, by
the indemnitees resulting from or attributable to (i) the operation of the
Company after the Distribution; (ii) any claim, suit or other type of proceeding
based upon or arising out of or in connection with the operation of Penril prior
to the Merger other than those based upon, arising out of or in connection with
(a) the modem business operated by Penril, (b) the Merger, (c) the Merger
Agreement, (d) the solicitation of proxies relating to the approval of the
Merger and other transactions relating to the Merger, or (e) the tax
consequences of the Distribution, but including any claim, suit, or other type
of proceeding based upon or arising out of or in connection with the sale or
transfer of all or substantially all of the assets or business of any subsidiary
of Penril, including EMI or of Technipower (but excluding the Modem
Subsidiaries); (iii) any claim, suit or other type of proceeding relating to the
termination of employment of certain employees of Penril and (iv) any claim,
suit or other type of proceeding based upon, arising out of or in connection
with any information concerning the Company in this Prospectus or any
information furnished by Penril or the Company concerning the Company for
inclusion in the Proxy Statement/Prospectus.

Penril will indemnify and save harmless the Company and its directors,
officers, employees, agents and/or affiliates from any claims incurred or
suffered, directly or indirectly, by them resulting from or attributable to,
among other things, (i) the operation of Penril from and after the Distribution;
(ii) any claim, suit or other type of proceeding based upon, arising out of or
in connection with the operation of the Modem Business prior to the Merger; and
(iii) any claim, suit or other type of proceeding relating to the Merger, the
Merger Agreement, the solicitation of proxies relating to approval of the Merger
and other transactions relating to the Merger (other than those claims based
upon, arising out of or in connection with the filing by the Company of

54
<PAGE> 55

the Registration Statement or any information furnished by Penril or the Company
concerning the Company for inclusion in the Proxy Statement/Prospectus) or the
tax consequences of the Distribution.

LEGAL MATTERS

The validity, authorization and issuance of the shares of Company Stock
offered hereby and the tax consequences of the Distribution will be passed upon
for the Company by Benesch, Friedlander, Coplan & Aronoff P.L.L. of Cleveland,
Ohio.

EXPERTS

The consolidated financial statements of Penril and its subsidiaries as of
July 31, 1996 and, 1995, and for each of the three years in the period ended
July 31, 1996 included in this Prospectus and the Registration Statement have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein and in the Registration Statement and have been so
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

55
<PAGE> 56

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Penril DataComm Networks, Inc. and Subsidiaries
Audited Financial Statements:
Independent Auditors' Report.................................................. F-2
Consolidated Statements of Operations for each of
the three years in the period ended July 31, 1996........................... F-3
Consolidated Balance Sheets as of July 31, 1996 and 1995...................... F-4
Consolidated Statements of Cash Flows for each of the
three years in the period ended July 31, 1996............................... F-5
Consolidated Statements of Stockholders' Equity for
each of the three years in the period
ended July 31, 1996......................................................... F-6
Notes to Consolidated Financial Statements for
the years ended July 31, 1996, 1995, and 1994............................... F-7-17
</TABLE>

F-1
<PAGE> 57

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders
Penril DataComm Networks, Inc.
Gaithersburg, Maryland

We have audited the accompanying consolidated balance sheets of Penril DataComm
Networks, Inc. and subsidiaries as of July 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended July 31, 1996. These financial
statements are the responsibility of Penril's management. Our responsibility is
to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Penril DataComm Networks, Inc. and
subsidiaries as of July 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended July 31,
1996 in conformity with generally accepted accounting principles.

/s/ Deloitte & Touche LLP

Washington, D.C.
September 6, 1996
(September 20, 1996 as to the sixth and ninth paragraphs of Note 7)

F-2
<PAGE> 58

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED JULY 31.
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
NET REVENUES FROM CONTINUING OPERATIONS...................... $ 39,435 $ 52,611 $ 61,838
COSTS AND EXPENSES
Cost of revenues........................................... 22,409 29,394 30,516
Selling, general and administrative........................ 18,611 18,765 18,815
Product development and engineering........................ 7,389 7,438 8,817
Amortization of cost over net assets acquired.............. 734 834 816
Provision for restructuring costs.......................... 9,718 -- --
Merger related expenses.................................... 500 -- --
-------- -------- --------
59,361 56,431 58,964
OPERATING INCOME (LOSS) FROM CONTINUING OPERATIONS........... (19,926) (3,820) 2,874
OTHER EXPENSE
Interest expense........................................... (698) (1,228) (908)
Other, net................................................. (44) (144) (134)
-------- -------- --------
(742) (1,372) (1,042)
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES...................................................... (20,668) (5,192) 1,832
BENEFIT FOR INCOME TAXES..................................... -- 578 513
-------- -------- --------
INCOME (LOSS) FROM CONTINUING OPERATIONS..................... (20,668) (4,614) 2,345
INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
net of income taxes........................................ 404 (1,661) (828)
LOSS ON DISPOSAL OF DISCONTINUED OPERATIONS,
net of income taxes........................................ (640) (1,400) --
-------- -------- --------
NET INCOME (LOSS)............................................ $(20,904) $ (7,675) $ 1,517
======== ======== ========
NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Continuing operations...................................... $ (2.14) $ (0.61) $ 0.30
Discontinued operations.................................... 0.04 (0.22) (.11)
Loss on disposal of discontinued operations................ (0.07) (0.19) --
-------- -------- --------
$ (2.17) $ (1.02) $ 0.19
======== ======== ========
Shares used in per share calculation......................... 9,650 7,559 7,809
======== ======== ========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE> 59

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
JULY 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
ASSETS
Current Assets
Cash and Cash Equivalents................................................ $ 4,237 $ 992
Accounts receivable, less allowance for doubtful accounts of $554 in 1996
and $1,067 in 1995..................................................... 7,044 13,521
Inventories.............................................................. 9,684 11,427
Deferred income taxes.................................................... 1,700 1,700
Net assets of discontinued operations.................................... 7,337 5,145
Other current assets..................................................... 249 778
------- -------
TOTAL CURRENT ASSETS..................................................... 30,251 33,563
------- -------
Property and Equipment, net.............................................. 2,457 2,648
Excess of Cost Over Fair Value of Net Assets Acquired, net............... -- 5,689
Other Assets............................................................. 1,072 2,487
------- -------
TOTAL ASSETS............................................................. $33,780 $44,387
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings.................................................. $ 4,000 $ 5,095
Current portion of long-term debt...................................... 272 5,164
Accounts payable....................................................... 6,076 8,156
Accrued compensation and commissions................................... 1,347 894
Deferred revenue....................................................... -- 1,244
Other accrued expenses................................................. 1,758 852
------- -------
TOTAL CURRENT LIABILITIES................................................ 13,453 21,405
Long-Term Debt, net of current portion................................... 633 517
Other Noncurrent Liabilities............................................. 1,479 742
------- -------
TOTAL LIABILITIES........................................................ 15,565 22,664
------- -------
Commitments and Contingencies (Note 7)
Stockholders' Equity
Serial preferred stock, $.01 par value; authorized, 100,000 shares;
issued, none........................................................ -- --
Common stock, $.01 par value; authorized, 20,000,000 shares; issued and
outstanding, 10,849,647 shares in 1996 and 7,542,815 shares in
1995................................................................ 109 76
Additional paid-in capital............................................. 39,837 22,384
Retained earnings (deficit)............................................ (21,581) (677)
------- -------
18,365 21,783
Equity adjustment from foreign currency translation...................... (150) (60)
------- -------
TOTAL STOCKHOLDERS' EQUITY............................................... 18,215 21,723
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................... $33,780 $44,387
======= =======
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE> 60

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
------------------------------
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM CONTINUING OPERATIONS
Net Income (Loss) from operations............................ $(20,668) $(4,614) $ 2,345
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization............................. 3,452 4,418 3,676
Benefit from deferred income taxes........................ -- (578) (513)
Provision for restructuring costs......................... 9,718 -- --
Other..................................................... (93) 25 234
(Increase) decrease in assets:
Accounts receivable....................................... 6,477 2,508 (1,710)
Inventories............................................... (472) 1,122 (1,820)
Other current assets...................................... 529 (287) (98)
Increase (decrease) in liabilities:
Accounts payable.......................................... (2,080) 1,792 (818)
Other liabilities......................................... (731) (291) 823
-------- ------- -------
Net cash provided by (used in) continuing operating
activities................................................... (3,868) 4,095 2,120
CASH FLOWS FROM DISCONTINUED OPERATIONS
Income (Loss) from discontinued operations................... (236) (3,061) (828)
Non-cash charges and changes in working capital.............. (2,832) 285 469
Provision for loss on disposal of discontinued operations.... 640 1,400 --
-------- ------- -------
Net cash used in discontinued operations....................... (2,428) (1,376) (359)
-------- ------- -------
Net cash provided by (used in) operations...................... (6,296) 2,719 1,761
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for purchased technology........................ (800) (1,049) (1,126)
Expenditures for property, equipment and other............... (747) (417) (933)
-------- ------- -------
Net cash used in investing activities.......................... (1,547) (1,466) (2,059)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit.......................... (1,095) 1,870 2,740
Borrowings on long-term debt................................. -- -- 1,780
Payments on long-term debt................................... (5,210) (3,300) (4,182)
Issuance of common stock..................................... 17,486 74 320
Dividends paid............................................... -- -- (147)
Other........................................................ (93) 94 36
-------- ------- -------
Net cash provided by (used in) financing activities............ 11,088 (1,262) 547
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR......... 992 1,001 752
-------- ------- -------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR............... $ 4,237 $ 992 $ 1,001
======== ======= =======
SUPPLEMENTAL INFORMATION
Cash payments for income taxes............................... $ 20 $ 113 $ 59
======== ======= =======
Cash payments for interest................................... $ 783 $ 1,103 $ 795
======== ======= =======
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE> 61

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED JULY 31, 1996, 1995 AND 1994

(IN THOUSANDS, EXCEPT SHARES)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
--------------------- PAID-IN UNEARNED EARNINGS CURRENCY
SHARES AMOUNT CAPITAL COMPENSATION (DEFICIT) ADJUSTMENT
---------- ------ ---------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AUGUST 1, 1993.................. 7,330,736 $ 73 $ 22,271 $ (143) $ 5,628 $ (328)
Net income............................ 1,517
Dividends paid........................ (147)
Issuance of common stock --
Upon exercise of stock options..... 132,700 1 367
Upon exercise of warrants.......... 180,000 2 400
Shares of common stock retired in
connection with the exercise of
options and warrants............... (66,840) (1) (458)
Shares of common stock returned in
conjunction with the valuation of
Datability, Inc.................... (124,388) (1) (828)
Shares of common stock returned in
conjunction with employee stock
award program...................... (9,840) (32) 21
Amortization of unearned income....... 106
Foreign currency translation
adjustment......................... 132
--------- ---- ------- ----- -------- -----
BALANCE JULY 31, 1994................... 7,442,368 $ 74 $ 21,720 $ (16) $ 6,998 $ (196)
Net loss.............................. (7,675)
Issuance of common stock --
Upon exercise of stock options..... 33,067 1 73
Upon exercise of warrants.......... 80,000 1 194
For acquisition of patent rights... 50,000 1 118
Shares of common stock retired in
connection with options, warrants,
and awards......................... (62,620) (1) (194) 16
Deferred tax benefit from exercise of
options............................ -- -- 473
Foreign currency translation
adjustment......................... 136
--------- ---- ------- ----- -------- -----
BALANCE JULY 31, 1995................... 7,542,815 $ 76 $ 22,384 $ -- $ (677) $ (60)
Net loss.............................. (20,904)
Issuance of common stock --
Upon sale in private placements.... 2,607,267 26 14,718
Upon exercise of stock options..... 687,284 7 2,735
Upon exercise of warrants.......... 25,000 -- --
Shares of common stock retired in
connection with options, warrants,
and awards......................... (12,719) -- --
Foreign currency translation
adjustment......................... (90)
--------- ---- ------- ----- -------- -----
BALANCE JULY 31, 1996................... 10,849,647 $109 $ 39,837 $ -- $(21,581) $ (150)
========= ==== ======= ===== ======== =====
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE> 62

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JULY 31, 1996, 1995 AND 1994

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Penril and its subsidiaries, all of which are wholly owned. All
significant intercompany accounts and transactions have been eliminated.

CASH AND CASH EQUIVALENTS: Penril considers cash on hand, deposits in
banks, and highly liquid investments with an original maturity of three months
or less as cash and cash equivalents.

FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying values of cash and cash
equivalents, accounts receivable, and accounts payable approximate fair value
due to the short maturities of such instruments. Long-term debt is carried at
amounts approximating fair values based on current rates offered to Penril for
debt with similar collateral and guarantees, if any, and maturities.

INVENTORIES: Inventories are stated at the lower of cost (first-in,
first-out method) or market. The inventories include the cost of material and,
when applicable, labor and manufacturing overhead.

<TABLE>
<CAPTION>
JULY 31,
---------------------
1996 1995
-------- --------
<S> <C> <C>
Inventories (in thousands):
Raw material............................ $ 5,823 $ 6,381
Work in process......................... 541 452
Finished goods.......................... 3,320 4,594
-------- --------
Total inventories....................... $ 9,684 $ 11,427
======== ========
</TABLE>

PROPERTY, EQUIPMENT AND DEPRECIATION: Additions to property and equipment
are recorded at cost. Penril provides depreciation for financial reporting
purposes using primarily the straight-line method over the estimated useful
lives of the assets which range from 3 to 10 years. Leasehold improvements are
amortized over the term of the related lease or their estimated useful lives,
whichever is shorter (in thousands).

<TABLE>
<CAPTION>
ESTIMATED JULY 31,
USEFUL ---------------------
LIFE 1996 1995
---------- -------- --------
<S> <C> <C> <C>
Machinery, and equipment................ 3-5 years $ 10,875 $ 9,952
Purchased software and technology....... 3-5 years 5,486 5,486
Leasehold improvements.................. 3-10 years 879 865
-------- --------
Total property and equipment, at cost... 17,240 16,303
Less accumulated depreciation and
amortization.......................... (14,783) (13,655)
-------- --------
Total property and equipment, net....... $ 2,457 $ 2,648
======== ========
</TABLE>

REVENUE RECOGNITION: Revenues are recognized at the time of shipment of
the product or performance of product-related services. Revenues from the
license of product technology is recorded upon delivery of the technology
specification and the fulfillment of other material obligations.

ACCOUNTING ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles (GAAP) requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

F-7
<PAGE> 63

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED: During fiscal 1996,
Penril adopted the provisions of Statement of Financial Accounting Standards No.
121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of", which requires Penril to review long-lived
assets, certain identifiable intangibles, and goodwill related to those assets
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. As a result of events
occurring in the fourth quarter of fiscal 1996, Penril decided to restructure
and refocus its remaining businesses. Due to these events, Penril determined
that the excess of costs over net assets acquired would not be recoverable, and
a charge of $4,952,000 was taken in the fourth quarter of fiscal 1996 against
the carrying value of this asset. This charge was the remaining balance in the
account "Excess of Costs over Fair Value of Net Assets Acquired" (See Note 2).

Excess of Cost Over Fair Value of Net Assets Acquired (in thousands):

<TABLE>
<CAPTION>
JULY 31,
-----------------
1996 1995
------ ------
<S> <C> <C>
Cost............................................................. $ -- $8,090
Less accumulated amortization.................................... -- 2,401
------ ------
$ -- $5,689
====== ======
</TABLE>

INCOME TAXES: Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of assets
and liabilities that will result in taxable or deductible amounts in the future.
A valuation allowance is established to reduce deferred tax assets to the amount
expected to be realized.

EARNINGS PER SHARE: Earnings per share for fiscal 1996 and 1995 are
calculated based on the weighted average shares of common stock outstanding.
Earnings per share for fiscal 1994 year are calculated using the modified
treasury stock method, which limits the assumed purchase of treasury shares to
20% of the outstanding shares of common stock. Any remaining proceeds are
assumed first to retire debt, with any remaining proceeds invested in commercial
paper. The difference between fully diluted and primary earnings per share was
not significant in any year.

SOFTWARE DEVELOPMENT COSTS: Certain acquired software development costs
are being amortized over their estimated economic life, principally five years,
commencing when each product is available for general release. Internal software
development and any other costs of development are expensed as incurred except
those costs applicable to third party contracts.

NEW ACCOUNTING PRONOUNCEMENTS: During fiscal 1996, Statement of Financial
Accounting Standard No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," which establishes a fair value based method for stock-based
compensation plans, was issued. SFAS 123 includes both recognition and
measurement provisions and disclosure requirements for stock-based compensation.
The Company has elected not to adopt the recognition and measurement provisions
of SFAS 123. The effect of adopting this statement in fiscal 1997 is not deemed
to be material.

RECLASSIFICATIONS: Certain reclassifications have been made to prior
period consolidated financial statements to conform to the July 31, 1996
presentation.

2. RESTRUCTURING

In the fourth quarter of fiscal 1996, Penril took actions to strategically
restructure its business to improve Penril's financial performance. The
restructuring included a plan to focus Penril's business operations on the
remote access server and remote connectivity markets ("remote access") and away
from the data transmis-

F-8
<PAGE> 64

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

sion markets. As a result of this plan Penril recorded a charge of $9,718,000 in
the fourth quarter of fiscal 1996. This charge was for the following costs.

a. The excess of costs over the fair value of net assets acquired through
the Datability, Inc. acquisition in fiscal 1993, was related to data
transmission techniques and, due to the restructuring plan, has no net
realizable value. Accordingly the remaining book value of $4,952,000 was written
off.

b. A charge of $2,339,000 was taken for the write-off of inventory and
fixed assets related to the data transmission business.

c. A charge of $1,012,000 was taken for contractual obligations and
settlement costs incurred for leased facilities in Carlstadt, New Jersey, Hong
Kong and Malaysia, which will be vacated under the restructuring plan.

d. A charge of $979,000 was taken for computer software related to the data
transmission business that was capitalized in accordance with FAS86, which has
no realizable value under the restructuring plan.

e. A charge of $436,000 was taken for severance costs associated with
employees terminated in connection with the restructuring plan. No such costs
were paid as of July 31, 1996.

3. DISCONTINUED OPERATIONS

As part of Penril's decision to restructure its business, the Board of
Directors of Penril decided to sell Electro-Metrics, Inc. ("EMI"), a wholly
owned subsidiary which manufactures test equipment and systems for analysis of
electromagnetic interference and communications security including applications
in satellite communications. As a result of this decision, previously reported
financial statements have been restated to reflect EMI as a discontinued
operation. Penril continues to operate EMI and expects EMI to operate at least
at a break-even level through the anticipated disposition date, which Penril's
management believes will be completed by December 31, 1996.

During fiscal 1995, the Board of Directors of Penril decided to sell
Technipower, a wholly-owned subsidiary manufacturing uninterruptible power
supplies and power regulating equipment. The divestiture of Technipower is
expected to be completed in fiscal 1997 for $4,300,000. The following table sets
forth the selected financial data of both Discontinued Operations (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenues................................ $10,469 $ 8,960 $11,995
======= ======= =======
Income (Loss) from operations net of
income taxes.......................... 404 (1,661) (828)
Loss on disposal net of income taxes.... (640) (1,400) --
------- ------- -------
Total loss from discontinued
operations............................ $ (236) $(3,061) $ (828)
======= ======= =======
Depreciation and Amortization........... $ 431 $ 415 $ 472
======= ======= =======
Capital Expenditures.................... $ 275 $ 245 $ 441
======= ======= =======
Identifiable Assets at year end......... $10,210 $ 7,950 $ 8,112
======= ======= =======
</TABLE>

Because Penril expects to retain the tax benefits associated with the
discontinued operations, no income tax benefit has been recorded for any year.

F-9
<PAGE> 65

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Net assets of the discontinued operations consist of the following (in
thousands):

<TABLE>
<CAPTION>
JULY 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Current assets.......................... $ 9,135 $ 6,803
Current liabilities..................... (2,229) (1,395)
------- -------
Net current assets...................... 6,906 5,408
Property, plant and equipment, net...... 783 849
Other non-current tangible assets,
net................................... 60 42
Non-current liabilities................. (4) (10)
------- -------
Net tangible assets..................... 7,745 6,289
Intangible assets, net.................. 232 256
------- -------
7,977 6,545
Estimated loss on disposal.............. (640) (1,400)
------- -------
Net Assets of Discontinued Operations... $ 7,337 $ 5,145
======= =======
</TABLE>

4. ACQUISITIONS

On May 6, 1993, Penril acquired all of the outstanding stock of Datability,
Inc. ("Datability"). The acquisition was accounted for by the purchase method,
and accordingly, the results of operations of Datability are included in the
Consolidated Statements of Operations from the date of acquisition. Datability
has been consolidated with Penril's data communications operations located in
Gaithersburg, Maryland.

The acquisition was accomplished through the issuance of 1,050,000 shares
of Penril's common stock ("Common Stock"). The purchase price totaled $4,980,000
including acquisition costs of $386,000. At the acquisition date, the purchase
price exceeded the fair value of net assets acquired by $8,169,000. Under terms
of the agreement, the final purchase price was dependent upon the valuation of
the net assets acquired. During fiscal 1994, a valuation adjustment of $829,000
resulted in 124,388 shares of the Common Stock being returned to Penril thereby
reducing the excess of cost over the fair value of net assets acquired. During
the fourth quarter of fiscal 1996, Penril expensed the remaining portion of
excess of cost over the fair value of net assets acquired.

5. FINANCING

BANK FINANCING: On March 15, 1996 Penril amended the credit agreement with
its principal bank. The new agreement provides for a maximum working capital
facility of $5,500,000 with borrowings based on qualified accounts receivable
and secured by substantially all Penril's assets. Interest accrues at the bank's
prime rate plus 2% with a commitment fee of 3/8% assessed on the unused portion
of the facility. In the event the facility is canceled prior to its expiration,
there is a fee due the bank equal to 3% of the total facility. The agreement
expires March 31, 1997. As of July 31, 1996, Penril had $5,412,000 available of
which Penril had utilized $4,000,000 for working capital loans and $90,000 for a
letter of credit. On June 16, 1996, Penril entered into a Plan and Agreement of
Merger, as amended on August 5, 1996 (the "Merger Agreement") with Bay Networks,
Inc. ("Bay") and a subsidiary of Bay. As part of the Merger Agreement with Bay,
outstanding bank debt up to $4,000,000 remains with Penril after the Transfer.
Average monthly borrowings and weighted average interest rate for the three
years ended July 31, 1996 are as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Average monthly borrowings under working capital facility
(in thousands)................................................. $4,353 $4,621 $1,475
Weighted average interest rate................................... 10.47% 9.6% 7.2%
</TABLE>

F-10
<PAGE> 66

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of March 7, 1996, Penril had repaid all outstanding term debt with its
principal bank.

SUBORDINATED DEBT: In April 1995, as part of the bank financing
arrangements, Penril was permitted to make principal payments on the
subordinated debt only after the bank term loans had been reduced by $3,000,000.
This reduction was accomplished by December 1995 at which time Penril made a
subordinated debt principal payment of $174,000 as required by the amended
subordinated debt agreement. The remaining outstanding balance of $805,000 was
repaid in May 1996.

LONG-TERM DEBT: Long-term debt at July 31, 1996 and 1995 consisted of (in
thousands):

<TABLE>
<CAPTION>
1996 1995
----- -------
<S> <C> <C>
Term Loans....................................................... $ -- $ 3,848
Subordinated Debt................................................ -- 979
----- -------
-- 4,827
Capital leases and other......................................... 905 854
----- -------
905 5,681
Less current portion............................................. (272) (5,164)
----- -------
Long-term debt................................................... $ 633 $ 517
===== =======
</TABLE>

Future maturities of long-term debt are as follows (in thousands):

<TABLE>
<S> <C>
Year Ending July 31,
1997.......................... $272
1998.......................... 261
1999.......................... 190
2000.......................... 146
2001.......................... 36
----
Total......................... $905
====
</TABLE>

6. INCOME TAXES

The following table sets forth the differences between the tax provision
(benefit) from continuing operations calculated at the statutory federal income
tax rate and the actual tax benefit for each year (in thousands):

<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31,
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Tax provision at federal statutory rate....................... $(7,027) $(1,724) $ 644
Amortization of nondeductible intangibles..................... 1,931 283 283
State & foreign taxes, net of federal benefit................. (1,137) (218) 236
Utilization of net operating loss carryforward................ -- -- (1,195)
Change in valuation allowance................................. 6,093 1,134 (538)
Other......................................................... 140 (53) 57
------- ------- -------
Income tax benefit............................................ $ -- $ (578) $ (513)
======= ======= =======
</TABLE>

The primary components of temporary differences which give rise to Penril's
net deferred tax asset are shown in the table below. At July 31, 1996 Penril had
consolidated federal net operating loss carryforwards including the EMI and
Technipower subsidiaries of approximately $17,200,000 which expires in 2007
through 2011, and general business and other tax credits of $1,248,000 to reduce
future tax liabilities through 2009.

F-11
<PAGE> 67

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
AS OF JULY 31,
-------------------
1996 1995
------- -------
<S> <C> <C>
Deferred tax assets (in thousands):
Reserves and other contingencies............................... $ 1,500 $ 1,462
Depreciation and amortization.................................. 65 34
Restructuring Reserve.......................................... 1,859
Net operating loss............................................. 6,780 2,615
General business and other tax credits......................... 1,248 1,248
Loss on discontinued operations................................ 546 546
Valuation reserve.............................................. (9,837) (3,744)
------- -------
Total deferred tax assets...................................... 2,161 2,161
Deferred tax liabilities:
Amortization of technologies................................. (461) (461)
------- -------
Net deferred tax assets........................................ $ 1,700 $ 1,700
======= =======
</TABLE>

The net deferred tax asset will remain with Penril after the Transfer
referred to below.

7. COMMITMENTS AND CONTINGENCIES

PENDING TRANSACTION

Under the terms of the Merger Agreement, Penril will transfer (the
"Transfer") all of its remote access products business and any other assets
unrelated to its modem business to a newly formed subsidiary, Access Beyond,
Inc. ("Access Beyond") and then distribute all of the shares of Access Beyond
common stock to Penril's stockholders in a spin-off transaction (the
"Spin-off"). Following the Spin-off, the subsidiary of Bay will merge with and
into Penril, whose primary remaining operations will consist of its modem
business, with Penril becoming a wholly owned subsidiary of Bay.

Pursuant to the Spin-off and merger, stockholders of Penril, as of the
appropriate record dates, will receive one share of Access Beyond common stock
for every share of Penril common stock held, plus $10 in Bay common stock. The
dollar value of Bay shares to be paid is fixed according to an exchange value
determined by averaging the closing prices of Bay common stock over a specific
period prior to consummation of the merger with Bay. In addition to the assets
and liabilities related to the modem business, Bay will assume the outstanding
bank debt of Penril up to $4,000,000. All cash of Penril on the date of the
closing of the transactions will be transferred to Access Beyond.

The transactions are subject to regulatory and Penril stockholders'
approval and certain conditions to closing as set forth in the Merger Agreement.
At the time of the consummation of the merger, Penril is responsible for payment
of the investment banking fees of approximately $1,300,000 and for change of
control payments of approximately $1,300,000 due to certain officers of Penril.

LEASED FACILITIES: Penril leases office and manufacturing facilities and
equipment under lease agreements, certain of which are renewable at Penril's
option and/or provide for increases in rent related to increases in the Consumer
Price Index and other factors. Rent expense for the fiscal years 1996, 1995 and
1994 was $1,673,000, $1,941,000 and $1,754,000 respectively. Approximate
aggregate future minimum rentals

F-12
<PAGE> 68

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

applicable to operating leases in effect at July 31, 1996 without consideration
of the effects of the Spin-off and merger transaction are as follows (in
thousands):

<TABLE>
<S> <C>
Year Ending July 31,
1997.......................... $1,720
1998.......................... 1,758
1999.......................... 1,729
2000.......................... 775
2001.......................... 633
Beyond 2001................... 135
------
Total minimum rentals................... $6,750
======
</TABLE>

LEGAL PROCEEDINGS: Penril is a party to several material legal proceedings
as summarized below. With the exception of the proceeding against Rockwell
International Corporation, et. al., and one other legal proceeding incurred in
connection with the modem business, all costs, expenses, liabilities and
obligations of the litigation will be assumed by Access Beyond in connection
with the Spin-off and all recoveries from such litigation will be realized by
Access Beyond; provided, however, that Penril may be deemed to have remained
contingently liable for satisfaction of the obligations.

On June 1, 1993 Penril initiated a lawsuit against Standard Microsystems
Corp. ("SMC"), SMC Massachusetts, Inc., Ashraf M. Dahad and Kwabena Akufo (the
"SMC Defendants") in the Circuit Court of Maryland for Montgomery County for
breach of contract including, among other things, failure to transfer
technology, unfair competition and false representations. Penril sought relief
in an aggregate amount of approximately $50,000,000. The SMC Defendants
subsequently brought a counterclaim alleging fraud and breach of contract and
sought recovery of amounts due under the contract which were alleged to be
approximately $1,650,000 in compensatory damages plus unspecified punitive
damages. In September 1996, Penril and the SMC Defendants agreed to drop the
fraud charges and to settle the contractual dispute. Penril will receive from
SMC, in settlement of litigation, $3,500,000, net of legal payments, in the
first quarter of fiscal 1997.

Digital Equipment Corporation ("DEC") has claimed, through a series of
written communications, that Penril has violated DEC patents related to DEC LAT
technology. Penril has taken the position that Datability, prior to its
acquisition by Penril, had a relationship with DEC that involved the development
of LAT for which Datability has not collected. Both DEC and Penril have taken
the position that it is in the best interests of both parties to work toward a
fair resolution. As of July 31, 1996 no formal claims have been filed.

On December 6, 1995, Penril filed a lawsuit against Rockwell International
Corporation and U.S. Robotics Access Corporation seeking declaratory,
injunctive, and money damage relief by reason of an alleged patent infringement
by the defendants. The action was filed in the United States District Court for
the District of Maryland. In September 1996, Penril agreed to settle its lawsuit
with U.S. Robotics.

Penril is involved in other routine litigation.

F-13
<PAGE> 69

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Management believes none of the litigation will have a material adverse
effect on Penril's financial position or results of operations.

8. STOCKHOLDERS' EQUITY

On September 22, 1995, Penril issued an aggregate of 1,465,000 shares of
its unregistered Common Stock to Pequot Partners Fund, L.P., Pequot Endowment
Fund, L.P and Pequot International Fund, Inc. (collectively the "Investors") for
$7,325,000 in a private transaction. As required by the Purchase Agreement
between the Investors and Penril, a shelf registration was filed with the
Securities and Exchange Commission which became effective on February 28, 1996.
The Investors may request one public shelf registration after the three years
until the later of September 22, 1999 or 30 days after Penril files its annual
report on Form 10-K for the fiscal year ended July 31, 1999. If Penril does not
keep the shelf registration effective for the required three years, the
Investors are entitled to require Penril to effect up to two public
registrations during that time. As part of the transaction, Penril has agreed to
increase the Board of Directors of Penril by one and, so long as the Investors
collectively own in the aggregate not less than 10% of the issued and
outstanding Common Stock, the Investors are entitled to fill such vacancy by
designating one person to the Board of Directors. In addition, on October 5,
1995, Penril completed the sale of 50,000 shares of its unregistered common
stock to Cramer Partners, L.P. for $250,000.

In the second half of fiscal 1996, Penril issued 1,092,267 shares of its
unregistered common stock in an unrelated series of private placements which
generated $7,425,000.

SERIAL PREFERRED STOCK: Penril's Serial Preferred Stock may be issued in
one or more series. The shares of any series may be convertible into Common
Stock, may have priority over Common Stock in the payment of dividends and in
the distribution of assets in the event of liquidation or dissolution of Penril,
and may have preferential or other voting rights, all as determined by the Board
of Directors of Penril at the time it approves the series.

EMPLOYEE STOCK OPTIONS AND STOCK AWARDS: On December 13, 1995, Penril
adopted the 1995 Long-Term Stock Option Incentive Plan (the "1995 Plan") to
replace the 1986 Incentive Plan which expires on October 8, 1996. The
stockholders of Penril approved the 1995 Plan at the Annual Meeting held April
10, 1996. Under the 1995 Plan, which will terminate December 13, 2005, key
employees of Penril and its subsidiaries may be granted awards consisting of
non-qualified stock options, incentive stock options, and restricted stock
awards. The option price of shares of Common Stock will not be less than 100%
(110% in the case of incentive stock options granted to optionees holding more
than 10% of the voting stock of Penril at the date of grant) of the fair market
value of shares of Common Stock on the date of grant. No option will be
exercisable more than ten years (five years in the case of incentive stock
options granted to optionees holding more than 10% of the voting stock of Penril
on the date of grant) from the date it is granted. Penril has reserved 1,000,000
shares for issuance under the 1995 Plan. At July 31, 1996, employees had been
granted awards for 70,000 shares.

In the case of a "change in control" of Penril, an option holder will
generally have the right, commencing at least five days prior to the "change in
control" and subject to any other limitation on the exercise of the option in
effect on the date of exercise, to immediately exercise any options in full to
the extent not previously exercised, without regard to any vesting limitations.
On July 2, 1996 Penril's Stock Option/Compensation Committee (the "Committee")
took action which caused all of the outstanding Penril options held by directors
and executive officers of Penril to vest.

The terms of restricted stock awards granted under the 1995 Plan are
determined at the time of the award. Penril will hold the shares of Common Stock
under restricted stock awards until all restrictions lapse and such Common Stock
may not be sold or transferred by the employee until such time. The employee
must

F-14
<PAGE> 70

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

be employed by Penril when the restrictions lapse in order to receive the shares
of Common Stock when the restrictions lapse.

On October 8, 1986, Penril adopted the 1986 Incentive Plan (the "1986
Plan"). Under the 1986 Plan, which will terminate on October 8, 1996, key
employees of Penril and its subsidiaries may be granted awards consisting of
incentive stock options, non-qualified stock options, and restricted stock
awards. The option price of shares of Common Stock subject to options granted
under the 1986 Plan will not be less than 100% (110% in the case of incentive
stock options granted to optionees holding more than ten percent of the voting
stock of Penril at the date of grant) of the fair market value of shares of
Common Stock at the date of grant. No option will be exercisable more than ten
years (five years in the case of incentive stock options granted to optionees
holding more than ten percent of the voting stock of Penril on the date of
grant) from the date it is granted. At July 31, 1996 an aggregate of 964,538
shares of Common Stock were reserved for issuance under the 1986 Plan, of which
employees have been awarded grants for 962,951 shares of Common Stock.

In the case of a "change in control" of Penril, an option holder will
generally have the right, commencing at least five days prior to the "change in
control" and subject to any other limitation on the exercise of the option in
effect on the date of exercise, to immediately exercise any options in full to
the extent not previously exercised, without regard to any vesting limitations.
On July 2, 1996 the Committee took action which caused all of the outstanding
Penril options held by directors and executive officers of Penril to vest.

The terms of restricted stock awards ("Stock Awards") granted under the
1986 Plan are determined at the time of issuance and are evidenced by a written
restricted stock agreement. Any Stock Awards granted are subject to approval by
a majority of all "disinterested directors" as defined in Rule 16b-3 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended.

On October 1, 1992, Penril granted Stock Awards, under the 1986 Plan for an
aggregate of 71,220 shares of Common Stock of Penril to employees of the
Gaithersburg, Maryland facility. The Stock Awards granted vested over two years
and employees had to be employed by Penril when the vested shares of Common
Stock were issued. Of the total shares of Common Stock awarded, 53,020 were
issued. Penril issued 29,560 shares of Common Stock in October, 1993 which
represented 50% of the Stock Awards outstanding on that date and the remaining
23,460 shares of Common Stock on October 1, 1994. Compensation related to the
Stock Award Program was amortized over the vesting period.

NON-EMPLOYEE DIRECTOR STOCK OPTIONS: On December 9, 1987, Penril adopted
the Non-Employee Directors' Stock Option Plan ("Directors Plan"). Under the
Directors Plan an option to purchase 24,000 shares of Common Stock is
automatically granted to each non-employee director of Penril on the first day
of his initial term. In addition, options to purchase shares of Common Stock are
automatically granted to each non-employee director on the fifth business day
after the Annual Report on Form 10-K is filed with the Securities and Exchange
Commission as follows: in each of the first two successive years after the
initial grant an option to purchase 6,000 shares of Common Stock is granted, and
in each of the next five successive years an option to purchase 3,000 shares of
Common Stock is granted. The option price per share of Common Stock of any
option granted under the Directors Plan is the fair market value of a share of
Common Stock on the date the option is granted. No option will be exercisable
more than ten years from the date of grant. An aggregate of 125,333 shares of
Common Stock were reserved for issuance under the Directors Plan at July 31,
1996, of which 92,000 shares of Common Stock have been granted. On July 2, 1996
the Committee took action which caused all of the outstanding Penril options
held by directors and executive officers of Penril to vest.

F-15
<PAGE> 71

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of stock option transactions during the three years ended July
31, 1996 is as follows:

<TABLE>
<CAPTION>
1995 INCENTIVE
1986 INCENTIVE PLAN DIRECTORS' PLAN PLAN
--------------------- -------------------- ------------------
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF PRICE OF PRICE OF PRICE
SHARES PER SHARE SHARES PER SHARE SHARES PER SHARE
--------- --------- -------- --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding August 1, 1993............ 1,192,752 $4.15 165,000 $3.35 -- $ --
Granted............................... 81,500 4.76 39,000 4.84 -- --
Exercised............................. (132,700) 2.77 -- -- -- --
Canceled.............................. (104,133) 4.67 -- -- -- --
--------- ----- -------- ----- ------ -----
Outstanding July 31, 1994............. 1,037,419 4.15 204,000 3.64 -- --
Granted............................... 348,000 3.12 18,000 3.25 -- --
Exercised............................. (33,067) 2.23 -- -- -- --
Canceled.............................. (233,617) 4.15 -- -- -- --
--------- ----- -------- ----- ------ -----
Outstanding July 31, 1995............. 1,118,735 3.89 222,000 3.61 -- --
Granted............................... 494,000 7.34 18,000 5.69 70,000 $6.77
Exercised............................. (539,284) 4.02 (148,000) 3.87 -- --
Canceled.............................. (110,500) 4.32 -- -- -- --
--------- ----- -------- ----- ------ -----
Outstanding July 31, 1996............. 962,951 $5.54 92,000 $3.59 70,000 $6.77
========= ===== ======== ===== ====== =====
Exercisable Options at July 31,
1996................................ 602,384 $5.73 92,000 $3.59 60,000 $6.44
</TABLE>

WARRANTS: In March, 1987, Henry D. Epstein joined Penril as President and
Chief Executive Officer and was sold Class A warrants to purchase 400,000 shares
of Common Stock at $2.23 per share and Class B warrants to purchase 80,000
shares of Common Stock at $2.34 per share. Mr. Epstein exercised 220,000 Class A
warrants in January 1993, 80,000 Class A warrants in January 1994 and 100,000
Class A warrants in February 1994. In February 1995, Mr. Epstein exercised all
80,000 Class B warrants. All exercises were accomplished by delivery of shares
of Common Stock previously held.

In October 1992, Penril issued a warrant to purchase 166,000 shares of
Common Stock at $4.50 per share, the fair market value on the date of issuance,
to Coast Federal Savings Bank ("Coast") in settlement of a law suit brought
against Penril. In addition, Penril issued Class E warrants to purchase 25,000
shares of Common Stock at $3.625 per share, the fair market value on the date of
issuance, to Mr. Epstein in consideration for Mr. Epstein, in his capacity as a
stockholder of Penril, assisting Penril in settling the litigation with Coast.
The Coast warrant expired June 7, 1995. In August 1995, Mr. Epstein exercised
all Class E warrants.

CASH DIVIDENDS: Penril declared a cash dividend of $.02 per share of
Common Stock to the holders of record on December 16, 1993 and paid December 30,
1993. There were 7,332,296 shares outstanding on the record date.

9. RETIREMENT AND SAVINGS PLAN

Penril's Retirement and Savings Plan ("401(k) Plan") is a defined
contribution plan including provisions of section 401(k) of the Internal Revenue
Code. Employees of Penril who have completed 90 days of service ("Participants")
are eligible to participate in the 401(k) Plan. The 401(k) Plan permits, but
does not require, Penril to match employee contributions. In addition, Penril
may make discretionary contributions to the 401(k) Plan which will be allocated
to each Participant based on the ratio of such Participant's eligible
compensation to the total of all Participants' eligible compensation. Amounts
contributed by Penril vest as to 30% after 1 year of eligible service, 60% after
2 years of eligible service and 100% after 3 years of eligible service.
Participants may elect to direct the investment of their contributions in
accordance with the provisions

F-16
<PAGE> 72

PENRIL DATACOMM NETWORKS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of the 401(k) Plan. Penril made matching contributions of $61,000, $45,000 and
$50,000 during fiscal 1996, 1995 and 1994, respectively. There were no
additional Penril contributions in any year. As part of the Transfer, the 401(k)
Plan will be transferred to Access Beyond and active participation in the 401(k)
Plan will be limited to eligible employees of Access Beyond. Access Beyond
intends to split up the 401(k) Plan so the portion of the plan representing the
benefits of participants not employed by Access Beyond can be terminated. Penril
provides no post-employment or post-retirement benefits.

10. GEOGRAPHIC AREA INFORMATION

Penril's foreign operations consist principally of sales and marketing
activities through subsidiaries located in Hong Kong and the United Kingdom.
Certain information, including the effect of intercompany transactions, relating
to Penril's operations on a geographic basis is as follows (in thousands):

<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Revenues
U.S. Revenue
Domestic................................................... $ 19,350 $26,190 $35,404
Export:
Europe.................................................. 8,808 9,326 11,665
Pacific Rim............................................. 3,868 6,402 4,959
Central and South America............................... 2,393 3,487 4,574
Other International..................................... 2,235 4,403 4,353
-------- ------- -------
Total Exports........................................... 17,304 23,618 25,551
-------- ------- -------
Total U.S. Revenue........................................... $ 36,654 $49,808 $60,955
Revenue from foreign subsidiaries............................ 7,392 6,839 7,876
Adjustments and eliminations................................. (4,611) (4,036) (6,993)
-------- ------- -------
Total Revenues............................................... $ 39,435 $52,611 $61,838
======== ======= =======
Income (Loss) before taxes
U.S.......................................................... $(20,267) $(5,143) $ 2,457
Foreign...................................................... (531) 688 1,479
Eliminations................................................. 130 (737) (2,104)
-------- ------- -------
Total Income (Loss) from continuing operations before
taxes...................................................... $(20,668) $(5,192) $ 1,832
======== ======= =======
Identifiable Assets
U.S.......................................................... $ 31,325 $40,946 $47,213
Foreign subsidiaries......................................... 2,455 3,441 3,848
-------- ------- -------
Total Identifiable Assets.................................... $ 33,780 $44,387 $51,061
======== ======= =======
</TABLE>

F-17