IPL SYSTEMS INC, 10-K405, 1997-03-31

IPL SYSTEMS INC
10-K405, 1997-03-31
COMPUTER STORAGE DEVICES

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

----------

FORM 10-K

[X] Annual Report pursuant to Section 13 or 15 (d) of the Securities and
Exchange Act of 1934.

For the fiscal year ended December 31, 1996 or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.

Commission file Number 0-10370

IPL SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)

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MASSACHUSETTS 04-2511897
(State or jurisdiction of (I.R.S. Employer Indentification No.)
incorporation or organization)

124 Acton Street, Maynard, Massachusetts 01754
(Address of principal executive offices and Zip Code)

(508) 461-1000
(Registrant's Telephone Number, including area code)

----------

Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 Par Value
------------------------------------
(Title of Class)

Indicate by a check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter periods that the
Registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.

Yes X No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definative proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]

The aggregate market value of Class A Common Stock held by non-affiliates of the
Registrant as of March 12, 1997 was: $ 10,888,232
The number of shares outstanding of the Registrant's Class A Common Stock as of
March 12, 1997 was: 5,633,819

DOCUMENTS INCORPORATED BY REFEREENCE

Portions of the Registrant's Proxy Statement for the 1997 Annual Meeting are
incorporated by reference into Part III of this Form 10-K.

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PART Item 1. Business
--------

GENERAL

IPL Systems, Inc. ("IPL" or the "Company") provides open-architecture storage
solutions for Hewlett Packard, Sun Microsystems, DEC Alpha, and IBM RS/6000 and
AS/400 Business servers, as well as Novell NetWare and Windows NT environments.
IPL design, manufactures, services and sells its products through direct,
indirect and OEM sales and service channels worldwide.

IPL has entered into an Agreement and Plan of Merger and Reorganization (the
"Merger Agreement"), dated as of February 28, 1997, among IPL, IPL Acquisition
Corp. ("Merger Sub"), a Delaware corporation and a wholly-owned subsidiary of
IPL, ANDATACO ("ANDATACO"), a California corporation, and W. David Sykes, the
controlling shareholder of ANDATACO providing for the merger (the "Merger") of
Merger Sub with and into ANDATACO. The Merger would result in former holders of
ANDATACO equity (including options, warrants and other rights to acquire
ANDATACO Common Stock, $1.00 par value per share) owning 74.8% of the
post-merger IPL Stock on a fully diluted basis. It is anticipated that approval
of matters related to the Merger will be submitted to the shareholders of IPL
and, if approved, will be consummated in the second quarter of 1997. In
addition to approval by the Company's shareholders, the Merger Agreement is
subject to several conditions, including those concerning the accuracy of the
Company's representations and warranties, the performance by the Company of
certain covenants, the agreement by a member of the Company's board of
directors to serve as Chief Executive Officer of ANDATACO following the Merger
and the expiration or early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. There can be
no assurance that these or any other conditions to the Merger will be satisfied
or that the Merger will be consummated. For additional information regarding
the terms of the Merger and the Merger Agreement, see the Company's Current
Report on Form 8-K filed on March 25, 1997.

IPL was incorporated in Massachusetts on January 15, 1973. The Company's
principal office is located at 124 Acton Street, Maynard, Massachusetts 01754,
and its telephone number at that address is (508) 461-1000.

The discussion contained in this section as well as elsewhere in this report may
contain forward-looking statements based on the current expectations of the
Company's management. Such statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from those
projected. See "Important Factors Regarding Forward-Looking Statements of IPL
Systems, Inc." attached hereto as Exhibit 99.1 and incorporated by reference
into this report. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events. See Rider re Exhibit 99.1.

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RECENT DEVELOPMENT OF BUSINESS

In 1996, IPL's strategy was to continue its focus on the large and growing
market for open systems storage. The Company's DataBase RAID (Redundant Array
of Independent Disks) architecture provides data management solutions for
users of large relational databases (such as Oracle, Sybase and Informix).
Several factors during 1996 adversely affected the Company's ability to fully
exploit the potential of its products in the market. These factors included the
inability to market and sell the Company products effectively, which resulted
in part from the departure of certain key sales personnel, and the delayed
introduction of certain strategic technology.

PRODUCT DEVELOPMENT

The Company's product development strategy is to identify opportunities for new
storage solutions for the open systems Very Large Database ("VLDB") market.
Typically, the Company will identify new devices available from third parties
which may bring significant benefits to users of IPL's targeted computer
platforms. The Company then adapts or develops its proprietary controllers to
provide an interface between these devices and the host computer without
requiring changes to the host's hardware or software. This approach is intended
to decrease development costs, accelerate new product development cycles and
enable the Company to be early to market with its storage offerings. See
"Research and Development" below.

In the fourth quarter of 1996, the Company introduced dual active controller
arrays for the open systems storage market. RAIDTower II's dual controllers
handle data simultaneously (active-active), as opposed to most implementations
in which one controller is active while the other sits idle (active-passive),
waiting for the other controller to fail. RAIDTower II's dual active
controllers accelerate performance because of multiple data paths from the host
IOPs. The protection of dual controller redundancy, combined with fast
performance, may make RAIDTower II an attractive solution for VLDB users whose
business operations demand high performance and high availability of critical
information. IPL expects that the product's success in the market will depend
upon customer demand for active-active solutions and its ability to expand
sales channels in the U.S.

MARKETS

Industry analysts from the International Data Corporation ("IDC") project that
the multi-billion dollar open systems storage market will continue to grow for
the next several years, at the rate of 20-30% annually. IPL's target customer in
this environment is the VLDB user whose storage needs range from 20-30 gigabytes
to multiple terabytes of data. Typically, this data is distributed across
multiple servers in data warehouse and on-line transaction processing ("OLTP")
applications in which data must be available at all

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times, and data loss is unacceptable. IPL products are designed to address the
requirements of these environments.

During 1996, the Company concentrated primarily on UNIX platforms (including
Hewlett Packard and Sun business servers), and added windows NT connectivity
during the course of the year. UNIX is expected to continue as the primary
market in 1997.

SALES AND DISTRIBUTION

The Company's new focus on open systems required adjustment in 1996 to the
direct sales force in North America, including some restaffing and significant
training of IPL personnel to support users in UNIX multi-server environments. By
the end of 1996, the 15 member sales team in North America consisted of 9 sales
representatives, 3 inside sales staff supporting the field, and 3 field
engineers.

In connection with the Merger Agreement, IPL engaged ANDATACO as a
non-exclusive worldwide reseller of IPL's products pursuant to an OEM Agreement
dated as of February 25, 1997. Shortly thereafter, IPL discontinued direct
sales, which included the termination of its direct sales force. The Company
now relies almost exclusively on ANDATACO as the primary distributor of its
products. ANDATACO has hired many of the prior IPL employees, as well as
certain representatives who had previously left IPL to work with other
companies. The OEM Agreement can be terminated by either party on thirty day's
notice. If the OEM Agreement is terminated, there can be no assurance that the
Company will be able to access alternative distribution channels and may,
therefore, confront significant difficulties marketing its products. There also
can be no assurance that the Company's relationship with ANDATACO will
ultimately prove successful.

In addition to its existing agreements with its STARs in the U.S., during 1996,
the Company continued to market its technology, on a limited basis, through
independent non-exclusive distributors worldwide. In Europe, these distributors
included Decision Systems International (DSI), an affiliate of Ing.C.Olivetti &
C.,S.p.A. ("Olivetti"), and GUWA Computer Systems. In Asia, these distributors
included Kanamatsu Electric LTD (KEL). The Company's international distributors
remained focused on the IBM AS/400 market during 1996. While some overseas
customers are beginning to move toward open systems technology, the pace of
adoption overseas is still expected to lag behind the U.S. The Company is not
currently attempting to engage new distributors and is relying primarily on its
relationship with ANDATACO for growth. The Company expects that its
relationship with ANDATACO may improve sales; however there can be no
assurance of such improvement or, if its relationship with ANDATACO is
unsuccessful or only moderately successful, that the Company could expand sales
through other distributors. Overall, the Company continues to have difficulty
penetrating markets, both in the U.S. and abroad, and no assurance can be given
that the Company's efforts, including the transition out of direct sales, will
be able to reverse this trend.

Consistent with industry practice, the Company provides its distributors with
discounts from IPL list prices, which are based on a number of factors,
including the nature and volume of the distributor's business and its sales
territory. Generally, IPL's agreements with its distributors establish
territories and pricing and may be canceled on short notice and/or contain no
firm purchase commitments.

All of the Company's sales in 1996 were in U.S. dollars. For additional
information regarding the Company's export sales, see Note 11 of the Notes to
Consolidated Financial Statements contained elsewhere in this report.

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BACKLOG

The Company believes that sales backlog is generally not material to its
business because the Company usually ships products within 30 days from receipt
of orders.

MANUFACTURING AND SUPPLIERS

Manufacture of the Company's disk drive sub-systems and tape drive systems
involves the assembly of purchased electro/mechanical components, custom-made
printed circuit boards fabricated in accordance with the Company's proprietary
designs, storage devices, standard integrated circuits and power supplies. All
products manufactured by IPL in this manner are then tested in the Company's
quality assurance program.

The Company has and will continue to rely on outside vendors to manufacture
certain electronic components and subassemblies used in the production of the
Company's products. Certain components, subassemblies, materials and equipment
necessary for the manufacture of the Company's products are obtained from a sole
supplier or a limited group of suppliers. The Company's reliance on sole
suppliers or a limited group of suppliers involves several risks, including a
potential inability to obtain an adequate supply of required products and
reduced control over the price, timely delivery, reliability and quality of
finished products. The Company does not have any long-term supply agreements
with its suppliers. Certain of the Company's suppliers have relatively limited
financial and other resources. Any inability to obtain timely deliveries of
products and services having acceptable qualities, or any other circumstance
that could require the Company to seek alternative sources of supply or to
manufacture its own electronic components, subassemblies and manufacturing
equipment internally, could delay the Company's ability to ship its products.
Any such delay could damage relationships with customers and could have a
material adverse effect on the Company's business and operating results.

COMPETITION

The computer data storage industry is intensely competitive and is characterized
by rapid technological change and constant pricing pressure. IPL competes with a
number of companies offering computer data storage, backup and recovery systems.
In the open systems storage market, EMC , Data General Corporation, server
systems manufacturers and resellers of servers are the major competitors, but
the Company believes that to date no dominant suppliers have emerged in the very
large database segment of the open systems storage market. Because IPL's systems
have to be compatible with the systems of the principal manufacturers of
UNIX-based open systems computers and the relational database software programs,
IPL's competitive position and operating results may be adversely affected by,
among other factors, modifications in the design of such systems or programs,
the introduction of new products by such manufacturers or other competitors,
reductions in the pricing of storage solutions in these markets, or the
implementation of new marketing strategies by any of its principal competitors.

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Today IPL focuses less on the AS/400 market than in prior years, but continues
to support its AS/400 customers. In this market, competitors include
International Business Machines ("IBM") and others. In both the UNIX and AS/400
markets, the company's competitors may have substantially greater financial,
product development marketing distribution resources than the Company.

There are several elements of competition in the market for computer storage
solutions. Principal among them are product quality and reliability, time to
market, price/performance characteristics, service and support, marketing and
distribution capability and the ability to deliver products in large volumes.
IPL believes that it competes favorably with respect to these elements, except
for marketing and distribution capabilities.

PRODUCT WARRANTY AND SERVICE

Disk and tape drive products have a warranty that covers defective material and
workmanship during the warranty period. Installation and maintenance service is
available to customers through various service providers, including Olivetti
North America, a U.S. affiliate of Olivetti, and DecisionOne. Certain of the
Company's major distributors also provide similar services. Technical support
for these services is provided from the Company's Maynard, Massachusetts, and
Brussels, Belgium offices.

RESEARCH AND DEVELOPMENT

IPL's ability to compete successfully depends upon the identification and
development of new storage, backup, and recovery solutions for the open systems
market. To achieve this goal, the Company's engineering group continuously
monitors hardware and software product development.

With the Company's focus on integrated hardware and software solutions, IPL has
developed software to further enhance its storage products. This software
includes the Centralized Management Systems ("CMS"), which monitors, tunes and
services IPL storage in local and distributed environments, and the software
component in ParellelBACK. Continued research and development in software is
intended to enhance ease of use, maintenance, and functionality of the Company's
storage solutions.

With respect to hardware, IPL will often evaluate and test a major component
that becomes available in the market, and subject it to IPL's own reliability
testing procedures to enable IPL to select the best available products with
adaptive potential for its markets. Once such a component has been identified
and qualified under IPL's reliability testing procedures, IPL then applies its
knowledge of host systems to adapt one of its proprietary controllers or develop
a new controller to provide an interface between the peripheral storage device
and the identified host computer. To facilitate this process, IPL has designed
standard controllers for several of the existing peripheral interfaces.

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To the extent that IPL is able to use its proprietary controllers for new
subsystems, the Company has been able to develop new products quickly at low
expense. However, because the computer industry is subject to rapid
technological development, there can be no assurance that IPL will be able to
respond in an effective or timely fashion to such changes. Historically, IPL
has been able to respond to technological changes introduced to the AS/400
market. In 1996, the Company responded to demand in the open systems market for
new dual controller technology by introducing the RAIDTower II. To date, IPL
remains one of a limited number of manufacturers delivering dual
(active-active) controller subsystems. Despite this early introduction,
however, the Company has had limited initial success in marketing this product.
The Company expects, subject to the risk factors mentioned herein, that this
ability to respond should continue with manufacturers in the open systems
business for which the Company currently develops storage and backup
technology. These manufacturers include Hewlett Packard, Sun Microsystems and
others.

During its fiscal year ended December 31, 1996, the Company incurred costs of
$1,439,000 for engineering and product development, compared to $1,317,000 in
1995 and $1,784,000 in 1994. The Company's research and development efforts
continue to focus on new products that utilize the Company's engineering
expertise in the design of storage products.

PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY

The Company believes that its success in developing new products depends
primarily upon the technical competence and creative skills of its personnel
rather than on the ownership of copyrights or patents. The Company has no
patents on its current products, but in 1995 the Company filed applications for
patents in the United States and foreign countries with respect to the
ParallelBACK product and another product introduced in 1996. The status of
patents involves complex legal and factual questions and the breadth of claims
allowed is uncertain. There can be no assurance as to the likelihood that
pending patents will be issued or that any such patents will afford protection
against competitors with similar technology. In addition, patent applications
filed in foreign countries may provide significantly less patent protection than
the United States. No assurances can be given that patents issued to the Company
will not be infringed upon or designed around by others.

Due to the rapid technological development of the computer data storage industry
with concurrent extensive patent coverage and with the rapid rate of issuance of
new patents, certain aspects of the Company's products may infringe patents
unknown to the Company. Patent protection may also be obtained in the future on
new inventions and designs for peripheral storage subsystems or the computers to
which the Company's subsystems attach. Although the Company believes that its
products and other proprietary rights do not infringe the proprietary rights of
third parties, there can be no assurance that other third parties will not
assert infringement claims against the Company or that such claims will not be
successful. If any infringement exists or any such patents

<PAGE> 8

are issued, the Company would seek, based upon industry practice, licenses to
such patents, but there can be no assurance that the Company will be able to
obtain any such licenses on terms which would not have a material adverse effect
on its business.

The Company also relies on unpatented proprietary technology, and there can be
no assurance that others may not independently develop the same or similar
technology or otherwise obtain access to the Company's proprietary technology.
To protect its rights in these areas, the Company requires all employees to
enter into confidentiality agreements. There can be no assurance that these
agreements will provide meaningful protection for the Company's trade secrets,
know-how or other proprietary information in the event of any unauthorized use,
misappropriation or disclosure of such trade secrets, know-how or other
proprietary information. If the Company is unable to maintain the proprietary
nature of its technologies, the Company's business could be adversely affected.

REGULATORY APPROVALS

All of the Company's current and proposed products have to comply with and have
regulatory or independent laboratory approval based on emissions and safety
standards for computing equipment. Delays in complying with such standards or in
obtaining any such approvals could delay introductions of new products.

International sales are subject to compliance with laws of various countries,
import/export restrictions and tariff regulations. While IPL is aware that it
may be subject to export restrictions with respect to certain countries, it has
not experienced difficulty in obtaining export licenses from the United States
Department of Commerce for sales into countries where it presently sells.

EMPLOYEES

On March 18, 1997, the Company had 61 full-time employees. The Company believes
it has a satisfactory relationship with its employees. The success of the
Company's operations depends, in part, on the Company's ability to attract and
retain experienced technical, sales, marketing and management personnel. Such
experienced personnel are in great demand and the Company must compete for their
services. None of the Company's employees is covered by a collective bargaining
agreement.

Item 2. Properties.
----------

The Company currently occupies approximately 59,000 square feet of leased office
and manufacturing space worldwide, with an average annualized rental cost, net
of sub-lease/income, of approximately $370,000 for 1996. Since April 1995, the
Company's lease of its facility located in Maynard Massachusetts covers 123,700
square feet of office and manufacturing space for a term extending through March
31, 1998. During 1995, the Company consolidated its activities into
approximately 42,000 square feet in the Maynard facility and has offered the
remaining space for sublease (See Notes 6 and 12 of

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Notes to the Consolidated Financial Statements). In March 1996 the Company
subleased an additional 36,700 square feet of its Maynard facility for a term
commensurate with the prime lease. In February 1997 the Company subleased an
additional 5,425 feet of its Maynard facility with options for a term
commensurate with the prime lease. In support of its direct sales program, the
Company had 9 regional offices which generally consisted of not more than
approximately 1,000 square feet, made available to the Company under occupancy
and service agreements with terms ranging between twelve and thirty-six months
all of which are expected to be terminated within months in connection with the
Company's transition out of Direct Sales in the U.S.

Item 3. Legal Proceedings.
-----------------

There are no legal proceedings to which the Company is a party, other than
routine litigation incidental to the business, none of which is believed to be
material.

Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------

No matter was submitted to a vote of the Company's security holders during the
quarter ended December 31, 1996.

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PART II

Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.

The Company's Class A Common Stock is traded on the Nasdaq Stock Market system
under the symbol IPLS. The following table reflects, for the period indicated,
the high and low sales prices for the Class A Common Stock as reported by
Nasdaq.

Price
-----
Year High Low
- ---- ---- ---

1996 First Quarter 5 7/8 2 1/2
Second Quarter 8 1/4 3 1/2
Third Quarter 4 1/4 1 7/8
Fourth Quarter 2 1/2 1 1/4

Year
- ----

1995 First Quarter 5 1/2 2
Second Quarter 6 3/4 3 5/8
Third Quarter 7 7/8 5 3/8
Fourth Quarter 6 5/16 2 3/4

On March 12, 1997 the last sale price of the Company's Class A Common Stock was
$2.313, and there were approximately 280 record holders and more than 2400
beneficial holders of the Company's Class A Common Stock.

The Company has never paid a cash dividend on its Class A Common Stock and it is
currently anticipated that cash dividends will not be paid to holders of Class A
Common Stock in the foreseeable future.

<PAGE> 11

Item 6. Selected Financial Data.
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Five-year Financial Summary Revenues $ 17,064 $ 24,764 $ 29,949 $ 39,721 $ 53,572
Dollars in thousands
(except per share amounts) Net income (loss) $ (2,142) $ (3,464) $ (15,046) $ (2,451) $ 3,053

Net income (loss)
per share $ (0.38) $ (0.63) $ (2.80) $ (0.47) $ 0.56

Weighted average
common shares
outstanding 5,617,926 5,469,177 5,381,519 5,235,964 5,435,649

Working capital $ 4,921 $ 6,195 $ 8,285 $ 21,549 $ 25,935

Total assets $ 10,614 $ 13,742 $ 18,764 $ 37,757 $ 39,355

Long-term debt $ -- $ -- $ -- $ -- $ --

Shareholder's
equity $ 6,550 $ 8,543 $ 11,352 $ 26,398 $ 28,399

Current ratio 2.2:1 2.2:1 2.1:1 2.9:1 3.4:1

</TABLE>

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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

The discussion contained in this item may contain forward-looking statements
based on the current expectations of the Company's management. Such statements
are subject to certain risks and uncertainties which would cause actual results
to differ materially from those projected. See "Important Factors Regarding
Forward-Looking Statements of IPL Systems, Inc." Filed as Exhibit 99.1 to this
report which is incorporated by reference into this report . Readers are
cautioned not to place undue reliance on these forward-looking statements which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
which may be made to reflect events or circumstances occurring after the date
hereof or to reflect the occurrence of unanticipated events.

The Company and ANDATACO entered into a definitive agreement dated as of
February 28, 1997 to merge the two companies. See Item 1, "Business - General"
above. IPL management believes that a successful merger would allow the Company
to obtain greater penetration into the rapidly expanding open systems storage
market and provide a broader revenue base to enable the Company access to
additional capital resources and reduction in overhead costs as a percentage of
revenues. In the absence of such a merger, management believes, based on its
cash flow estimates, that overhead cost burdens could be reduced in order to
provide a break-even cash flow and permit the Company's continuance as a going
concern only if recent revenue levels increased. Absent the Merger or an
alternative third-party channel of distribution, through ANDATACO or otherwise,
management does not believe that the Company will be able to achieve any such
increase in revenue.

The Company's net loss for 1996 was $2,142,000, or $0.38 per share, compared
with a net loss of $3,464,000, or $0.63 per share in 1995. The lower net loss
in 1996 resulted from higher gross margins from the sale of open systems
products, as well as reduced expenses. The Company has experienced increased
expenses in 1997 in connection with the Merger Agreement. The Company has
discontinued direct sales. In the foreseeable future, the Company intends to
sell almost exclusively pursuant to arrangements with ANDATACO. See Item 1
above. The pace of early sales under the Company's new marketing approach have
been disappointing and there can be no assurance that sales will ultimately
improve. Furthermore, the Company's reliance on one primary distributor is
inherently risky.

RESULTS OF OPERATIONS 1995 COMPARED WITH 1994
- ---------------------------------------------

Revenues in 1996 were $17,064,000 compared with $24,764,000 in 1995. This 31%
decrease in revenue compared to a year ago is the result of several factors,
including continued competitive pressures; changes in the business priorities of
the Company's major European distributors; the departure of several U.S. sales
representatives employed

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by IPL and the delay in releasing certain strategic new technology. Total open
systems products sales grew from 26% of total product revenue in 1995 to 54% in
1996. Total U.S. sales were 73% and international sales were 27% in 1996
compared with 66% and 34%, respectively, for 1995. Disk revenue was 75% of total
revenue in 1996 and 77% in 1995 respectively.

Gross margins were 44% in 1996 compared with 38% in 1995. The improvement is
the result of reduced costs, increased gross margins on U.S. open systems
product sales, and higher extended warranty revenues as well as partial
recoveries of a doubtful accounts receivable that was reserved in an earlier
period which totalled $1,550,000 in 1996 and $1,767,000 in 1995. Selling,
general and administrative expenses decreased approximately 26% to $8,501,000
in 1996 compared with $11,436,000 in 1995. This $2,935,000 decrease is
primarily due to IPL employing fewer sales representatives and ongoing expense
control as well as the reduction in revenue.

Engineering and development expenses were $1,439,000 in 1996 compared with
$1,317,000 in 1995. These additional expenses permitted the Company to develop
new storage backup and disaster recovery solutions for the database segment of
the UNIX market. On October 3, 1996, the Company announced the RAIDTower II
storage system with dual active technology.

Restructuring expenses were increased $497,000 in 1995 to cover the entire
occupancy cost for unused space for the balance of the lease term of the
Company's Maynard facility. In 1994, the Company recorded a $1,971,000
restructuring charge in connection with substantially reducing the scale of its
operations, and refocused on product development and sales efforts on the open
systems market.

The 1994 restructuring expense was reduced by $100,000 in the first quarter of
1996, when the Company sublet a portion of the unused space in its Maynard
facility. The occupancy cost associated with this space had been previously
expensed in the third quarter of 1995 when restructuring expenses increased
$497,000 to cover the entire occupancy cost for unused space for the balance of
the lease term of the Company's Maynard facility. In the fourth quarter of 1994,
the Company had recorded a $1,971,000 restructuring charge when it had reduced
the scale of its operation and refocused on product development and sales
efforts in the open systems market.

Other income decreased to $123,000 in 1996 from $274,000 in 1995 primarily
due to lower average cash balances during 1996.

The Company had no federal tax liability in 1996. The Company fully utilized its
benefit from the net operating loss carryback in 1994. There are approximately
$14,000,000 of federal and $26,000,000 of state tax loss carryforwards
available through 2011 and 2001, respectively. The Company's ability to use
these losses will be subject to certain annual limitations as a result of the
change in control if the proposed Merger is consummated. See Note 5 to the
Notes to Consolidated Financial Statements.

<PAGE> 14

In 1996 the Company had a net loss of $2,142,000, or $ 0.38 per share, compared
with the 1995 net loss of $3,464,000, or $0.63 per share.

1995 COMPARED WITH 1994

In 1995, the Company's revenues were $24,764,000 compared to $29,949,000 in
1994. This decline was primarily due to a significant reduction in purchases
made by the Company's European distributors who have been slow to transition to
the open systems technology. Continued competitive pressures and changes in the
business priorities of the Company's major European distributors contributed to
the decline in European sales. U.S. and non-European revenues were approximately
the same for 1995 and 1994. Open systems product sales represented 26% of total
product revenue in 1995 compared to 2% in 1994. Disk revenue was 77% of total
revenue in 1995 and 75% in 1994.

Gross margins were 38% in 1995 compared with 10% in 1994. The increase
in margins of approximately 280% was due to reduced costs, the transition from
the AS/400 market to the open systems market, and a partial recovery of a
doubtful accounts receivable in 1995 which had been fully reserved in 1994. The
1994 gross margin was reduced by $4,600,000 relating to provisions for bad
debts and excess and obsolete inventory reserves.

Selling, general and administrative expenses decreased approximately 27% in 1995
from 1994. This was primarily due to reengineering of the Company's operations
and ongoing expense control.

Engineering and development expenses decreased approximately 26% in 1995
compared with 1994 as a result of lower costs associated with the development of
open systems products.

Total other income decreased from $274,000 in 1995 to $288,000 in 1994 primarily
due to lower average cash balance during 1995.

There was no federal tax liability in 1995. The Company fully utilized its
benefit from the net operating loss carryback in 1994. The effective tax benefit
rate in 1994 was 7.2%

In 1995 the Company had a net loss of $3,464,000 or $0.63 per share, compared
with the 1994 net loss of $15,046,000 or $2.80 per share.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and equivalents as of December 31, 1996 were $2,274,000
compared with $3,595,000 at December 31, 1995. Accounts receivable decreased 41%
from $4,019,000 at December 31, 1995 to $2,391,000 at December 31, 1996. This
decrease was the result of the reduction in revenue. Inventories increased 15%
to $3,891,000 at December 31, 1996 from $3,375,000 at December 31, 1995, due
primarily

<PAGE> 15

to the new RAIDTower II product and also maintaining RAIDTower I product in
anticipation of higher revenue in the fourth quarter of 1996. Accounts payable
and accrued expenses decreased $1,135,000 primarily due to reduced purchasing
requirements and operating expenses.

As of December 31, 1996, IPL had working capital of $4,921,000, a decrease of
$1,274,000, or approximately 21%, from $6,195,000 as of December 31, 1995.
IPL's current ratio remained stable at about 2.2:1 as of the end of both years.
In the year ended December 31, 1996, IPL used $1,159,000 in cash to fund the
losses of its operating activities. If IPL's operating activities continue to
generate losses and use IPL's remaining cash, IPL will need to either liquidate
assets or seek outside sources of financing, which, if available at all, may not
be available on reasonable terms. IPL's management does not anticipate any such
needs if both (i) its OEM Agreement with ANDATACO produces cash receipts
anticipated by Company management and (ii) the Merger is consummated by the end
of May. If the Merger is delayed or terminated or if projected cash receipts
from the arrangements with ANDATACO are less than management projects, IPL will
need to attempt to access outside sources of capital. There can be no
assurance, however, that such outside sources of capital will be available.
14

<PAGE> 16

Item 8. Financial Statements and Supplementary Data.
-------------------------------------------

See Item 14 for Financial Statement filed as part of this Form 10-K.

Quarterly Financial Data (Unaudited)

Summarized unaudited quarterly financial data for 1995 and 1994 (dollars in
thousands, except per share amounts) is as follows:

1996 - Three Months Ended March 31 June 30 Sept. 30 Dec. 31

- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Revenue $ 7,101 $ 4,464 $ 3,077 $ 2,422

Net income (loss) 230 ( 581) ( 796) ( 996)

Net income (loss) per common share .04 ( 0.10) ( 0.14) ( 0.18)

</TABLE>

1995 - Three Months Ended March 31 June 30 Sept. 30 Dec. 31

- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>

Revenue $ 6,517 $ 6,707 $ 4,524 $ 7,016

Net loss ( 785) ( 389) ( 1,910) ( 380)

Net loss per common share ( 0.15) ( 0.07) ( 0.35) ( 0.07)

</TABLE>

Item 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.

None.

<PAGE> 17

PART III

Item 10. Directors and Executive Officers of the Registrant.
--------------------------------------------------

The information required to be reported hereunder is incorporated by reference
to the information reported in the Company's Proxy Statement for its 1997 Annual
Meeting of Stockholders under the caption "Election of Directors", "Executive
Officers" and "Compliance with Section 16 (a) of the Securities Exchange Act of
1934".

Item 11. Executive Compensation.
----------------------

The information required to be reported hereunder is incorporated by reference
to the information reported in the Company's Proxy Statement for its 1997 Annual
Meeting of Stockholders under the caption "Executive Compensation" and "Election
of Directors -- Director Compensation."

Item 12. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------

Item 13. Certain Relationships and Related Transactions.
----------------------------------------------

The information required to be reported hereunder is incorporated by reference
to the information reported in the Company's Proxy Statement for its 1997 Annual
Meeting of Stockholders under the caption "Certain Transactions" and Note 10 of
the Notes to Consolidated Financial Statements contained elsewhere in this
report.

<PAGE> 18

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
- -------------------------------------------------------------------------

Page Number
-----------
(a) (1) The following report and financial statements of
IPL Systems, Inc. are filed as part of this Form 10-K:

Independent Auditors' Report 23

Consolidated Balance Sheets - December 31, 1996 and 1995 24

Consolidated Statements of Operations - Years Ended
December 31, 1996, 1995 and 1994 25

Consolidated Statements of Stockholders' Equity --
Years Ended December 31, 1996, 1995, and 1994 26

Consolidated Statements of Cash Flows --
Years Ended December 31, 1996,
1995 and 1994 27

Notes to Consolidated Financial Statements 28

(a) (2) The following report and financial schedule
of IPL Systems, Inc. are filed as part of the Form 10-K:

Schedule VIII -- Valuation of Qualifying
Accounts 38

Independent Auditors' Consent and Report on
Schedule 76

All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.

17
<PAGE> 19

(a) (3) The following exhibits are filed as part of this Form 10-K:

Exhibit
Number Exhibit
- ------ -------
2.1 Agreement and Plan of Merger and Reorganization dated as of
February 28, 1997, by and among the Company, IPL Acquisition
Corp., ANDATACO and W. David Sykes, filed Exhibit 2.1 to the
Company's Current Report on Form 8-K dated as of February 28, 1997
and incorporated herein by reference.

3.1 Restated Articles of Organization dated March 24, 1981, and
Articles of Amendment, dated May 12, 1981, and July 8, 1992, filed
as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 (the "1992 Form 10-K"), and
incorporated herein by reference.

3.2 By-Laws, as amended, filed as Exhibit 3.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1987
(Commission File No. 0-10370) and incorporated herein by
reference.

10.1 Stockholder Agreement dated as of April 25, 1980, as amended,
filed as Exhibit 10.8 to the Company's Registration Statement on
Form S-1 (File No. 2-71414) "1981 Registration Statement") and
incorporated herein by reference.

10.2 Second Amendment to Stockholder Agreement dated as of May 24,
1989, filed as Exhibit 10.3. to the Company's Registration
Statement on Form S-1 (File No. 33-40454) (the "1991 Registration
Statement") and incorporated herein by reference.

10.3 Form of Indemnification Agreement, filed as Exhibit 10.8 to the
Company's 1991 Registration Statement and incorporated herein by
reference.

10.4 Lease dated August 20, 1992 between the Company and Maynard
Industrial Park Associates, filed as Exhibit 10.2 to the 1992
Form 10-K and incorporated herein by reference.

10.5 1993 Director Stock Option Plan, filed as Exhibit 10.12 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 (the "1993 Form 10-K") and incorporated herein
by reference.

10.6 Form of Executive Severance Agreement, filed as Exhibit 10.13 to
the 1993 Form 10-K and incorporated herein by reference.

10.7 1991/1993 Consolidated Equity Incentive Plan, filed as Exhibit
10.9 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994 (the "1994 Form 10-K") and
incorporated herein by reference.

18
<PAGE> 20

10.8 Consulting Agreement dated as of January 1, 1995 between the
Company and Firecracker Technology Corp., filed as Exhibit 10.8 to
the 1994 Form 10-K and incorporated herein by reference.

10.9 Employment Agreement with Ronald J. Gellert dated as of December
4, 1995 between the Company and Ronald J. Gellert, filed as
Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "1995 Form 10-K") and incorporated herein
by reference.

10.10 Stock Option Agreement dated as of December 4, 1995 between the
Company and Ronald J. Gellert, filed as Exhibit 10.10 to the 1995
Form 10-K and incorporated herein by reference to the 1995 Form
10-K and incorporated herein by reference.

10.11 1996 Consolidated Equity Incentive Plan, filed herewith as
Exhibit 10.11.

10.12 Consulting Agreement dated as of October 1, 1996 between the
Company and Cornelius P. McMullan, filed herewith as Exhibit
10.12.

10.13 Consulting Agreement dated as of October 1, 1996 between the
Company and Harris Ravine, filed herewith as Exhibit 10.13.

10.14 Consulting Agreement dated as of January 1, 1997 between the
Company and BI Capital, Ltd., filed herewith as Exhibit 10.14.

10.15 Form of Consulting Agreement dated as of March 1, 1997 between
the Company and Harris Ravine, filed herewith as Exhibit 10.15.

10.16 OEM Agreement dated as of February 25, 1997 between the Company
and ANDATACO, filed herewith as Exhibit 10.16.

11 Computation of Net Income per Common Share, filed herewith as
Exhibit 11.

21.1 List of subsidiaries, filed as Exhibit 22 to the 1991 Registration
Statement and incorporated herein by reference.

23. Consent of Deloitte & Touche LLP, Independent Certified Public
Accountants, filed herewith as Exhibit 23.

99.1 Important Factors Regarding Future Results of IPL Systems, Inc.,
filed herewith as Exhibit 99.1.

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

Exhibits 10.3 and 10.5 through 10.15 to this Form 10-K are management contracts
or compensatory plan arrangements.

Reports on Form 8-K
-------------------

There were no reports on Form 8-K filed for the quarter ended December 31, 1996.

19
<PAGE> 21

SIGNATURES

Pursuant to the requirement of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, IPL Systems, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

IPL SYSTEMS, INC.

By: /s/ Ronald J. Gellert
-----------------------
Ronald J. Gellert
President and Chief Executive Officer
March 26, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<S> <C> <C>
Signature Title Date
- --------- ----- ----
/s/ Ronald J. Gellert
- ----------------------------- President, Chief Executive March 26, 1997
Ronald J. Gellert Officer and Director (Principal
Executive Officer)

/s/ Eugene F. Tallone
- ----------------------------- Vice President - Finance, Chief March 26, 1997
Eugene F. Tallone Financial Officer and Treasurer
(Principal Financial and
Accounting Officer)

/s/ Stephen J. Ippolito
- ----------------------------- Director March 26, 1997
Stephen J. Ippolito

/s/ Cornelius P. McMullan
- ----------------------------- Director March 26, 1997
Cornelius P. McMullan

/s/ Harris Ravine
- ----------------------------- Director March 26, 1997
Harris Ravine

</TABLE>
20

<PAGE> 22

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders of
IPL Systems, Inc.
Maynard, Massachusetts

We have audited the accompanying consolidated balance sheets of IPL Systems,
Inc. and its subsidiaries as of December 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 December 31, 1996. These financial
statements are the responsibility of the Company'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 IPL Systems, Inc. and its
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company's losses from operations and past
and anticipated cash flow deficiencies raise substantial doubt about its ability
to continue as a going concern. Management's plans concerning these matters are
also described in Note 2. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 14 to the consolidated financial statements, the Company
has signed a Definitive Agreement of Merger and Reorganization dated as of
February 28, 1997 with anDATAco and taken certain other related actions.

Boston, Massachusetts
February 21, 1997
(Except for Note 14, for which the date is March 7, 1997)

<PAGE> 23
IPL SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------

ASSETS 1996 1995

CURRENT ASSETS:

<S> <C> <C>
Cash and equivalents $ 2,274,080 $ 3,595,268
Accounts receivable - trade (net of allowance
for doubtful accounts of $353,000 and $2,111,000) 2,391,330 4,018,511
Inventories 3,891,466 3,375,652
Prepaid expenses and other current assets 428,289 404,564
----------- ------------

Total current assets 8,985,165 11,393,995
----------- ------------
EQUIPMENT, FIXTURES AND
LEASEHOLD IMPROVEMENTS:
Manufacturing equipment 4,931,807 4,883,499
Office equipment and fixtures 2,190,977 2,319,517
Customer support equipment 3,103,577 3,500,011
Leasehold improvements 1,338,598 1,334,788
----------- ------------
11,564,959 12,037,815
Less accumulated depreciation and
amortization 9,935,858 9,689,630
----------- ------------
1,629,101 2,348,185

$ 10,614,266 $ 13,742,180
============ ============

LIABILITIES AND STOCKHOLDERS'
EQUITY 1996 1995

CURRENT LIABILITIES:
Trade accounts payable $ 3,188,660 $ 3,583,605
Accrued payroll expenses 391,554 827,026
Accrued restructuring expenses 291,773 594,782
Other accrued expenses 192,307 193,959
------------ ------------
Total current liabilities $ 4,064,294 $ 5,199,372
------------ ------------
STOCKHOLDERS' EQUITY:
Class A common stock, $.01 par value -
authorized, 20,000,000 shares; issued
and outstanding, 5,633,819 shares and
5,200,590 shares at December 31, 1996
and 1995, respectively 56,338 52,006
Class C common stock, $.01 par value -
authorized, 2,250,000 shares; issued and
outstanding, 386,929 shares at
December 31, 1995 - 3,869
Additional paid-in capital 17,378,568 17,230,023
Deficit (10,884,934) (8,743,090)
------------ ------------
Total stockholders' equity 6,549,972 8,542,808
------------ ------------
$ 10,614,266 $ 13,742,180
============ ============

</TABLE>

See notes to consolidated financial statements.

-2-

<PAGE> 24

IPL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ---------------------------------------------------------------------------------------------------------------------------

1996 1995 1994

<S> <C> <C> <C>
REVENUES:
Product $14,593,901 $22,952,315 $ 27,511,453
Service 2,470,531 1,811,500 2,437,072
----------- ----------- ------------
17,064,432 24,763,815 29,948,525
----------- ----------- ------------
COSTS AND EXPENSES:
Cost of sales 9,488,716 15,251,668 26,938,094
Selling, general and administrative expenses 8,501,768 11,436,222 15,759,705
Engineering and development 1,438,936 1,317,299 1,784,113
Restructuring expenses (income) (100,000) 496,880 1,970,587
----------- ----------- -----------
19,329,420 28,502,069 46,452,499
----------- ----------- -----------
OPERATING LOSS (2,264,988) (3,738,254) (16,503,974)

OTHER INCOME:
Interest 118,922 199,568 162,857
Other, net 4,222 74,923 124,906
----------- ----------- -----------
LOSS BEFORE INCOME TAX BENEFIT (2,141,844) (3,463,763) (16,216,211)

INCOME TAX BENEFIT - Federal - - (1,170,000)

NET LOSS $(2,141,844) $(3,463,763) $(15,046,211)
=========== =========== ============

NET LOSS PER COMMON AND COMMON EQUIVALENT
SHARE $ (0.38) $ (0.63) $ (2.80)
=========== =========== ============
COMMON AND COMMON EQUIVALENT SHARES USED IN
CALCULATION OF NET LOSS PER SHARE 5,617,926 5,469,177 5,381,519
=========== =========== ============

</TABLE>

See notes to consolidated financial statements.

-3-

<PAGE> 25
IPL SYSTEMS, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>

Common Stock
------------------------------------------------
Class A (Voting) Class C (Voting) Additional Retained
------------------------ -------------------- Paid-in Earnings
Shares Amount Shares Amount Capital (Deficit)

BALANCE, JANUARY 1, 1994 4,501,776 $45,018 879,743 $ 8,797 $16,577,458 $ 9,766,884

Net loss for the year -- -- -- -- -- (15,046,211)
--------- ------- -------- ------- ----------- ------------

BALANCE, DECEMBER 31, 1994 4,501,776 45,018 879,743 8,797 16,577,458 (5,279,327)

Net loss for the year -- -- -- -- -- (3,463,763)

Exercise of stock options 206,000 2,060 -- -- 652,565 --

Conversion of Class C to Class A stock 492,814 4,928 (492,814) (4,928) -- --
--------- ------- -------- ------- ----------- ------------

BALANCE, DECEMBER 31, 1995 5,200,590 52,006 386,929 3,869 17,230,023 (8,743,090)

Net loss for the year -- -- -- -- -- (2,141,844)

Exercise of stock options 46,300 463 -- -- 122,517 --

Consultant's stock option compensation -- -- -- -- 26,028 --

Conversion of Class C to Class A stock 386,929 3,869 (386,929) (3,869) -- --
--------- ------- -------- ------- ----------- ------------

BALANCE, DECEMBER 31, 1996 5,633,819 $56,338 -- $ -- $17,378,568 $(10,884,934)
========= ======= ======== ======= =========== ============

Total

<S> <C>
BALANCE, JANUARY 1, 1994 $ 26,398,157

Net loss for the year (15,046,211)
------------

BALANCE, DECEMBER 31, 1994 11,351,946

Net loss for the year (3,463,763)

Exercise of stock options 654,625

Conversion of Class C to Class A stock --
------------

BALANCE, DECEMBER 31, 1995 8,542,808

Net loss for the year (2,141,844)

Exercise of stock options 122,980

Consultant's stock option compensation 26,028

Conversion of Class C to Class A stock --
------------

BALANCE, DECEMBER 31, 1996 $ 6,549,972
============
</TABLE>

See notes to consolidated financial statements.

-4-
<PAGE> 26

IPL SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>

1996 1995 1994

<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,141,844) $(3,463,763) $(15,046,211)

Adjustments to reconcile net loss to net cash
(used for) provided by operating
activities:
Depreciation and amortization 976,561 1,213,005 2,614,596
Loss on the sale of equipment and fixtures 27,479 27,072 46,223
Consultant's stock option compensation 26,028 - -
Noncash restructuring expenses - - 1,185,790
Bad debt expense (recoveries) (432,535) (1,374,995) 3,173,526
Inventory reserves 409,473 (1,422,474) 1,382,055
Changes in assets and liabilities:
Accounts receivable - trade 2,059,716 5,971,339 6,279,971
Inventories (925,287) 1,107,188 3,436,420
Prepaid expenses and other current assets (23,725) (46,599) 177,095
Refundable income taxes - 1,425,000 475,000
Deferred income taxes - - 395,000
Trade accounts payable and accrued payroll expenses (832,069) (2,248,464) (4,506,131)
Accrued restructuring expenses (303,009) 35,496 559,286
----------- ----------- ------------
Total adjustments 982,632 4,686,568 15,218,831

Net cash (used for) provided by operating
activities (1,159,212) 1,222,805 172,620
----------- ----------- ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment, fixtures and leasehold
improvements (298,895) (568,488) (2,064,398)
Proceeds from sale of equipment and fixtures 13,939 47,514 -
----------- ------------ ------------

Cash used for investing activities (284,956) (520,974) (2,064,398)
----------- ------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES -
Exercise of stock options 122,980 654,625 -
----------- ------------ ------------

CASH AND EQUIVALENTS:
Net (decrease) increase (1,321,188) 1,356,456 (1,891,778)
Balance, beginning of year 3,595,268 2,238,812 4,130,590
----------- ------------ -------------

Balance, end of year $ 2,274,080 $ 3,595,268 $ 2,238,812
=========== ============ =============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Income taxes paid $ 53,000 $ - $ 23,000
=========== ============ =============

</TABLE>

See notes to consolidated financial statements.

-5-

<PAGE> 27

IPL SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
- -------------------------------------------------------------------------------

1. INDUSTRY

IPL Systems, Inc. (the "Company"), founded in 1973, provides open
architecture database storage solutions for multi-host computer
environments. The Company supplies its products through direct, indirect
and Original Equipment Manufacturer ("OEM") sales and service channels
throughout the world.

2. GOING CONCERN MATTERS

The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in
the consolidated financial statements, during the years ended December 31,
1996, 1995 and 1994, the Company incurred net losses of $2,141,844,
$3,463,763 and $15,046,211, respectively, and net cash used for operating
activities totaled $1,159,212 in 1996. In addition, the Company
anticipates, absent corrective actions, a cash flow deficiency during 1997.
These factors, among others, indicate that the Company may be unable to
continue as a going concern for a reasonable period of time.

The consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded asset amounts
or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern. The Company's
continuation as a going concern within the next year is dependent upon its
ability to generate sufficient cash flow from operations to meet its
obligations on a timely basis, and/or to obtain additional financing as may
be required. In the long-term, its success is dependent ultimately on the
attainment of successful operational results.

Management believes that a successful merger, as discussed in Note 14, will
allow the Company to realize certain cost savings, further penetrate the
rapidly expanding open architecture storage market and provide sufficient
working capital to sustain operations through 1997. In the absence of such
a merger, management believes, based on its cash flow estimates, that
overhead cost burdens could be reduced in order to provide a break-even
cash flow and result in the Company's continuance as a going concern only
if revenue levels are substantially increased over current levels. If
revenue levels do not increase, the Company would likely be forced to
either liquidate assets or seek outside sources of financing, which, if
available at all, may not be available on reasonable terms.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES - The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. In 1996 and 1995, the allowance for
doubtful accounts was reduced by $1,758,000 and $1,557,000, respectively,
principally as a result of partial collection of previously reserved
balances.

-6-
<PAGE> 28

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries, IPL
Investments, Inc. and IPL International Sales Corporation. All intercompany
accounts and transactions have been eliminated.

FAIR VALUE - The fair value of assets and liabilities representing
financial instruments approximates their carrying value.

CASH AND EQUIVALENTS - For purposes of reporting cash flows, cash and
equivalents include cash on hand and amounts on short-term deposit with
banks or other financial institutions.

INVENTORIES - Inventories are stated at the lower of cost (based on the
first-in, first-out method) or market.

At December 31, 1996, the Company was in the process of a product
transition. Inventory levels at that time reflect raw materials,
work-in-process, and finished goods relating to new and existing products.
Management has developed a program to reduce inventory to desired levels
over the near term and believes no loss will be incurred on its
disposition.

EQUIPMENT, FIXTURES AND LEASEHOLD IMPROVEMENTS - Maintenance, repairs and
minor renewals are charged to operations as incurred. Depreciation of
equipment and fixtures is computed by the straight-line method over the
estimated useful lives of the assets which range between two and seven
years. Leasehold improvements are amortized over the term of the lease or
the useful lives of the assets, whichever is shorter. Customer support
inventory is valued at cost when available for service and is amortized
over a four-year period using the straight-line method. The Company
continually reviews its equipment, fixtures and leasehold improvements to
determine that the carrying values have not been impaired.

STOCK-BASED COMPENSATION - Effective January 1, 1995, the Company adopted
SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123").
SFAS No. 123 requires that the fair values of stock-based compensation to
employees and non-employees be either disclosed or reported in the
consolidated financial statements. Compensation expense associated with
awards of stock or options to employees is measured using the intrinsic
value method. Compensation expense associated with awards to non-employees
is measured using a fair value method. The effect of adopting SFAS No. 123
for the year ended December 31, 1996 was to increase net loss by $26,028.

REVENUE RECOGNITION - Product and parts sales are recorded when shipped
under the terms of firm purchase contracts. Service revenue includes parts
sales, warranty, extended warranty and repairs charges. Warranty and
extended warranty revenue for contracts for which the liability for on-site
service and component replacement have been transferred to or assumed by
third parties are recognized at time of sale together with the associated
costs. For those contracts which the Company is liable for any portion of
on-site service or component replacement, the Company recognizes that
portion of the warranty and extended warranty income and expense ratably
over the contract period.

INCOME TAXES - The Company utilizes the liability method of accounting for
income taxes. Deferred taxes are based on the difference between the
financial statement and tax bases of assets and liabilities, and the
deferred tax expense or credit represents the change in the deferred tax
asset or liability balance.

-7-

<PAGE> 29

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

LOSS PER SHARE - Loss per common and common equivalent share is computed
based on the weighted average number of shares outstanding and the dilutive
effect (when applicable) of common share equivalents based on the treasury
stock method. Common share equivalents are not included in loss periods as
the effect is anti-dilutive.

RECLASSIFICATIONS - Certain amounts in the 1995 and 1994 consolidated
financial statements have been reclassified to conform with the 1996
presentation.

4. INVENTORIES

Inventories consist of the following at December 31:

1996 1995

Raw materials $ 1,764,001 $ 1,460,423
Work-in-process 976,978 651,245
Finished goods 1,150,487 1,263,984
------------ ------------

$ 3,891,466 $ 3,375,652
============ ============

5. INCOME TAXES

Income tax expense (benefit) consists of the following for the years ended
December 31:
<TABLE>
<CAPTION>

1996 1995 1994

<S> <C> <C> <C>
Current - federal $ - $ - $(1,565,000)

Deferred:
Federal (711,000) (974,000) (4,255,000)
State (101,000) (305,000) (1,125,000)
Change in valuation allowance 812,000 1,279,000 5,775,000
--------- ---------- -----------
$ - $ - $(1,170,000)
========= ========== ===========

</TABLE>

The following is a reconciliation between the actual income tax benefit
and income taxes computed by applying the statutory federal income tax
rate to loss before income tax benefit for the years ended December 31:

1996 1995 1994

U.S. federal statutory rate (35.0)% (35.0)% (35.0)%
Change in valuation allowance 37.9 36.9 35.6
Benefit of prior year tax credits - - (5.3)
Other, net (2.9) (1.9) (2.5)
----- ----- ----

0.0 % 0.0 % (7.2)%
==== ===== ====

-8-

<PAGE> 30

5. INCOME TAXES (CONTINUED)

The tax effects of significant items comprising the Company's deferred tax
assets as of December 31 are as follows:

1996 1995
Reserves and accruals not currently deductible:
Accounts receivable $ 141,000 $ 865,000
Inventory 409,000 238,000
Warranty 352,000 294,000
Compensation 41,000 56,000
Restructuring 117,000 238,000
Other 1,000 131,000
---------- -----------
1,061,000 1,822,000

Depreciation 258,000 467,000
Loss carryforward amounts 6,063,000 4,280,000
Tax credits 944,000 945,000
---------- -----------

8,326,000 7,514,000
Valuation allowance (8,326,000) (7,514,000)
---------- -----------

$ - $ -
========== ===========

The Company has approximately $13,652,000 in net federal operating loss
carryforwards which expire through 2011, and approximately $25,703,000 in
state operating loss carryforwards which expire through 2001. The ability
of the Company to utilize these loss carryforward amounts will be limited
in the event of a change in control, as defined by the Internal Revenue
Code. The change in the valuation allowance represents the amount required
to fully reserve against the recorded deferred tax assets, due to
uncertainty about their future realization.

6. LEASE COMMITMENT AND RENT EXPENSE

The Company leases manufacturing and office facilities under a lease which
expires in 1998 and leases office space at various U.S. locations and in
Belgium under leases which expire through 1997. The following is a schedule
by years of future rental payments, net of related sublease income,
required under these leases:

1997 $278,682
1998 68,551

Rental expense, net of sublease income, amounted to approximately
$370,000, $493,000 and $564,000 in 1996, 1995 and 1994, respectively.

-9-

<PAGE> 31

7. CLASS C COMMON STOCK

Class C common stock was convertible into an equal number of shares of
Class A common stock at any time at the option of the holder but was
required to be converted if the number of shares of Class C common stock
outstanding became less than 5% of all shares outstanding. In 1995 and
through February 6, 1996, the Class C shares were converted to Class A
common stock.

8. EMPLOYEE STOCK PLANS

The Consolidated 1991/1993 Equity Incentive Plan (the "1993 Plan") provides
for the grant of incentive stock options, nonstatutory stock options and
stock appreciation rights to key employees and consultants, subject to
terms and conditions determined by the Company. A total of 650,000 shares
of Class A common stock has been reserved for issuance under the 1993 Plan.

In December 1995, the Company granted an option (the "1995 Plan") with
respect to 115,000 shares not covered by the 1993 Plan.

In 1996, the stockholders approved the Consolidated 1996 Equity Incentive
Plan (the "1996 Plan") to provide for grants of incentive stock options to
employees and consultants, subject to terms and conditions determined by
the Company. Upon approval of the 1996 Plan, the 1995 Plan was consolidated
with the 1996 Plan (the "Consolidated 1996 Plan"). A total of 650,000
shares of Class A common stock, which includes the 115,000 shares of the
1995 Plan, has been reserved for issuance under the Consolidated 1996 Plan.

On December 29, 1994, the Company amended incentive stock options
previously granted with respect to an aggregate of 357,000 shares of Class
A common stock under the 1993 Plan, whereby options were repriced to market
value on that date. There was no financial statement impact as a result of
this change.

Under the 1993 Director Stock Option Plan (the "Director Plan"), directors
who are not employees of the Company are granted initial options of 10,000
shares of Class A common stock, which are exercisable over five years,
subject to continued service as a director. A total of 75,000 shares of
Class A common stock has been reserved for issuance under the Director
Plan.

-10-

<PAGE> 32

8. EMPLOYEE STOCK PLANS (CONTINUED)

The following table presents activity under the:

1993 AND
1996 CONSOLIDATED PLANS DIRECTOR PLAN
-------------------------------------------- ---------------------------------------
WEIGHTED WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE FAIR NUMBER EXERCISE FAIR
OF OPTIONS PRICE VALUE OF OPTIONS PRICE VALUE

Outstanding, January 1, 1994 590,500 $7.46 20,000 $9.25

Granted 570,000 2.90 4,000 7.25
Exercised - - - -
Terminated (520,500) 7.58 - -
------- -------

Outstanding, December 31, 1994 640,000 3.84 24,000 8.92

Granted 209,500 3.38 $1.79 20,000 4.44 $2.35
Exercised (206,000) 3.18 - -
Terminated (121,200) 7.62 (12,000) 8.92
------- -------
Outstanding, December 31, 1995 522,300 3.04 32,000 6.12

Granted 243,500 2.40 1.08 12,000 14.54 3.27
Exercised (46,300) 2.66 - -
Terminated (143,900) 3.48 (7,200) 8.92
------- -------

Outstanding, December 31, 1996 575,600 2.69 36,800 8.32
======= =======

Exerciseable, December 31, 1996 176,800 16,800
======= =======

Exerciseable, December 31, 1995 139,400 4,400
======= =======

</TABLE>

-11-

<PAGE> 33

8. EMPLOYEE STOCK PLANS (CONTINUED)

The following table sets forth information regarding options outstanding at
December 31, 1996 under the 1993 and 1996 Consolidated Plans:

Weighted
Average
Weighted Weighted Exercise
Range Of Number Average Average Price For
Exercise Currently Exercise Remaining Currently
Number Of Options Prices Exercisable Price Life (Years) Exercisable
<S> <C> <C> <C> <C> <C>
418,100 $2.00 - 3.00 143,500 $2.40 6.7 $2.29
153,500 3.25 - 4.88 31,300 3.31 9.0 3.04
4,000 8.75 2,000 8.75 6.6 8.75

</TABLE>

The following table sets forth information regarding options outstanding at
December 31, 1996 under the Director Plan:

<TABLE>
<CAPTION>
Weighted
Average
Weighted Weighted Exercise
Range Of Number Average Average Price
Exercise Currently Exercise Remaining Currently
Number Of Options Prices Exercisable Price Life (Years) Exercisable

<S> <C> <C> <C> <C> <C>
10,000 $ 3.25 2,000 $ 3.25 8.9 $ 3.25
10,000 5.63 2,000 5.63 8.4 5.63
16,800 7.25 - 20.50 12,800 12.94 6.6 14.09

</TABLE>

The fair value of options on their grant date under all stock option plans
was measured using the Black/Scholes option pricing model. Key assumptions
used to apply this pricing model are as follows:

1996 1995

Risk-free interest rate 6.01% 6.01%
Expected life of option grants 1-5 years 1-5 years
Expected volatility of underlying stock 80% 80%
Expected dividend payment rate, as a percentage of the
stock price on the date of grant - -
Expected terminations 50% 50%

The option pricing model used was designed to value readily tradeable stock
options with relatively short lives. The options granted to employees are
not tradeable with contractual lives of up to ten years and graded vesting
up to five years. However, management believes that the assumptions used to
value the options and the model applied yield a reasonable estimate of the
fair value of the grants made under the circumstances.

-12-

<PAGE> 34

8. EMPLOYEE STOCK PLANS (CONTINUED)

As described in Note 3, the Company uses the intrinsic value method to
measure compensation expense associated with grants of stock options to
employees. During 1996, the Company granted options to purchase 50,000
shares of Class A common stock under the 1996 Consolidated Plan to certain
Directors acting as non-employee consultants. The compensation expense
relating to those options, as valued using the fair value method,
aggregated $26,028 and is included in net loss for the year ended December
31, 1996. Had the Company used the fair value method for all options to
measure compensation, reported net income and earnings per share would have
been as follows:

1996 1995

Net loss:
As reported $ (2,141,844) $ (3,463,763)
Pro forma (2,275,376) (3,674,539)

Net loss per common share:
As reported (.38) (.63)
Pro forma (.40) (.67)

9. EMPLOYEE BENEFIT PLANS

Effective December 1, 1991, the Company adopted the IPL Systems, Inc.
401(k) Plan under Section 401(k) of the Internal Revenue Code. The 401(k)
plan covers substantially all employees who meet minimum service
requirements. The amount of the Company's annual contribution is
discretionary. No contributions were made by the Company for the years
ended December 31, 1996, 1995 and 1994.

10. RELATED PARTY

SALES - The Company has a distribution agreement with certain European
affiliates of Olivetti Holding N.V. ("Olivetti"), entered into while
Olivetti was the beneficial owner of the issued and outstanding Class C
common stock. Sales to these entities, all in Europe, totaled $2,401,000,
$3,630,000 and $7,763,000 in 1996, 1995 and 1994, respectively. Related
amounts outstanding, included in accounts receivable - trade, totaled
$318,000 and $1,147,000 at December 31, 1996 and 1995, respectively.

PURCHASES - The Company contracts with Olivetti N.A., Inc., a subsidiary of
Olivetti, to provide installation and warranty coverage for the majority of
the Company's U.S. product sales. Expenses incurred by the Company in
connection with this agreement totaled $1,114,000, $1,612,000 and
$1,759,000 in 1996, 1995 and 1994, respectively, of which $251,000 is
included in trade accounts payable at December 31, 1995.

11. SALES INFORMATION

MAJOR CUSTOMERS - The Company had sales to an unaffiliated major customer
of approximately $2,796,000 (16% of revenue) in 1996 and $3,675,000 (15% of
revenue) to a different unaffiliated customer in 1994.

EXPORTS - Export sales to unaffiliated customers which are principally in
Europe, on materially the same terms as to domestic customers, totaled
$2,190,000, $4,741,000 and $6,115,000 in 1996, 1995 and 1994, respectively.

-13-
<PAGE> 35
12. RESTRUCTURING EXPENSES

In November 1994, the Company approved and executed a restructuring program
(the "Plan") to focus future product development and sales efforts in the
open systems market. As a result of this change in product strategy, the
Company streamlined its operations by reducing its workforce, consolidating
and closing certain facilities and writing off idle and excess assets.
These costs are presented in the Company's 1994 consolidated statement of
operations as a restructuring charge of $1,970,587.

In September 1995, the Company revised its estimates of the costs
associated with the Plan and recorded an additional restructuring charge of
$496,880 related to the net lease obligation on certain idle facilities.

In March 1996, the Company changed its estimate of the cost of the Plan and
recognized a reduction in future net lease expenses in the amount of
$100,000, net of required additional leasehold improvements, following the
sublease of certain excess space to an unrelated party.
<TABLE>
Restructuring charges were recorded and payments were made in 1996, 1995
and 1994 as follows:
<CAPTION>
1994
-----------------------------------------
BALANCE,
DECEMBER 31,
INITIAL EXPENSE PAID 1994
<S> <C> <C> <C>
Excess space:
Occupancy costs, net $ 473,652 $ 2,269 $471,383
Write-down of leasehold improvements 850,914 -- --
Write-down of idle assets 334,876 -- --
Severance costs 311,145 223,242 87,903
---------- -------- --------

$1,970,587 $225,511 $559,286
========== ======== ========

<CAPTION>
1995
---------------------------------------
BALANCE
ADDITIONAL DECEMBER 31,
RESERVE PAID 1995

<S> <C> <C> <C>
Excess space:
Occupancy costs, net $ 496,880 $373,481 $594,782
Severance costs -- 87,903 --
---------- -------- --------

$ 496,880 $461,384 $594,782
========== ======== ========

</TABLE>

-14-

<PAGE> 36

12. RESTRUCTURING EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
1996
--------------------------------------------
BALANCE,
REDUCTION IN DECEMBER 31,
EXPENSES PAID 1996
<S> <C> <C> <C>
Excess space - occupancy costs (income), net $(100,000) $203,009 $291,773
</TABLE>

13. CONTINGENCIES

The Company is the subject of various legal proceedings which arose in the
normal course of business, the outcome of which management believes will
not be material to the Company's consolidated financial position,
operations or liquidity.

14. SUBSEQUENT EVENTS

The Company entered into a Definitive Agreement of Merger and
Reorganization dated as of February 28, 1997, with anDATAco, a
California-based, privately held company that designs, manufactures and
markets network storage solutions. Under the terms of the agreement, the
shareholders of anDATAco will receive approximately three shares for each
share of the Company deemed to be outstanding on a fully diluted basis. The
merger is subject to various conditions, including approval by the
stockholders of the Company and other regulatory and third-party approvals.

On February 24, 1997, the Company and anDATAco entered into a one-year
nonexclusive OEM Agreement, whereby anDATAco will purchase up to $1,500,000
of product from the Company in each of March and April 1997.

On March 7, 1997, the Company terminated the employment of its direct sales
force, many of whom were subsequently employed by anDATAco.

* * * * * *

-15-
<PAGE> 37
IPL SYSTEMS, INC.
SCHEDULE VIII
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1996 (DOLLARS IN THOUSAND)
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
Charged
Balance at Charged to to Other Balance
Begining Cost and Accounts at End
of Period Expenses Describe Write off Period
<S> <C> <C> <C> <C> <C>
Description
- -----------

DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:

Allowed for doubtful
accounts - sales:

Year ending December 31,1996 2,111 (1,739) (B) (19) (A) -- 353
Year ended December 31, 1995 3,668 (1,519) (B) (38) (A) -- 2,111
Year ended December 31, 1994 463 3,165 40 (A) -- 3,668

<FN>

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

(A) Charged against sales for product not returned by year end
(B) Includes partial recovery of a doubtful account receivable totaling $1,767,000 in 1995 and $1,550,000 in 1996
</TABLE>

<PAGE> 1

Exhibit 10.11

As Amended 11/96

IPL SYSTEMS, INC.
1996 CONSOLIDATED EQUITY INCENTIVE PLAN

1. Purpose.

The purpose of the IPL Systems, Inc. 1996 Equity Incentive Plan (the
"PLAN") is to attract and retain key personnel of IPL Systems, Inc. (the
"COMPANY") and its affiliates, to provide an incentive for them to achieve
long-range performance goals, and to enable them to participate in the long-term
growth of the Company by the granting of awards ("AWARDS") with respect to the
Company's Class A Common Stock, $0.01 par value (the "COMMON STOCK"). The option
granted by the Company to one of its employees in December 1995 with respect to
115,000 shares of the Common Stock (the "1995 Equity Plan") shall be
consolidated with and subject to the Plan for all purposes, and shall be amended
and restated in its entirety so as to be consistent with the terms of the Plan
and incentive stock options granted under the Plan to the extent such terms do
not adversely affect the rights and privileges of the holder of the option
granted under the 1995 Equity Plan.

2. Administration.

The Plan will be administered by a committee of not less than two members
of the Board of Directors of the Company appointed by the Board to administer
the Plan (the "COMMITTEE"); provided, however, that in any instance the Board of
Directors may take any action delegated hereunder to the Committee. Each member
of the Committee will be a "Non-Employee Director" or the equivalent within the
meaning of Rule 16b-3(b)(3)(i) under the Securities Exchange Act of 1934, as
amended from time to time (the "EXCHANGE ACT"). The Committee will select those
persons to receive Awards under the Plan ("PARTICIPANTS") and will determine the
terms and conditions of all Awards. The Committee will have authority to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the operation of the Plan as it from time to time considers advisable, and to
interpret the provisions of the Plan. The Committee's decisions will be final
and binding. To the extent permitted by applicable law, the Committee may
delegate to one or more executive officers of the Company the power to make
Awards to Participants who are not subject to Section 16 of the Exchange Act and
all determinations under the Plan with respect thereto, provided that the
Committee will fix the maximum amount of such Awards for all such Participants
and a maximum for any one Participant.

<PAGE> 2

3. Eligibility.

All employees, directors and consultants of the Company (or any business
entity in which the Company owns directly or indirectly 50% or more of the total
voting power or has a significant financial interest as determined by the
Committee) capable of contributing significantly to the successful performance
of the Company, other than an employee who has irrevocably elected not to be
eligible, are eligible to be Participants in the Plan.

4. Types of Awards.

(a) Stock Options. The Committee may grant options ("STOCK OPTIONS") to
purchase shares of Common Stock upon such terms and conditions as the Committee
determines. Stock Options may include both incentive stock options that comply
with the requirements of Section 422 of the Internal Revenue Code of 1986, as
amended from time to time (the "CODE") and nonstatutory stock options that are
not intended to comply with such requirements. No incentive stock option may be
granted under the Plan more than ten years after the effective date of the Plan.
Payment of the exercise price may be made in cash or, to the extent permitted by
the Committee at or after the grant of the Stock Option, in whole or in part by
delivery of a note or shares of Common Stock owned by the optionee or by
retaining shares otherwise issuable pursuant to the Stock Option, in each case
valued at fair market value on the date of delivery or retention, or such other
lawful consideration as the Committee may determine.

(b) Stock Appreciation Rights. The Committee may grant stock appreciation
rights ("SARS") upon such terms and conditions as the Committee determines. SARs
are rights to receive any excess in value of shares of Common Stock over the
exercise price. The Committee will determine at the time of grant or thereafter
whether SARs are to be settled in cash, Common Stock or other securities of the
Company, other Awards or other property.

5. Stock Available for Awards.

(a) Amount. Subject to adjustment under subsection (b), Awards may be made
under the Plan for up to 650,000 shares of Common Stock. If any Award expires or
is terminated unexercised or is forfeited or settled in a manner that results in
fewer shares outstanding than were awarded, the shares subject to such Award, to
the extent of such expiration, termination, forfeiture or decrease, will again
be available for award under the Plan. Common Stock issued through the
assumption or substitution of outstanding grants from an acquired company will
not reduce the shares available for Awards under the Plan. Shares issued under
the Plan may consist in whole or in part of authorized but unissued shares or
treasury shares.

(b) Adjustment. In the event that the Committee determines that any stock
dividend, extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares or other
change affects the

- 2 -

<PAGE> 3

Common Stock such that an adjustment is required in order to preserve the
benefits intended to be provided by the Plan, then the Committee (subject in the
case of incentive stock options to any limitation required under the Code) will
equitably adjust any or all of (i) the number and kind of shares for which
Awards may be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards and (iii) the exercise price with respect to any of the
foregoing. In making such adjustments, the Committee may ignore fractional
shares so that the number of shares subject to any Award will be a whole number.
If considered appropriate, the Committee may make provision for a cash payment
with respect to all or part of an outstanding Award instead of or in addition to
any such adjustment.

(c) Limit on Individual Grants. Subject to adjustment under subsection (b),
the maximum number of shares of Common Stock subject to Stock Options and SARs
that may be granted to any Participant in the aggregate will not exceed 250,000
shares.

6. General Provisions Applicable to Awards.

(a) Awards at Fair Market Value. The Committee will establish the exercise
price of an Award at the time the Award is granted. The exercise price will not
be less than 100% of the fair market value of the Common Stock on the date of
the Award, provided that (i) in the case of a nonstatutory Stock Option or an
SAR granted to a new employee of the Company within 90 days of the date of
employment, the exercise price may be less than 100% of fair market value on the
date of such Award so long as such price is not less than 100% of fair market
value at the date of employment and (ii) in the case of an SAR granted in tandem
with a Stock Option, the exercise price may be less than 100% of fair market
value on the date of such Award so long as such exercise price is not less than
the exercise price of the related Stock Option.

(b) Fair Market Value. The fair market value of the Common Stock or any
other property will be the fair market value of such property as determined by
the Committee in good faith or in the manner established by the Committee from
time to time.

(c) Limitations on Transferability. Awards will not be transferable by the
Participant other than by will or the laws of descent and distribution and are
exercisable during such person's lifetime only by such person or by such
person's guardian or legal representative; provided, however, that the Committee
may, in its discretion, waive such restriction in any case.

(d) Documentation. Each Award under the Plan will be evidenced by a writing
delivered to the Participant specifying the terms and conditions thereof and
containing such other terms and conditions not inconsistent with the provisions
of the Plan as the Committee considers necessary or advisable to achieve the
purposes of the Plan. These terms and conditions may include performance
criteria, vesting requirements, restrictions on transfer and payment rules. The
Committee may establish the terms and conditions at the time the Award is
granted or may provide that such terms and conditions will be determined at
anytime thereafter.

- 3 -

<PAGE> 4

(e) Committee Discretion. Each type of Award may be made alone, in addition
to or in relation to any other Award. SARs granted in tandem with a Stock Option
will terminate to the extent that the related Stock Option is exercised, and the
related Stock Option will terminate to the extent that the tandem SARs are
exercised. The terms of each type of Award need not be identical, and the
Committee need not treat Participants uniformly. Except as otherwise provided by
the Plan or a particular Award, any determination with respect to an Award may
be made by the Committee at the time of grant or at any time thereafter.

(f) Dividends and Cash Awards. In the discretion of the Committee, any
Award under the Plan may provide the Participant with (i) dividends or dividend
equivalents payable currently or deferred with or without interest and (ii) cash
payments in lieu of or in addition to an Award.

(g) Termination of Employment. The Committee will determine the effect on
an Award of the disability, death, retirement or other termination of employment
of a Participant and the extent to which, and the period during which, the
Participant's legal representative, guardian or beneficiary may receive payment
of an Award or exercise rights thereunder. A Participant may designate a
beneficiary in a manner determined by the Committee. In the absence of an
effective designation, a Participant's beneficiary will be the Participant's
estate.

(h) Change in Control. In order to preserve a Participant's rights under an
Award in the event of a change in control of the Company, the Committee in its
discretion may, at the time an Award is made or at any time thereafter, take one
or more of the following actions: (i) provide for the acceleration of any time
period relating to the exercise or payment of the Award, (ii) provide for
payment to the Participant of cash or other property with a fair market value
equal to the amount that would have been received upon the exercise or payment
of the Award had the Award been exercised or paid upon the change in control,
(iii) adjust the terms of the Award in a manner determined by the Committee to
reflect the change in control, (iv) cause the Award to be assumed, or new rights
substituted therefor, by another entity, or (v) make such other provision as the
Committee may consider equitable to the Participant and in the best interests of
the Company.

(i) Loans. The Committee may authorize the making of loans or cash payments
to Participants in connection with the grant or exercise of any Award under the
Plan, which loans may be secured by any security, including Common Stock,
underlying such Award (provided that the loan will not exceed the fair market
value of the security underlying such Award), and which may be forgiven upon
such terms and conditions as the Committee may establish at the time of such
loan or at any time thereafter.

(j) Withholding Taxes. The Participant will pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in

- 4 -

<PAGE> 5

part in shares of Common Stock, including shares retained from the Award
creating the tax obligation, valued at fair market value on the date of
delivery. The Company and its affiliates may, to the extent permitted by law,
deduct any such tax obligations from any payment of any kind otherwise due to
the Participant.

(k) Foreign Nationals. Awards may be made to Participants who are foreign
nationals or employed outside the United States on such terms and conditions
different from those specified in the Plan as the Committee considers necessary
or advisable to achieve the purposes of the Plan or to comply with applicable
laws.

(l) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type and changing the date of exercise or realization, provided that
the Participant's consent to such action will be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.

7. Miscellaneous.

(a) No Right To Employment. No person will have any claim or right to be
granted an Award. Neither the Plan nor any Award hereunder will be deemed to
give any employee the right to continued employment or to limit the right of the
Company to discharge any employee at any time.

(b) No Rights As Shareholder. Subject to the provisions of the applicable
Award, no Participant or beneficiary will have any rights as a shareholder with
respect to any shares of Common Stock to be distributed under the Plan until he
or she becomes the holder thereof. A Participant to whom Common Stock is awarded
will be considered the holder of such Common Stock at the time of the Award
except as otherwise provided in the applicable Award.

(d) Amendment of Plan. The Board of Directors of the Company may amend,
suspend or terminate the Plan or any portion thereof at any time, subject to any
shareholder approval that the Board determines to be necessary or advisable.

(e) Governing Law. The provisions of the Plan will be governed by and
interpreted in accordance with the laws of the Commonwealth of Massachusetts.

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

This Plan was adopted by the Board of Directors on March 21, 1996 and amended on
November 1, 1996. This Plan was adopted by the shareholders of the Company on
May 29, 1996.

- 5 -

<PAGE> 1

Exhibit 10.12

CONSULTING AGREEMENT

This Consulting Agreement (this "Agreement") is entered into effective as
of October 1, 1996 (the "Effective Date") between IPL Systems, Inc. ("IPL"), a
Massachusetts corporation with its principal executive offices at 124 Acton
Street, Maynard, Massachusetts, and Cornelius P. McMullan ("Consultant"),
residing at .

RECITALS

A. Consultant is an outside director of IPL.

B. IPL, on behalf of itself and its subsidiaries and successors, whether
now existing or hereafter acquired or established (severally and collectively,
the "Company") desires to obtain the services of Consultant in addition to
Consultant's activities as a director of IPL, and Consultant is willing to
render his services to the Company, upon the terms and conditions set forth
below.

NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Company and Consultant hereby agree as follows:

ARTICLE 1. ENGAGEMENT AND SCOPE OF WORK

1.1 ENGAGEMENT. Subject to the following terms and conditions, the Company
hereby retains Consultant to provide such consulting services as may be
requested by the Company from time to time in addition to Consultant's duties
attending meetings of shareholders, directors and committees thereof in his
capacity as a director of the Company, and Consultant accepts such engagement.
During the term of this Agreement, Consultant agrees to provide consulting
services to the Company as requested by its Chief Executive Officer, including
without limitation (i) assistance to the senior management of the Company in
formulating strategy and tactics for distribution of the Company's products,
including anaylsis of alternative distribution channels in different markets and
maximization of the competitive differentiation of the Company's products, and
(ii) assistance in identifying and contacting potential corporate distribution
partners and participation in meetings with their representatives.

1.2 MINIMUM COMMITMENT. Consultant agrees to provide at least twenty (20)
days of consulting services during the term of this Agreement, but such services
shall not exceed thirty (30) days without the mutual consent of the parties.
Services performed on an hourly basis shall be computed on the basis of eight
working hours per day; provided, however, that (i) travel time spent in a day
outside of normal working hours in connection with at least four hours of
consulting services shall not be counted as consulting services, and total
travel and working time in one day aggregating more than eight hours shall not
be counted as more than one day of consulting services.

<PAGE> 2

ARTICLE 2. PAYMENTS AND INVOICES

2.1 MONTHLY RETAINER RATE. For all services provided under this Agreement,
IPL will pay Consultant a fee at the rate of US$6,666 per month. Consultant
acknowledges and agrees that the foregoing schedule of fees shall be full
compensation for Consultant's services during the term of this Agreement. Fees
will be paid monthly in arrears.

2.2 STOCK OPTIONS. The Company will grant Consultant a nonstatutory stock
option (the "Option") to purchase Twenty-Five Thousand (25,000) shares of the
Company's Class A Common Stock pursuant to the Company's Consolidated 1996
Equity Incentive Plan at a price equal to the closing price of the Company's
Class A Common Stock on the last trading day before the date of grant. So long
as Consultant is providing services to the Company under this Agreement, the
Option shall become exercisable over the three-month term of this Agreement at
the rate of 8,333 shares per month commencing with the conclusion of the first
monthly period after the Effective Date or per each ten days of consulting
services, whichever occurs first; provided, however, that on the last day of the
third such month after the Effective Date or after thirty (30) days of service,
whichever occurs first, the Option shall become exercisable as to 8,334 shares.
The portion of the Option that is exercisable as of the termination of this
Agreement shall remain exercisable until ninety (90) days after the later of (i)
the date Consultant is no longer providing services under this Agreement or (ii)
Consultant ceases to be a director of the Company. Consultant's options shall
otherwise be subject to the terms of the Company's standard form of Nonstatutory
Stock Option Certificate, and his acceptance thereof shall evidence his
acceptance of the terms and conditions of the Option set forth therein.

2.3 EXPENSES. Travel and related expenses incurred by Consultant in
connection with the performance of services under this Agreement will be
reimbursed at actual costs by the Company in accordance with general policies
and procedures established by the Company from time to time. No reimbursement
will be made for any expenses other than travel and related expenses incurred by
Consultant during the performance of services under this Agreement unless such
expenses are approved in advance by the Company. All approvals by the Company
must be given or confirmed in writing; expense approvals can be requested from
the Chairman of the Board, the President, the Chief Financial Officer or the
Vice President of Finance of the Company.

ARTICLE 3. CONFIDENTIALITY AND INVENTIONS

3.1 CONFIDENTIALITY AND INVENTIONS. Consultant has executed, or in
connection with this Agreement is executing, a Consultant Confidentiality and
Inventions Agreement (the "Confidentiality Agreement") with the Company, and he
agrees to be bound by the terms of the Confidentiality Agreement.

- 2 -

<PAGE> 3

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CONSULTANT

4.1 ABSENCE OF RESTRICTIONS. Consultant represents and warrants to the
Company that he is presently under no contractual or other restrictions or
obligation which is inconsistent with Consultant's execution of this Agreement
or the Confidentiality Agreement or the performance of the Services, and agrees
that during the Term, Consultant will not enter into any agreement, either
written or oral, in conflict with this Agreement or the Confidentiality
Agreement.

ARTICLE 5. TERM AND TERMINATION

5.1 TERM. This Agreement shall have an initial term of three calendar (3)
months from the Effective Date and may be extended by mutual agreement for
additional three-month periods; provided, however, that the parties contemplate
that Consultant's compensation during any such extension will be solely a
continuation of cash compensation and reimbursement payable pursuant to Sections
2.1 and 2.3, respectively, and that no further equity compensation shall be
granted for services provided hereunder.

5.2 TERMINATION. This Agreement may be terminated by the Company
immediately upon written notice to Consultant and by Consultant upon thirty (30)
days prior written notice to the Company. The Confidentiality Agreement and the
provisions of Article 7 shall survive any termination of this Agreement.

ARTICLE 6. MISCELLANEOUS

6.1 INDEPENDENT CONTRACTOR. Consultant is an independent contractor under
this Agreement. He is not any employee or agent of the Company and as a result
will not be entitled to participate in, or receive any benefit or right as an
employee under any employee benefit or welfare plan of the Company nor have
authority to represent or bind the Company in any manner in dealings with third
parties. Consultant shall have sole responsibility for payment of all federal,
state and local taxes or contributions imposed or required under unemployment
insurance, social security and income tax laws and for filing all required tax
forms with respect to any amounts paid by the Company to Consultant hereunder.
Consultant shall indemnify and hold the Company harmless against any claim or
liability (including penalties) resulting from failure of Consultant to pay such
taxes or contributions or file any such tax forms.

6.2 NOTICES. All notices, requests, demands and other communications to be
given pursuant to this Agreement shall be in writing and shall be deemed to have
been duly given to a party if delivered by hand or mailed by registered or
certified mail, return receipt requested, postage prepaid, to such party at its
address set forth in the first paragraph or at such other address as such party
shall have designated by notice in writing to the other party.

- 3 -

<PAGE> 4

6.3 SEVERABILITY. If any one or more of the provisions of this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, it shall not affect any other term or provision of this Agreement. If
any provision in this Agreement shall be held to be excessively broad, it shall
be construed by limiting it so as to be enforceable to the extent compatible
with applicable law.

6.4 CAPTIONS. Captions of sections have been added only for convenience and
shall not be deemed to be a part of this Agreement.

6.5 BINDING EFFECT. Consultant's obligations under this Agreement shall be
binding upon his heirs, executors and administrators and shall inure to the
benefit of the Company's successors and assigns.

6.6 COMPLETE AGREEMENT; AMENDMENTS. This Agreement, together with the
Confidentiality Agreement, constitutes the entire agreement between the parties
with respect to the subject matter hereof and may not be modified or amended
except in a writing signed by both parties.

6.7 RIGHTS OF PUBLICITY. The Company shall have the right to use
Consultant's name and likeness in any publicity materials prepared by it and in
presentations to current or prospective clients, investors and others.
Consultant shall not have the right to use the Company's name in any
publications or publicity materials prepared by him without obtaining the prior
written consent of the Company.

6.8 APPLICABLE LAW. This Agreement shall be considered to have been made in
the United States, and shall be interpreted in accordance with the laws of the
Commonwealth of Massachusetts, United States of America, and the parties hereby
submit to the jurisdiction of the courts of that state.

6.9 NONWAIVER PROVISION. The waiver by either party hereto of any right
hereunder or of the failure to perform or of a breach by the other party shall
not be deemed a waiver of any other right hereunder or of any other breach or
failure by said other party whether of a similar nature or otherwise.

6.10 ASSIGNMENT. Neither this Agreement nor any rights hereunder shall be
assignable by either party hereto without the prior written consent of the other
party.

6.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument.

- 4 -

<PAGE> 5

IN WITNESS WHEREOF, the Company and the Consultant have duly executed and
delivered this Agreement as of the date first written above.

IPL SYSTEMS, INC. CONSULTANT

By: /S/ Ronald J. Gellert /S/ Cornelius P. McMullan
------------------------- --------------------------
[signature]
Title: President and Chief Executive Officer

- 5 -

<PAGE> 1
Exhibit 10.13

CONSULTING AGREEMENT

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

RECITALS

A. Consultant is an outside director of IPL.

NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Company and Consultant hereby agree as follows:

ARTICLE 1. ENGAGEMENT AND SCOPE OF WORK

1.1 ENGAGEMENT. Subject to the following terms and conditions, the Company
hereby retains Consultant to provide such consulting services as may be
requested by the Company from time to time in addition to Consultant's duties
attending meetings of shareholders, directors and committees thereof in his
capacity as a director of the Company, and Consultant accepts such engagement.
During the term of this Agreement, Consultant agrees to provide consulting
services to the Company as requested by its Chief Executive Officer, including
without limitation (i) assistance to the senior management of the Company in
formulating the Company's strategy and tactics for obtaining strategic partners
and financing alternatives for any such strategic initiatives, and (ii)
assistance in identifying and contacting potential strategic partners and
sources of financing and participation in meetings with their representatives.

<PAGE> 2

ARTICLE 2. PAYMENTS AND INVOICES

2.1 MONTHLY RETAINER RATE. For all services provided under this Agreement,
IPL will pay Consultant a fee at the rate of US$6,333 per month. Consultant
acknowledges and agrees that the foregoing schedule of fees shall be full
compensation for Consultant's services during the term of this Agreement. Fees
will be paid monthly in arrears.

2.2 STOCK OPTIONS. The Company will grant Consultant a nonstatutory stock
option (the "Option") to purchase Twenty-Five Thousand (25,000) shares of the
Company's Class A Common Stock pursuant to the Company's Consolidated 1995/1996
Equity Incentive Plan at a price equal to the closing price of the Company's
Class A Common Stock on the last trading day before the date of grant. So long
as Consultant is providing services to the Company under this Agreement, the
Option shall become exercisable over the three-month term of this Agreement at
the rate of 8,333 shares per month commencing with the conclusion of the first
monthly period after the Effective Date or per each ten days of consulting
services, whichever occurs first; provided, however, that on the last day of the
third such month after the Effective Date or after thirty (30) days of service,
whichever occurs first, the Option shall become exercisable as to 8,334 shares.
The portion of the Option that is exercisable as of the termination of this
Agreement shall remain exercisable until ninety (90) days after the later of (i)
the date Consultant is no longer providing services under this Agreement or (ii)
Consultant ceases to be a director of the Company. Consultant's options shall
otherwise be subject to the terms of the Company's standard form of Nonstatutory
Stock Option Certificate, and his acceptance thereof shall evidence his
acceptance of the terms and conditions of the Option set forth therein.

ARTICLE 3. CONFIDENTIALITY AND INVENTIONS

- 2 -

<PAGE> 3

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CONSULTANT

ARTICLE 5. TERM AND TERMINATION

ARTICLE 6. MISCELLANEOUS

- 3 -

<PAGE> 4

6.4 CAPTIONS. Captions of sections have been added only for convenience and
shall not be deemed to be a part of this Agreement.

6.5 BINDING EFFECT. Consultant's obligations under this Agreement shall be
binding upon his heirs, executors and administrators and shall inure to the
benefit of the Company's successors and assigns.

6.10 ASSIGNMENT. Neither this Agreement nor any rights hereunder shall be
assignable by either party hereto without the prior written consent of the other
party.

6.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument.

- 4 -

<PAGE> 5

IN WITNESS WHEREOF, the Company and the Consultant have duly executed
and delivered this Agreement as of the date first written above.

IPL SYSTEMS, INC. CONSULTANT

By: /S/ Ronald J. Gellert /S/ Harris Ravine
------------------------ --------------------
[signature]
Title: President and Chief Executive Officer

- 5 -

<PAGE> 1

Exhibit 10.14

January 1, 1997

The Board of Directors
IPL Systems, Inc.
124 Acton Street
Maynard, MA 01754

Gentlemen:

This letter confirms our understanding that IPL Systems, Inc. (the
"Company" or "you") has engaged BI Capital ("BI Capital" or "we") to act as its
financial advisor with respect to exploring the Company's strategic alternatives
with ANDATACO, a California corporation.

As part of our engagement, Harris Ravine will, if requested:

a. assist the Company in negotiating with ANDATACO a transaction to
merge the two companies;

b. review with management and other members of the Board the Company's
financial plans and analyze its strategic plans and business alternatives;
and

c. assist the Company in evaluating the proposed transaction with
ANDATACO.

In connection with BI Capital's engagement, the Company will furnish BI
Capital with all information concerning the Company which BI Capital reasonably
deems appropriate and will provide BI Capital with access to the Company's
officers, directors, employees, accountants, counsel and other representatives
(collectively, the "Representatives"). All non-public information concerning the
Company which is given to BI Capital will be used solely in the course of the
performance of our services hereunder and will be treated confidentially by us
for so long as it remains non-public. Except as otherwise required by law, BI
Capital will not disclose this information to a third party without the
Company's consent.

As compensation for our services hereunder, the Company agrees to pay BI
Capital as follows:

1. A financial advisory fee of $25,000 per month payable on the last day
of each month until termination of this agreement, and, with respect
to the final month of this agreement, prorated for the portion of such
month up to the date of termination.

<PAGE> 2

The Board of Directors
IPL Systems, Inc.
January 1, 1997
Page 2

2. If, during the term of this agreement or six months after the
termination by the Company of our engagement, a controlling interest
in the Company or substantially all of its assets are acquired by any
third party, a transaction fee of $50,000 shall be payable upon the
closing of such transaction.

In connection with this engagement, BI Capital is acting as an independent
contractor with duties owing solely to the Company. This agreement shall be
governed by and construed in accordance with the laws of The Commonwealth of
Massachusetts, without regard to conflicts of law principles thereof.

This engagement shall terminate on the date of any definitive agreement
between the Company and ANDATACO and may be terminated, with or without cause,
at any time by either party upon seven business days notice to the other party.
Our obligations with respect to non-public information, however, will survive
termination of this agreement.

We are delighted to accept this engagement and look forward to working with
you on this assignment. Please confirm that the foregoing is in accordance with
your understanding by signing and returning to us the enclosed duplicate of this
letter.

Very truly yours,

BI CAPITAL

By: /S/ Harris Ravine
------------------------
Name: Harris Ravine
Title: Managing Director

Accepted and agreed to as of the date
first written above:

IPL SYSTEMS, INC.

By: /S/ Ronald J. Gellert
--------------------------
Name: Ronald J. Gellert
Title: President and Chief Executive Officer

<PAGE> 1
Exhibit 10.15

CONSULTING AGREEMENT

This Consulting Agreement (this "Agreement") is entered into effective as
of March 1, 1997 (the "Effective Date") between IPL Systems, Inc. ("IPL"), a
Massachusetts corporation with its principal executive offices at 124 Acton
Street, Maynard, Massachusetts, and Harris Ravine ("Consultant"), residing at

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

RECITALS

A. Consultant is an outside director of IPL.

NOW, THEREFORE, in consideration of the mutual promises contained herein,
the Company and Consultant hereby agree as follows:

ARTICLE 1. ENGAGEMENT AND SCOPE OF WORK

1.1 ENGAGEMENT. Subject to the following terms and conditions, the Company
hereby retains Consultant to provide such consulting services as may be
requested by the Company from time to time in addition to Consultant's duties
attending meetings of shareholders, directors and committees thereof in his
capacity as a director of the Company, and Consultant accepts such engagement.
During the term of this Agreement, Consultant agrees to provide consulting
services to the Company as requested by its Chief Executive Officer, including
without limitation assistance to the senior management of the Company in
effecting the closing of the Agreement and Plan of Merger and Reorganization,
dated as of February 28, 1997 (the "Merger Agreement"), among IPL, IPL
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of IPL
(the "Merger Subsidiary"), ANDATACO, a California corporation ("ANDATACO"), and
W. David Sykes.

1.2 MINIMUM COMMITMENT. Consultant agrees to provide at least twenty (20)
days of consulting services per month during the term of this Agreement.
Services performed on an hourly basis shall be computed on the basis of eight
working hours per day; provided, however, that (i) travel time spent in a day
outside of normal working hours in connection with at least four hours of
consulting services shall not be counted as consulting services, and (ii) total
travel and working time in one day aggregating more than eight hours shall not
be counted as more than one day of consulting services.

<PAGE> 2

ARTICLE 2. PAYMENTS AND INVOICES

2.1 MONTHLY RETAINER RATE. For all services provided under this Agreement,
Consultant will receive a fee at the rate of US$25,000 per month in the
aggregate; provided, however, that IPL's obligation to pay Consultant will be
limited to US$6,250 per month unless (and only to the extent that) the remaining
US$18,750 per month to be payable by IPL is reimbursed to IPL by ANDATACO
pursuant to its agreement to pay IPL an amount equal to seventy-five percent
(75%) of any compensation payable by IPL to Consultant pursuant to Section 5.9
of the Merger Agreement. Consultant acknowledges and agrees that the foregoing
schedule of fees shall be full compensation for Consultant's services during the
term of this Agreement. Fees will be paid monthly in arrears.

2.2 EXPENSES. Travel and related expenses incurred by Consultant in
connection with the performance of services under this Agreement will be
reimbursed at actual costs by the Company in accordance with general policies
and procedures established by the Company from time to time. No reimbursement
will be made for any expenses other than travel and related expenses incurred by
Consultant during the performance of services under this Agreement unless such
expenses are approved in advance by the Company. All approvals by the Company
must be given or confirmed in writing; expense approvals can be requested from
the Chairman of the Board, the President, the Chief Financial Officer or the
Vice President of Finance of the Company.

ARTICLE 3. CONFIDENTIALITY AND INVENTIONS

3.1 CONFIDENTIALITY AND INVENTIONS. Consultant has previously executed a
Consultant Confidentiality and Inventions Agreement (the "Confidentiality
Agreement") with the Company, and he agrees to continue to be bound by the terms
of the Confidentiality Agreement.

ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CONSULTANT

ARTICLE 5. TERM AND TERMINATION

5.1 TERM. This Agreement shall have a term from the Effective Date to the
Closing Date (as defined in the Merger Agreement).

- 2 -

<PAGE> 3

5.2 TERMINATION. This Agreement shall terminate (i) upon the filing of the
documents necessary to effect the merger of the Merger Subsidiary with and into
ANDATACO with the Secretaries of State of the State of California and the State
of Delaware or (ii) upon termination of the Merger Agreement pursuant to its
terms. The Confidentiality Agreement and the provisions of Article 7 shall
survive any termination of this Agreement.

ARTICLE 6. MISCELLANEOUS

6.4 CAPTIONS. Captions of sections have been added only for convenience and
shall not be deemed to be a part of this Agreement.

6.5 BINDING EFFECT. Consultant's obligations under this Agreement shall be
binding upon his heirs, executors and administrators and shall inure to the
benefit of the Company's successors and assigns.

6.6 COMPLETE AGREEMENT; AMENDMENTS. This Agreement, together with the
Confidentiality Agreement, constitutes the entire agreement between the parties
with respect

- 3 -

<PAGE> 4

to the subject matter hereof and may not be modified or amended except in a
writing signed by both parties.

6.10 ASSIGNMENT. Neither this Agreement nor any rights hereunder shall be
assignable by either party hereto without the prior written consent of the other
party.

6.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be deemed to be one and the same instrument.

IN WITNESS WHEREOF, the Company and the Consultant have duly executed and
delivered this Agreement as of the date first written above.

IPL SYSTEMS, INC. CONSULTANT

By:
---------------------------- -----------------------------
[signature]
Title:
-------------------------

- 4 -

<PAGE> 1
Exhibit 10.16

MASTER OEM AGREEMENT
--------------------

This master OEM Agreement is made the 25 day of February, 1997 (the
"Effective Date"), between IPL Systems, Inc. (hereinafter referred to as "IPL"),
a Massachusetts corporation with its principal place of business as 124 Acton
Street, Maynard, MA 01754 and Andataco, a qualified OEM (defined below), having
its principal place of business at 10140 Mesa Rim Road, San Diego, California
92121 (hereinafter referred to as "Andataco.")

I. IPL and Andataco desire to enter into an Agreement for the purchase,
resale, and service of IPL Products and Spares (defined below); and,

II. Andataco agrees to act as an OEM "Reseller" for such Products and
Spares and agrees to sell such Products and Spares pursuant to the terms and
conditions contained herein.

NOW, THEREFORE, the parties agree as follows:

Section 1. Definitions.
-----------

For the purpose of this Agreement, the following definitions shall apply;

1.1 "AGREEMENT" shall mean the terms and conditions specified herein, the
Exhibits attached hereto, and all other documents incorporated by reference in
this Agreement.

1.2 "AREA" shall mean the geographical locations where Andataco has
authority to market the Products which shall mean the entire world with the
exception of Europe. For this purpose "Europe" shall mean the countries of the
European Union and of the European Free Trade Association.

1.3 "DATE OF SHIPMENT" shall mean the date the Products are delivered to a
common carrier at IPL facilities.

1.4 "DROP SHIPMENT" shall mean the shipment by IPL of Products directly to
the End User, at the request of Andataco.

1.5 "EFFECTIVE DATE" shall mean the date first written above.

1.6 "END USER" shall mean the ultimate consumer of the Products.

1.7 "PRODUCTS" shall mean the IPL computer hardware and software products
described in Exhibit A attached hereto. IPL may, upon written notice to
Andataco, add or delete Products on Exhibit A from time to time during the term
of this Agreement.

<PAGE> 2

1.8. "PROPRIETARY INFORMATION" shall mean data, documentation or other
information provided by either party to the other which is proprietary and
confidential to IPL.

1.9. "PURCHASE ORDER" shall mean an order for Products placed by Andataco
pursuant to the terms and conditions of this Agreement.

1.10. "SPARES" shall mean spare parts for the Products, as listed on
Exhibit A.

1.11. "OEM" shall mean a designated Storage Authorized Reseller who has
executed a valid OEM Agreement.

1.12. "TERM" shall have the meaning set forth in Section 12.

Section 2. Designation as IPL "OEM".
------------------------

2.1. IPL hereby appoints Andataco as an authorized non-exclusive OEM of
IPL Products and Spares in the Area. Andataco agrees that IPL may in its sole
discretion (i) designate additional OEMS or resellers of the Products in the
Area and (ii) market IPL Products through its own direct sales force in the
Area.

Section 3. Product Pricing And Discount.
----------------------------

3.1. The IPL Products and Spares available for purchase are specified in
the IPL Product List as set forth in Exhibit A attached hereto. The suggested
End User list prices for IPL Products and Spares in effect as of the Effective
Date of this Agreement are set forth in Exhibit A attached hereto and may be
amended by IPL from time to time upon thirty (30) days written notice to
Andataco.

3.2. Andataco shall be entitled to purchase Products and Spares at the
discounts from IPL's standard End User list price based upon achieving the
relevant Revenue Commitment levels, as set forth in Exhibit B attached hereto.
IPL reserves the right to modify its discounts contained in Exhibit B attached
hereto, from time to time upon thirty (30) days written notice to Andataco.

Section 4. Shipment.
--------

4.1. Andataco shall be solely responsible for any and all costs of
shipment and storage of the Products from IPL's production facilities in the
United States. Shipments shall be made to Andataco's principal office unless
otherwise specified. Unless otherwise agreed, IPL shall select the mode of
shipment and the carrier.

4.2. In addition, Andataco may request that IPL make Drop Shipments of
large orders directly to the End User. This shall be considered on a case by
case basis and shall be at the sole discretion of IPL.

-2-

<PAGE> 3

4.3. In the event that Drop Shipment has been requested, Andataco shall
provide a valid Sales Tax Exemption Certificate for each state where Andataco
has requested that IPL ship its Products to. In the event that such Certificate
is not provided, Andataco shall either (i) accept IPL shipment terms and
conditions and be liable for applicable taxes for each shipment or (ii) hold the
order for pick up arranged by Andataco independently from IPL.

Section 5. Title.
-----

5.1. Title to the Products and risk of loss shall pass to Andataco upon
delivery to a carrier, including responsibility for all transportation charges,
taxes, losses and other costs incurred after delivery to the carrier by IPL.
Andataco shall also indemnify and hold harmless, IPL from all risk of loss or
damages occurring to the Products after delivery to a carrier. Andataco hereby
undertakes to purchase insurance sufficient to comply with the foregoing.

Section 6. Payment Terms.
-------------

6.1. Andataco shall receive a one and one-half percent (1.5%) discount
from the purchase price for Products and Spares if it makes payment in full
at the placement of the order with IPL; otherwise, payment in full shall be
made by Andataco within Thirty (30) days after invoice by IPL.

6.2. Andataco's initial credit limit shall be established by IPL. To
assist IPL in establishing and updating the credit limit of Andataco, such OEM
shall submit audited financial statements, including statements of operation and
balance sheets, as soon as they are available following the completion of each
fiscal year of Andataco. In the event the credit limit is exceeded at any time,
or in the event IPL otherwise becomes insecure as to payment for Products
shipped to Andataco, IPL may in its sole discretion refuse shipments to Andataco
or modify such credit limit. IPL shall be under no obligation to store the
Products for Andataco beyond the scheduled shipment date, if Andataco has
exceeded its credit limit. All Products affected may, at IPL's option, be
shipped to another party or treated as canceled, subject to certain cancellation
charges specified in Section 16 herein.

6.3. Late payments past due thirty (30) days or more may at IPL's
discretion bear interest on the unpaid balance at one and one-half percent
(1.5%) per month or the maximum rate allowed by law. Failure to make payments
when due may, at IPL's discretion, result in delay of other shipments, and the
placement of such OEM on credit hold until all past due balances are paid in
full. IPL may also suspend all further IPL obligations to Andataco due to
non-payment.

6.4. In the event of late payment, IPL reserves the right to adjust
payment terms to require prepayment or other payment arrangements satisfactory
to IPL in all subsequent deliveries of Products.

-3-

<PAGE> 4

Section 7. Purchase Orders.
---------------

7.1. Andataco shall submit Purchase Orders in writing for the Products to
IPL thirty (30) days prior to the required shipment date for such orders. All
Purchase Orders must reference this Agreement, specify the requested shipment
date, Product type, features if applicable, unit price, total price, warranty
type, initial shipment destination, and quantities of Products. In the event of
any conflict, the terms and conditions of this Agreement shall prevail over the
terms and conditions of any Purchase Order.

7.2. IPL shall accept or reject such Purchase Order within ten (10)
business days after receipt of such Purchase Order. If IPL determines that it
will be unable to meet the requested shipping dates, IPL shall, within such
(10) day period, notify Andataco thereof and the parties shall thereafter agree
upon a schedule for shipment. IPL shall in any event use reasonable efforts to
meet the requested shipping dates in such Purchase Orders, but shall not be
liable for damages for failing to do so.

7.3. Andataco shall have the right to cancel any Purchase Orders
submitted to IPL, or change the order, any time prior to fifteen (15) days
before the requested shipping date without penalty. If any Purchase Order is
canceled by Andataco within fifteen (15) days of the requested date of shipment,
Andataco shall be subject to the charges contained in Section 16 herein.

7.4. Andataco shall use IPL's latest lead times when estimating delivery
dates to meet its End User requirements and for requesting delivery dates for
the Products on its Purchase Orders.

Section 8. Obligations of Andataco.
-----------------------

8.1. Andataco shall use its best efforts to promote the sale and/or lease
of the Products throughout the Area, including but not limited to advertising of
the Products in appropriate media, informing of End Users and potential End
Users regarding the Products, and counseling of End Users on the selection of
the proper Products.

8.2. Andataco shall keep an appropriate inventory of Products and Spares
on hand in sufficient quantity to adequately sell and service End Users in the
Area served by Andataco.

8.3. Andataco shall not advertise outside the Area, not shall it solicit
any sales from End Users outside the Area, not shall it sell or ship any
Products to End Users outside the area.

8.4. Andataco shall list the Products in its catalogs and advertise and
promote the Products, in accordance with the provisions of Section 16.1 herein,
and send copies of its catalogs and all advertising and sales promotion
literature relating to the Products to IPL.

8.5. Andataco shall develop appropriate sales and marketing plans for the
Products, and will provide copies thereof to IPL. IPL may review and evaluate
such plans for compliance with IPL's worldwide policies and procedures for the
marketing of the Products, and shall have

-4-

<PAGE> 5

the right to acquire Andataco to modify the said plans if they unreasonably
interfere with IPL's ability to market the Products.

8.6. Andataco shall maintain a staff of sufficiently trained and qualified
personnel to adequately develop and support the Area served by Andataco.

8.7. Each month, Andataco shall provide IPL a written report (a
"Forecast") of its expected Product requirements for each of the succeeding
three calendar month periods, including the month of the issuance of such
Forecast. Each Forecast, the form of which is set out in EXHIBIT C, shall be for
planning purposes only and shall not constitute an agreement by IPL to
manufacture, nor for OEM to purchase, such quantities. IPL's obligations of
availability and lead times as set forth in this agreement are dependent upon
the timely provision of this Forecast. Failure to timely provide this Forecast
releases IPL from any obligation of the availability and lead time provisions.

Section 9. Obligations of IPL.
------------------

9.1. IPL shall sell the Products and Spares to Andataco at the prices set
forth in Exhibit A, as such Exhibit A may be modified from time to time
hereunder, in quantities and lead times reflecting their current availability,
and subject to certain discounts for which Andataco may be eligible under
Exhibit B attached hereto.

9.2. IPL shall assist Andataco in the sale and service of Products by
providing (i) manuals, Product literature, and other written materials, (ii)
advertising and other sales promotional support, (iii) sales and service
training of OEM's personnel, as IPL in its sole judgment deems necessary to
effectuate the purposes of this Agreement. IPL may charge its then current
prices for items listed in (i), (ii), (iii) above.

9.3. IPL shall keep OEM regularly informed of any changes to its published
specifications and design of the Products.

Section 10. Term.
----

10.1. The term of the Agreement shall commence on the Effective Date first
above written and shall continue for a period of one (1) year thereafter unless
extended or prematurely terminated in accordance with the provisions of this
Agreement.

Section 11. Limited Warranty.
----------------

11.1. IPL warrants to OEM that the Products purchased from IPL shall be
free from defects in materials and workmanship, when given normal, proper and
intended usage, for the IPL warranty period specified in Exhibit A attached
hereto (the "Warranty Period"), and that during the Warranty Period such
Products shall conform to their published product specifications. IPL agrees to
repair or replace, at IPL's option, any part of a Product purchased

-5-

<PAGE> 6

hereunder which proves to be defective in design, material or workmanship in the
course of normal intended use during the Warranty Period. This warranty shall
not apply to used or refurbished Products.

11.2. The above warranty shall not apply to expendable components, such as
but not limited to, fuses and bulbs, not shall IPL have any obligation under
this Agreement to make repairs or replacements which are required by normal wear
and tear, or result in whole or in part from catastrophe, fault or negligence of
Andataco, or from improper or unauthorized use of the Product or use of the
Product in a manner for which it was not designed, or by causes external to the
Product, such as but not limited, to power failure or air conditioning failure.

11.3. This limited warranty shall not apply to any Products sold or
transferred outside the United States (unless otherwise agreed in writing by
IPL), or to Products sold by parties other than Andataco.

11.4. IPL does not warrant that the Products will perform in combination
with devices or products not purchased from IPL, including but not limited to
products designed and manufactured by Andataco nor will IPL be responsible for
defects resulting from improper maintenance, modification or misuse.

11.5. In the event that Andataco believes that any Products are defective
under 11.1 above, the Products shall at IPL's option, either (i) be returned by
Andataco, transportation and insurance prepaid to IPL's designated facility for
examination and testing or (ii) be repaired by IPL and an End User site, or an
Andataco facility. IPL shall either repair or replace any such Product found to
be defective and promptly return the same to Andataco or End-User,
transportation and insurance prepaid, retaining the replaced part or Product. In
the event that the IPL examination and testing does not verify any such defect,
then IPL shall so advise Andataco and dispose of the Product in accordance with
Andataco's instructions and at Andataco's cost, and Andataco shall reimburse IPL
for testing expenses incurred at IPL's then current rates. IPL shall not be
deemed to have any obligation with respect to data contained in any Product
placed in its possession for warranty repair purposes.

11.6. In the event that IPL's optional ServiceONE program is chosen by
Andataco as an to provide installation and/or warranty service to End Users of
any Products, Andataco agrees to advise IPL in writing of the date Andataco
ships the Product and the warranty option chosen, within ten (10) days from the
date of shipment to OEM's End User by mailing to IPL the completed Warranty
Account Registration Form ("WAR Form") in the form attached as Exhibit D. Any
failure to so notify IPL may delay warranty service to the End User and shall
entitle IPL to treat such failure as a breach of Andataco's obligations under
this Agreement. Repaired products may consist in part of used parts which are
warranted equivalent to new when used in the Products. Such warranty coverage
shall be designated as local or remote depending on the location and type of
Product and shall specify if the warranty is "Mail-Back Exchange" or "Depot".
The End User requesting warranty or installation service must produce proof of
an executed WAR Form, in order to be serviced by an IPL Customer Support
Representative. An executed WAR Form shall be required for warranty coverage to
End Users on Products sold to Andataco. Andataco shall maintain copies of all
WAR Forms for five (5) years from the date of execution.

-6-

<PAGE> 7
11.7. THE FOREGOING WARRANTIES ARE IN LIEU OF ANY AND ALL REPRESENTATIONS
AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IPL SHALL NOT BE LIABLE FOR
ANY SPECIAL, CONSEQUENTIAL OR INCIDENTAL DAMAGES, INCLUDING BUT NOT LIMITED TO
LOST DATA OR LOST PROFITS, RESULTING FROM THE USE OF THE IPL PRODUCTS, OR CAUSED
BY ANY DEFECT, FAILURE OR MALFUNCTION, WHETHER SUCH CLAIM OR SUCH DAMAGE IS
BASED UPON WARRANTY, CONTRACT, NEGLIGENCE OR OTHERWISE. UNDER NO CIRCUMSTANCES
SHALL IPL BE LIABLE FOR AN AMOUNT GREATER THAN THE PURCHASE PRICE OF THE PRODUCT
WITH RESPECT TO WHICH SUCH CLAIM IS MADE.

Section 12. Limitation of Liability.
-----------------------

12.1. Except as expressly provided to the contrary in this Agreement, IPL
shall not be liable for any loss or damage claimed to have resulted from the use
of the Products or to be related in any way to their acquisition in the
transaction to which this Agreement relates, regardless of the form of actions,
and Andataco shall hold IPL harmless from any such claims and shall indemnify it
for any expenses or cost incurred if any such claims are made.

12.2. Neither IPL nor Andataco shall be liable to the other for damages of
any kind, including incidental or consequential damages, on account of the
termination or expiration of this Agreement in accordance with its terms.
Neither IPL nor Andataco shall be liable to the other on account of termination
or expiration of this Agreement for reimbursement or damages for the loss of
good will, prospective profits, or anticipated sales, or on account of any
expenditures, investment, leased or commitments made by either IPL or Andataco
or for any reason whatsoever based upon or growing out of such termination or
expiration.

Section 13. Indemnification.
---------------

13.1. IPL shall defend any claim, suit or proceeding brought against
Andataco so far as it is based on a claim that the use or transfer by Andataco
or the use by its End Users of any Product delivered hereunder constitutes an
infringement of any patent or copyright in the United States of America, if
notified within ten (10) days after its commencement and given full authority,
information and assistance for the defense of same and IPL shall pay all damages
and costs awarded therein against Andataco but shall not be liable for any
compromise made without its consent, provided that IPL may, at any time it is
concerned over the possible outcome of such an infringement action, at its
option and expense, procure for Andataco the right to continue using and
transferring the Products, replace or modify the Products so that the
infringement will not exist, or remove the Product involved and refund to
Andataco the price thereof as depreciated or amortized by an equal annual
amount over the lifetime of the Product as established by IPL.

-7-
<PAGE> 8

13.2. IPL shall have no liability to Andataco with respect to any claim of
patent infringement based on the combination of any Product with equipment or
devices not supplied by IPL hereunder.

13.3. IPL shall not be liable to Andataco under any provision of this
Section 13 if any patent infringement or claim thereof is based upon the use of
the Products in connection with equipment or devices not delivered by IPL, or
used in a manner for which the Products were not designed. Andataco shall
indemnify IPL for, and hold it harmless for any loss, cost, or expense suffered
or incurred in connection with any claim, suit, or proceeding brought against
IPL so far as it is based on a claim that the manufacture or sale of any
Products delivered hereunder and modified or altered, combined with any
equipment or device not supplied by IPL hereunder constitutes such an
infringement because of such modifications, alterations or combination.

Section 14. Trademarks.
----------

14.1. Andataco shall not alter any of the IPL trademarks or symbols
affixed to the Products or their packaging, nor may Andataco add any other
trademark or symbol thereto. During the term of this Agreement, Andataco shall
have a non-exclusive license to use IPL trademarks and symbols in connection
with its marketing of IPL Products. Andataco shall follow IPL instructions with
respect to the use of such trademarks and symbols and agrees to discontinue
their use immediately upon termination of this Agreement.

Section 15. Proprietary Information.
-----------------------

15.1. No Proprietary Information disclosed by either party to the other in
connection with this Agreement shall be disclosed to any person or entity other
than the recipient party's employees directly involved with the recipient
party's use of such information who are bound by written agreement to protect
the confidentiality of such information, and such information shall otherwise be
protected by the recipient party from disclosure to others with the same degree
of care accorded to its own similar proprietary information. Information will
not be subject to this provision if it is or becomes a matter of public
knowledge without the fault of the recipient party, if it was a matter of
written record in the recipient party's files prior to disclosure to it by the
other party, or if it was or is received by the recipient party from a third
person having no obligation of confidentiality to the providing party under
circumstances permitting its unrestricted disclosure by the recipient party.
Upon termination or expiration of this Agreement, each party shall promptly
deliver to the other all Proprietary Information of the other party in the
possession or control of such party and all copies thereof. The obligations
under this Section shall continue for both parties for a period of ten (10)
years after delivery by IPL to Andataco of the last Products under this
Agreement.

-8-

<PAGE> 9

Section 16. Cancellation and Rescheduling of Products.
-----------------------------------------

16.1. Andataco may cancel delivery of any and all Products prior to
shipment of such Products by sending written notice to IPL subject to the
following terms and charges:

(a) The charge per unit of Product shall be expressed as a
percentage of the applicable unit price in effect when notice
of cancellation or rescheduling is received by IPL.

(b) Number of days prior to scheduled shipment that notice is
received by IPL:

15 Days No Charge
6-14 Days 10%
5 Days or Less No Cancellation Allowed

(c) Ten percent (10%) of the units scheduled for a particular
shipment date may be rescheduled by up to sixty (60) days,
provided that IPL receives written notice fifteen (15) days or
more prior to a scheduled shipment date. No order or any
portion thereof may be rescheduled more than one time. Any
reschedule of greater than ten percent (10%) of an order and
any subsequent reschedule of an order which has already been
rescheduled shall be subject to the cancellation charges
specified in Section 16(b) above.

16.2. The parties agree that the above charges and terms are fair and
reasonable as cancellation charges, and Andataco agrees to pay IPL's invoice for
such charges in accordance with the IPL payment terms specified in Section 6.1
herein.

Section 17. Early Termination By IPL.
------------------------

17.1. IPL may terminate this Agreement prior to the expiration of its
term, upon written notice to Andataco, in the event of any one of the following
conditions:

(a) Any significant change in ownership and/or control of
Andataco, which in the sole opinion of IPL is likely to affect
adversely future sales of the Products;

(b) If Andataco is declared insolvent;

(d) If Andataco does not make timely payments to IPL, within
thirty (30) days of written demand by IPL.

-9-

<PAGE> 10

Section 18. Termination by Either Party.
---------------------------

18.1. In addition to the rights provided above, either party shall have
the right to terminate this Agreement prior to the expiration of its term upon
written notice to the other party:

(a) in the event that the other party goes into liquidation,
voluntary or otherwise, or goes into bankruptcy, or makes an
assignment for the benefit of creditors, or in the event or a
receiver being appointed for its property or of any part
thereof; or

(b) If either party shall commit any material breach of this
Agreement which has not been remedied within thirty (30) days
after written notice thereof has given by the other party; or

(c) If either party undergoes a change of ownership or control
which results in it directly or indirectly becoming owned or
controlled by a competitor of the other party, to which said
other party objects within thirty (30) days of learning of
such a change.

(d) For any reason, following thirty (30) days written notice to
the other party.

Section 19. Rights and Obligations Upon Expiration or Termination.
-----------------------------------------------------

19.1. Upon the expiration or early termination of this Agreement, Andataco
shall cease representing itself as an authorized OEM of IPL Products and shall
promptly return to IPL all pricing information, customer information,
catalogues, literature and other documents and/or materials relating to the
Products. The expiration of this Agreement shall not give rise to the payment of
any indemnity whatsoever by either party to the other.

19.2. In addition to those provisions which by their terms survive, the
following provisions shall survive expiration or termination of this Agreement:
7.1; 11.8; 12; 16.1; 19.1; and 26.

Section 20. Export Regulations.
------------------

20.1. The Products and Spares are subject to U.S. law and regulations
governing their export to other countries. Andataco agrees that it shall be
solely responsible for ensuring that any such exports are in full compliance
with such all applicable U.S. export laws and regulations. This provision shall
survive any termination or expiration of this Agreement.

-10-

<PAGE> 11

Section 21. Notices.
-------

21.1. Unless otherwise agreed to by the parties, all notices required
under the Agreement shall be made by certified mail return receipt requested,
and all notices shall be addressed to the attention of the party executing this
Agreement or his or her successor at the address set forth at the beginning of
this Agreement. Either party may, upon written notice to the other party,
designate a different individual and/or address for the receipt of notices.

Section 22. Successors; Non-Assignment.
--------------------------

22.1. All the terms, provisions and conditions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
representatives, heirs, successors, trustees, transferees, lawful assigns and
legal representatives. Neither this Agreement, nor any right granted herein, is
assignable by Andataco without the prior written consent of IPL which consent
shall not be unreasonably withheld. Any attempt by Andataco to assign any said
rights, or to delegate the duties or obligations imposed on Andataco by this
Agreement without IPL's prior written consent shall be void.

Section 23. General Status of The Parties.
-----------------------------

23.1. The relationship of the parties under this Agreement shall be and at
all times remain one of independent contractors. Andataco is not an employee,
agent or legal representative of IPL and shall have no authority to assume or
create obligations on IPL's behalf with respect to the Products or otherwise,
except as may be provided from time to time by written instruments signed by
both parties. This Agreement creates no relationship or partnership, limited
partnership or agency between the parties and the parties hereby acknowledge no
other facts or relations exist that would create any such relationship between
them.

Section 24. Entire Agreement.
----------------

24.1. This Agreement constitutes the entire Agreement between IPL and
Andataco and shall not be amended, altered or changed except by a written
agreement signed by the parties hereto. Any terms and conditions in any purchase
order or other instrument issued by Andataco or End User in connection with this
Agreement which are in addition to or inconsistent with the terms and conditions
of this Agreement shall not be binding on IPL. Andataco acknowledges that it is
not entering into this Agreement on the basis of any representations not
expressly contained herein.

-11-

<PAGE> 12

Section 25. Waivers.
-------

25.1. No delay or omission on the part of either party to this Agreement
in requiring performance by the other party hereunder, or in exercising any
right hereunder, shall operate as a waiver or any provision hereof or of any
right or rights hereunder; and the waiver or omission or delay in requiring
performance or exercising any right hereunder on one occasion shall not be
construed as a bar to or waiver of such performance or right, or of any right or
remedy under this Agreement, on any future occasion.

Section 26. Governing Law.
-------------

26.1. This Agreement shall be governed and construed in accordance with
the laws of the Commonwealth of Massachusetts. The parties agree that any legal
action arising out of or in connection with this Agreement shall be brought in
the courts of the County of Middlesex, Massachusetts, of the U.S. Federal Court
for the District of Massachusetts, and the parties irrevocably submit for all
purposes to the jurisdiction of each such court.

Section 27. Force Majeure.
-------------

27.1. Neither IPL nor Andataco shall be liable in any respect for
failures to perform, or delays in performing, hereunder where such failure or
delay shall have been due wholly or in part to unforeseen circumstances or
causes beyond the reasonable control of IPL or Andataco, as the case may be,
including but not limited to acts of God, acts of civil or military authority,
fires, floods, epidemics, quarantine restrictions, war, riots, strikes,
lock-outs, accidents to machinery or delays in transportation.

EXECUTED under seal as of the date first above written.

ANDATACO IPL SYSTEMS, INC.

By: /s/ W. David Sykes By: /s/ Ronald J. Gellert
---------------------------- -------------------------------

Typed Name: W. David Sykes Typed Name: Ronald J. Gellert
-------------------- -----------------------

Title: President Title: President & CEO
------------------------- ----------------------------

-12-

<PAGE> 1

IPL SYSTEMS, INC.
- -----------------

COMPUTATION OF NET LOSS PER COMMON SHARE EXHIBIT 11
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Thousands of Dollars Except Per Share Amounts)

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

<TABLE>
<CAPTION>
Primary 1996 1995 1994
---- ---- ----

<S> <C> <C> <C>
Net loss ($ 2,142) ($ 3,464) ($ 15,046)
----------- ----------- -----------

Weighted average
shares outstanding 5,617,926 5,469,177 5,381,519

Dilutive stock options based on
the treasury stock method
using average market price for
the period -- -- --
----------- ----------- -----------

Common shares used in
calculation of loss per
share 5,617,926 5,469,177 5,381,519
----------- ----------- -----------

Net loss per common
and common
equivalent share ($ 0.38) ($ 0.63) ($ 2.80)
=========== =========== ===========

</TABLE>

<PAGE> 2

IPL SYSTEMS, INC.
- -----------------

COMPUTATION OF NET LOSS PER COMMON SHARE EXHIBIT 11
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Thousands of Dollars Except Per Share Amounts)

- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>

Fully Diluted 1996 1995 1994
- ------------- ---- ---- ----
<S> <C> <C> <C>

Net loss ($ 2,142) ($ 3,464) ($ 15,046)
----------- ----------- -----------

Weighted average shares
outstanding 5,617,926 5,469,177 5,381,519

Dilutive stock options based on
the treasury stock method using
the higher of average or period
and market price 96,680(A) 211,600(A) 128,963(A)
----------- ----------- -----------

Common shares used in
calculation of loss per share 5,716,606 5,680,777 5,510,482
----------- ----------- -----------

Net loss per common and
common equivalent share: ($ 0.37) ($ 0.61) ($ 2.73)
=========== =========== ===========
</TABLE>

(A) This calculation is presented in accordance with Item 601 of Regulations
S-X although it is not required by Paragraph 14 of APB Opinion No. 15.

<PAGE> 1

Exhibit 23

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE

We consent to the incorporation by reference in Registration Statements Nos.
333-10025, 33- 79080, 33-79078 and 33-50090 of IPL Systems, Inc. on Form S-8 of
our report dated February 21, 1997 (except for Note 14, for which the date is
March 7, 1997), (which report includes an explanatory paragraph as to an
uncertainty concerning going concern matters) appearing in this Annual Report on
Form 10-K for the year ended December 31, 1996.

Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of IPL Systems, Inc., listed in
Item 14. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

Boston, Massachusetts
March 19, 1997

<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,274
<SECURITIES> 0
<RECEIVABLES> 2,744
<ALLOWANCES> 353
<INVENTORY> 3,891
<CURRENT-ASSETS> 8,985
<PP&E> 11,564
<DEPRECIATION> 9,935
<TOTAL-ASSETS> 10,614
<CURRENT-LIABILITIES> 4,064
<BONDS> 0
0
0
<COMMON> 56
<OTHER-SE> 6,549
<TOTAL-LIABILITY-AND-EQUITY> 10,614
<SALES> 17,064
<TOTAL-REVENUES> 17,064
<CGS> 9,488
<TOTAL-COSTS> 19,329
<OTHER-EXPENSES> (123)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,141)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,141)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,141)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> (.37)

</TABLE>

<PAGE> 1

EXHIBIT 99.1 TO 1996 FORM 10-K

Important Factors Regarding Future Results of IPL Systems, Inc.
---------------------------------------------------------------

Information provided by IPL Systems, Inc. ("IPL" or the "Company") or its
spokespersons from time to time may contain forward-looking statements
concerning projected financial performance, product development or other aspects
of future operations. Such statements will be based on the assumptions and
expectations of the Company's management at the time such statements are made.
The Company cautions investors that any forward-looking statements made by the
Company are not guarantees of future performance. Various factors, including but
not limited to the following, have affected the Company's results in the past
and may cause its future results to differ materially from those projects in the
forward-looking statements.

Rapid Technological and Market Changes. The market for the Company's products is
characterized by rapidly changing technology and evolving customer needs which
shorten the life cycles of existing products and require ongoing development and
introduction of new products. The Company's ability to realize its expectations
will depend on its success at enhancing its current offerings, developing new
products that keep pace with developments in technology and meet evolving
customer requirements for performance and price, and delivering those products
through distribution channels with appropriate customer service and support.
This will require, among other things, correctly anticipating customer needs,
hiring and retaining personnel with the necessary skills and creativity,
providing adequate resources for product development, and managing distribution
channels effectively. Failure by the Company to anticipate or respond adequately
to technological developments and customer requirements, significant delays in
the development, product, testing, or availability of new or enhanced products,
or the failure of customers to accept such products, could adversely affect the
Company's technological position and operating results. Furthermore, there can
be no assurance that the Company's competitors will not succeed in developing
products or technologies that have superior price/performance characteristics
compared to any products being offered or developed by the Company.

Competition. The computer data storage industry is intensely competitive and is
characterized by rapid technological change and constant pricing pressure. IPL
competes with a number of companies offering computer data storage, back-up and
recovery systems, including International Business Machines ("IBM"), EMC
Corporation ("EMC") and others, which have substantially greater financial,
product development, marketing and distribution resources than the Company. In
the open systems storage market, EMC , Data General Corporation, and the host
systems manufacturers are the major competitors, but the Company believes that
to date no dominant suppliers have emerged in the very large database ("VLDB")
segment of the open systems storage market. In the AS/400 market, IBM is the
major competitor. Because IPL's systems have to be compatible with the AS/400
computer systems or with the systems of the

<PAGE> 2

principal manufacturers of UNIX-based open systems computers and the relational
database software programs, IPL's competitive position and operating results may
be adversely affected by, among other factors, modifications in the design of
such systems or programs, the introduction of new products by such manufacturers
or other competitors, reductions in the pricing of storage solutions in these
markets, or the implementation of new marketing strategies by any of its
principal competitors. The same is also true for the Company's existing AS/400
products which the Company continues to support for its existing customers. The
Company has no plans for future development of AS/400 storage.

Fluctuations in Operating Results; Recent Losses. The Company has recently
experienced losses from operations and may in the future experience further
losses and significant period-to-period fluctuations in operating results. The
Company's revenues in any quarter are substantially dependent on the timing of
product shipments to third party distributors (sales to which are often
difficult to forecast) as well as the status of competing product introductions.
Like many other high technology companies, a disproportionately large percentage
of quarterly sales occur in the closing weeks of each quarter. Any
forward-looking statements about operating results made by members of management
will be based on assumptions about the likelihood of closing sales then in the
pipeline and other factors management considers reasonable based in part on
knowledge of performance in prior periods. The failure to consummate any of
those sales may have a disproportionately negative impact on operating results,
given the Company's relatively fixed costs, and may thus prevent management's
projections from being realized.

Other factors that affect the Company's operating results and that management
takes into account include competitive pricing trends and changes in the revenue
and gross margin mix among open systems and AS/400 disk systems and tape systems
for computer data storage. Changes in the factors underlying management's
assumptions may result in a material variation between actual results and those
forecast in any forward-looking statements made during a particular period.

Patents and Protection of Proprietary Technology. The Company believes that its
success in developing new products depends primarily upon the technical
competence and creative skills of its personnel rather than on the ownership of
copyrights or patents. The Company has no patents on its current products, but
in 1995 the Company filed applications for patents in the United States and
foreign countries with respect to new products scheduled to be introduced in
1996. The status of patents involves complex legal and factual questions and the
breadth of claims allowed is uncertain. There can be no assurance as to the
likelihood that pending patents will be issued or that any such patents will
afford protection against competitors with similar technology. In addition,
patent applications filed in foreign countries may provide significantly less
patent protection than the United States. No assurances can be given that
patents issued to the Company will not be infringed upon or designed around by
others.

<PAGE> 3

In addition, due to the rapid technological development of the computer
data storage industry with concurrent extensive patent coverage and with the
rapid rate of issuance of new patents, certain aspects of the Company's products
may infringe patents unknown to the Company. Patent protection may also be
obtained in the future on new inventions and designs for peripheral storage
subsystems or the computers to which the Company's subsystems attach. Although
the Company believes that its products and other proprietary rights do not
infringe the proprietary rights of third parties, there can be no assurance that
other third parties will not assert infringement claims against the Company or
that such claims will not be successful. If any infringement exists or any such
patents are issued, the Company would seek, based upon industry practice,
licenses to such patents, but there can be no assurance that the Company will be
able to obtain any such licenses on terms which would not have a material
adverse effect on its business.

Dependence on Key Personnel. The success of the Company's operations depends on
its ability to attract and retain experienced technical, sales, marketing and
management personnel. Such personnel are in great demand and the Company must
compete for their services. Management's projections necessarily assume that the
Company will continue to attract and retain such personnel, so the failure to do
so could have a material adverse effect on the Company's ability to develop and
market competitive products.

Dependence on Suppliers. The Company has and will continue to rely on outside
vendors to manufacture certain electronic components and subassemblies used in
the production of the Company's products. Certain components, subassemblies,
materials and equipment necessary for the manufacture of the Company's products
are obtained from a sole supplier or a limited group of suppliers. The Company's
reliance on sole suppliers or a limited group of suppliers involves several
risks, including a potential inability to obtain an adequate supply of required
products and reduced control over the price, timely delivery, reliability and
quality of finished products. The Company does not have any long-term supply
agreements with its suppliers. Certain of the Company's suppliers have
relatively limited financial and other resources. Any inability to obtain timely
deliveries of products and services having acceptable qualities or any other
circumstance that could require the Company to seek alternative sources of
supply or to manufacture its own electronic components, subassemblies and
manufacturing equipment internally, could delay the Company's ability to ship
its products. Any such delay could

<PAGE> 4

damage relationships with customers and could have a material adverse effect on
the Company's business and operating results.

Dependence on Distributors and OEMs. In March 1997, the Company transitioned out
of direct sales of its products to end users. It has non-exclusive distribution
arrangements with a number of distributors and Original Equipment Manufacturers,
all of which can and do sell products that are competitive with the Company's
products. The Company's principal distributor is now ANDATACO, which entered
into an OEM agreement with the Company as of February 25, 1997. All of the
Company's distribution agreements are short-term agreements which can be
terminated by either party within less than 30 days.

Future Capital Needs As of December 31, 1996, IPL had working capital of $4.9
million and cash and cash equivalent of $2.27 million, a decrease of $1.3
million, or approximately 21% from $6.2 million as of December 31, 1995. IPL's
current ratio remained stable at about 2.2:1 as of the end of both years. In the
year ended December 31, 1996, IPL used $1.2 million in cash to fund the losses
of its operating activities. If IPL's operating activities continue to generate
losses and use IPL's remaining cash, IPL will need to either liquidate assets or
seek outside sources of financing, which if available at all, may not be
available on reasonable terms. IPL's management does not anticipate any such
needs if the Merger is consummated by the end of May, but if there is any delay
in the Merger or if the Merger Agreement is terminated, IPL will proceed to seek
such additional sources of cash for the business.