FIRST AMENDMENT TO

                                 LOAN AGREEMENT

                                     BETWEEN

                       STATE STREET BANK AND TRUST COMPANY

                                       AND

                          STORAGE COMPUTER CORPORATION





                                 AUGUST 20, 1996







                        FIRST AMENDMENT TO LOAN AGREEMENT

         THIS FIRST AMENDMENT (this  "Amendment") is made and entered into as of
August  20,  1996  by and  between  STATE  STREET  BANK  AND  TRUST  COMPANY,  a
Massachusetts  trust  company  having its  principal  place of  business  at 225
Franklin  Street,  Boston,  Massachusetts  02110-2804  (the  "Bank") and STORAGE
COMPUTER  CORPORATION,  a Delaware  corporation  having its  principal  place of
business at 11 Riverside Street, Nashua, New Hampshire 03032 (the "Borrower").

                              W I T N E S S E T H:

         WHEREAS,  the Bank and the  Borrower  are  parties to a Loan  Agreement
dated as of August 4, 1995 (the  "Original Loan  Agreement"),  pursuant to which
the Bank has  established  a line of credit for the  Borrower,  on the terms and
conditions set forth  therein,  in the maximum  principal  amount of Six Million
Dollars ($6,000,000) (the "Original Line of Credit"); and

         WHEREAS,  the Original  Line of Credit is  evidenced by the  Borrower's
Line of Credit  Note dated  August 4, 1995 in the  maximum  principal  amount of
$6,000,000 (the "Original Note"); and

         WHEREAS, the Borrower has requested that the Bank (i) increase the Line
of Credit from $6,000,000 to $10,000,000,  (ii) make letter of credit borrowings
available thereunder, and (iii) to make certain other amendments to the Original
Loan Agreement as hereinafter set forth; and

         WHEREAS,  the Bank is willing to accommodate the Borrower's requests on
the terms and conditions hereinafter set forth.

         NOW,  THEREFORE,  in consideration of the mutual promises  contained in
this  Amendment,  and intending to be legally bound hereby,  the parties  hereto
hereby agree as follows:

         1.  Capitalized  terms not  otherwise  defined  herein  shall  have the
meanings  ascribed  to them in the  Original  Loan  Agreement  or the  Affiliate
Subordination Agreement, as the context so requires.

         2.  The  following  respective  definitions  in  Section  1.01  of  the
Original  Loan  Agreement  are  hereby  replaced  in  their  entirety  with  the
following:

             "Line of Credit"  shall mean the line of credit made  available  to
         the Borrower  under this Agreement in the maximum  principal  amount of
         Ten Million Dollars ($10,000,000).

             "Maximum  Line   Availability"   shall  mean  Ten  Million  Dollars
         ($10,000,000).

             "Note" shall mean the unsecured Amended and Restated Line of Credit
         Note dated the Closing  Date (as amended and  restated as of August 20,
         1996) in the maximum








         principal  amount of Ten Million  Dollars  ($10,000,000)  issued by the
         Borrower to the Bank in the form of Exhibit A annexed  hereto,  and all
         extensions,  renewals,  modifications,   substitutions,   restatements,
         replacements and amendments thereof.

                  "Review Date" shall mean May 31, 1997, the date upon which the
         Line of Credit  shall be due and  payable in full,  unless the  payment
         thereof is earlier made, whether upon demand,  prepayment or otherwise,
         or unless  such date is  extended  in  writing  by the Bank in its sole
         discretion."

         4. There is hereby added the following provision as new Section 2.11 to
the Loan Agreement:

         "2.11.   LETTERS OF CREDIT; REDUCTION OF AVAILABILITY UNDER THE LINE OF
                  CREDIT.

         (a)  STANDBY  LETTERS OF CREDIT. If requested by the Borrower  prior to
the  earlier  of  demand or the  Review  Date,  the Bank will  issue one or more
standby  letters of credit,  for the purpose of providing  credit  support for a
Taiwanese supplier relationship,  pursuant to one or more of the Bank's standard
standby letter of credit agreements, for the account of the Borrower, in amounts
in  the  aggregate  not  to  exceed  the  lesser  of  (i)  Two  Million  Dollars
($2,000,000),   or  (ii)  the  unused   availability   under  the  Maximum  Line
Availability.

         (b)  REDUCTION  OF MAXIMUM  LINE  AVAILABILITY.  The face amount of the
letters of credit in the aggregate shall reduce the Maximum Line Availability on
a dollar for dollar basis.

         (c)  EXPIRATION  DATES.  All such letters of credit shall expire within
one year of their issuance.

         (d)  LOANS. All amounts  paid out under such letters of credit shall be
deemed to be Loans, evidenced by the Note.

         (e)  FEES. In addition to all other fees and charges payable  hereunder
and under the Note, the Borrower shall pay to the Bank (i) concurrently with the
issuance of each letter of credit,  the Bank's standard issuance and transmittal
fees, and (ii) while any letter of credit is outstanding  for the account of the
Borrower,  a fee of one and one-half  percent (12%) per annum on the face amount
of outstanding letters of credit,  calculated on the basis of a year of 360 days
counting  the  actual  number of days  elapsed,  shall be  payable  annually  in
advance."

         5. Section 7.02 of the Loan Agreement is hereby amended as follows:

         "7.02.  QUICK RATIO. A Quick Ratio greater than or equal to 1.25:1.00."

         6. The  Original  Note and Exhibit A to the Loan  Agreement  are hereby
amended  in  their  entirety  to  read  as set  forth  in  Attachment  I to this
Amendment.  In order to evidence such changes in the Original Note, the Borrower
shall issue to the Bank on the date hereof a new note

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(the  "Replacement  Note")  in the  form  of  Attachment  I  annexed  hereto  in
replacement and  substitution  of the Original Note. The Replacement  Note shall
not constitute a  satisfaction  or a novation of the Original Note, but merely a
replacement thereof.

         7. To induce the Bank to enter into this Amendment, the Borrower hereby
represents and warrants that on the date hereof,  there exists neither an "Event
of  Default"  under  the  Original  Loan  Agreement,  the  Original  Note or the
Affiliate  Subordination  Agreement  (or under any other  agreement  or document
executed in connection with the foregoing), nor any event which would constitute
such an Event of  Default  but for the  passage  of time,  or for the  giving of
notice,  or both.  The Borrower  hereby  restates  and  reaffirms as of the date
hereof all of the representations and warranties set forth in Article III of the
Loan Agreement,  as amended by this  Amendment,  except that for the purposes of
such restated  representations  and  warranties,  all  references  hereto to the
"Agreement"  shall be deemed to refer to the Original Loan  Agreement as amended
hereby, and the use of "hereunder",  "herein", and words of similar import shall
be deemed to refer to the Original Loan Agreement,  as amended  hereby,  and all
references  to the  Original  Note  shall be deemed to refer to the  Replacement
Note. All covenants and  agreements of the Borrower  contained in Articles V, VI
and VII of the Loan  Agreement and all Events of Default and remedies  contained
in Article  VIII of the Loan  Agreement,  except as may be amended  hereby,  are
hereby  incorporated in this Amendment by reference as though  specifically  set
forth herein.

         8. The  Borrower  hereby  confirms  and  agrees  that  each  and  every
reference to the  "Agreement" or the "Loan  Agreement" in the Loan Agreement and
the  Exhibits  thereto and in any other loan  document  executed  in  connection
therewith shall hereinafter be deemed to refer to the Original Loan Agreement as
amended hereby.

         9. The  Borrower  hereby  confirms  and  agrees  that  each  and  every
reference to the "Note" or the "Line of Credit Note" in the Loan  Agreement  and
the  Exhibits  thereto and in any other loan  document  executed  in  connection
therewith shall  hereinafter be deemed to refer to the  Replacement  Note in its
new principal amount.

         10. In addition to the  conditions  set forth in Article IV of the Loan
Agreement,  the Bank's obligation to enter into this Amendment is subject to the
following conditions:

         (i)      the Borrower shall have delivered to the Bank the following:

                  (1) the Replacement  Note, an Agreement of Consent,  Amendment
                  and  Confirmation of Security  Documents  between the Bank and
                  the   Borrower,   and  such   other   agreements,   documents,
                  certificates, resolutions, schedules and/or exhibits as may be
                  necessary  or  desirable  to  further  the  purposes  of  this
                  Amendment;

                  (2) any and all amendments to Certificate of Incorporation, if
                  any,  since the execution of the Original Loan  Agreement,  to
                  the extent not previously  delivered to the Bank, certified by
                  the Secretary of the State of the Borrower's incorporation;

                                      -4-





                  (3) a certificate of the Secretary of the Borrower  certifying
                  as to: (a) the incumbency  and signature of its officers;  (b)
                  adoption of resolutions of its Board of Directors  authorizing
                  the execution, delivery and performance of this Amendment, the
                  Replacement  Note and of all  other  instruments,  agreements,
                  documents or certificates  contemplated by the Amendment;  and
                  (c) the accuracy and completeness of its charter documents and
                  by-laws as previously delivered to the Bank or as amended; and

                  (4)  such  other  supporting   agreements,   certificates  and
                  documents as the Bank may reasonably request.

         (ii) the Bank shall have received an opinion of counsel to the Borrower
to the effect that (a) the execution,  delivery and  performance by the Borrower
of this  Amendment,  the Replacement  Note and any other  agreement  executed in
connection herewith, have been duly authorized by all requisite corporate action
of the Borrower and constitutes the legal, valid and binding  obligations of the
Borrower, enforceable in accordance with their terms, and (b) such other matters
as the Bank may reasonably request.

         11. The execution,  delivery and  performance of this Amendment and the
Replacement  Note by the Borrower  have been duly  authorized  by all  requisite
corporate  action,  are legal,  valid and binding on the Borrower,  and will not
violate  any  provision  of law,  any order,  judgment or decree of any court or
other agency of government,  or the organizational  documents of the Borrower or
any  instrument  to which the  Borrower  is a party or by which the  Borrower is
bound.

         12. The Borrower will pay all out-of-pocket  expenses, cost and charges
incurred by the Bank (including reasonable fees and disbursements of counsel) in
connection  with the preparation  and  implementation  of this Amendment and the
transactions  contemplated  hereby  and  the  documents  and  instruments  to be
delivered pursuant hereto.

         13. Except as specifically  amended hereby, the Original Loan Agreement
and Replacement  Note and all  instruments and documents  executed in connection
therewith,  shall remain in full force and effect,  and are hereby  ratified and
affirmed in all respects.




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                                      -5-




         IN  WITNESS  WHEREOF,  the  Borrower  and the  Bank  have  caused  this
Amendment to be duly executed as a sealed  instrument  by their duly  authorized
representatives, all as of the day and year first above written.

                                   STATE STREET BANK AND TRUST COMPANY


                                   By: /s/  L. Dan Lobdell
                                      ------------------------------
                                            L. Dan Lobdell
                                            Vice President

ATTEST:                            STORAGE COMPUTER CORPORATION


/s/ Thomas A. Wooters              By: /s/  Theodore Goodlander
----------------------                ------------------------------
Secretary                                   Theodore Goodlander
                                            Chief Executive Officer



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