<PAGE>   1




                                                                    Exhibit 10.9







                   SECOND AMENDED AND RESTATED LOAN AGREEMENT

                                     BETWEEN

                       STATE STREET BANK AND TRUST COMPANY

                                       AND

                          STORAGE COMPUTER CORPORATION




                         DATED AS OF NOVEMBER ___, 1998


                      =====================================

                      $10,500,000 Revolving Credit Facility

                      =====================================

















                                TABLE OF CONTENTS

                                       (v)


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                                                                            Page
                                                                            ----

I.   DEFINITIONS...............................................................1
     1.01.  Terms..............................................................1
     1.02.  Other Definitional Provisions......................................7

II.  THE LOANS.................................................................8
     2.01.  Line of Credit; Advances; The Note.................................8
            (a)  Line of Credit................................................8
            (b)  Advances under the Line of Credit.............................8
            (c)  The Note......................................................8
            (d)  Principal Repayment...........................................8
            (e)  Voluntary Prepayments or Permanent Reduction of Maximum 
                 Line Availability.............................................8
            (f)  Application of Prepayments....................................9
     2.02.  Rate of Interest; Payment of Interest..............................9
            (a)  Rates of Interest.............................................9
            (b)  Payment of Interest...........................................9
            (c)  Default Rate of Interest......................................9
            (d)  Change in Prime Rate..........................................9
            (e)  Calculation of Interest.......................................9
     2.03.  Line Availability Fee..............................................9
     2.04.  Payments Under the Note...........................................10
     2.05.  Late Payment Fee..................................................10
     2.06.  Day of Payment....................................................10
     2.07.  Use of Proceeds...................................................10
     2.08.  Negative Pledge Covenant..........................................10
     2.09.  Subordination of Indebtedness to Third Parties....................10

III. REPRESENTATIONS AND WARRANTIES...........................................11
     3.01.  Financial Statements..............................................11
     3.02.  Organization of the Borrower......................................11
     3.03.  Authorization and Binding Effect..................................11
     3.04.  Litigation........................................................12
     3.05.  No Encumbrances or Defaults.......................................12
     3.06.  Indebtedness and Liens............................................12
     3.07.  Taxes.............................................................12
     3.08.  Investments.......................................................13
     3.09.  Borrower not an Investment Company................................13
     3.10.  Federal Reserve System Regulations................................13
     3.11.  ERISA Compliance..................................................13
     3.12.  No Misstatements or Omissions.....................................13
     3.13.  Solvency of Borrower..............................................14
     3.14.  Year 2000 Compliance..............................................14
     3.15.  Principal Place of Business; Location of Records..................14
     3.16.  Subsidiaries......................................................14
     3.17.  Stock.............................................................14
     3.18.  Environmental Matters.............................................14


                                      (vi)


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      3.19.  Material Contracts...............................................16
      3.20.  Qualified Customer Orders. ......................................16

IV.   CONDITIONS OF MAKING THE LOANS AND ADVANCES.............................16
      4.01.  Initial Advance..................................................16
      4.02.  Subsequent Advances..............................................17

V.    AFFIRMATIVE COVENANTS...................................................18
      5.01.  Maintenance of Properties; Compliance with Laws..................18
      5.02.  Payment of Taxes; Debts..........................................18
      5.03.  Reports to Bank..................................................19
      5.04.  Inspection by Bank...............................................20
      5.05.  Accounting.......................................................20
      5.06.  Bank Accounts....................................................20
      5.07.  Insurance........................................................20
      5.08.  Notice of Proceedings, Defaults and Adverse Changes..............21
      5.09.  Additional Assurances............................................21
      5.10.  Year 2000 Compliance.............................................22
      5.11.  Tax Refund.......................................................22
      5.12.  Maintenance of Properties and Leases.............................22
      5.13.  Records, Accounts and Places of Business.........................22
      5.14.  Financial Advisor................................................22

VI.   NEGATIVE COVENANTS......................................................23
      6.01.  Indebtedness.....................................................23
      6.02.  Liens............................................................23
      6.03.  Guarantees.......................................................24
      6.04.  Sale of Assets and Accounts Receivable...........................24
      6.05.  Sale and Leaseback...............................................24
      6.06.  Investments......................................................25
      6.07.  Reorganization...................................................25
      6.08.  Payments to Stockholders or Affiliates...........................25
      6.09.  Transactions with Affiliates.....................................25
      6.10.  ERISA............................................................25

VII.  FINANCIAL COVENANTS.....................................................26
      7.01.  Quick Ratio......................................................26
      7.02.  Tangible Net Worth...............................................26
      7.03.  EBIT to Interest Ratio...........................................26
      7.04.  Minimum Qualified Customer Orders................................26

VIII. DEFAULTS................................................................26

IX.   MISCELLANEOUS...........................................................29
      9.01.  Survival of Warranties...........................................29
      9.02.  Reimbursement of Bank's Expenses.................................29
      9.03.  Governing Law....................................................30

                                      (vii)





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     9.04.  Waivers and Amendments............................................30
     9.05.  No Implied Waivers................................................30
     9.06.  Notices...........................................................30
     9.07.  Set-Off...........................................................31
     9.08.  Successors and Assigns............................................32
     9.09.  Counterparts......................................................32
     9.10.  Jurisdiction and Venue; Waiver of Jury Trial......................32
     9.11.  Savings Clause....................................................32
     9.12.  Headings..........................................................33
     9.13.  Indemnification by Borrower.......................................33
     9.14.  Third Party Beneficiaries.........................................33



                                     (viii)


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                   SECOND AMENDED AND RESTATED LOAN AGREEMENT


         THIS SECOND AMENDED AND RESTATED LOAN AGREEMENT is made and entered
into as of the ___th day of November, 1998 by and between STORAGE COMPUTER
CORPORATION, a corporation formed under the laws of the State of Delaware, with
its principal place of business at 11 Riverside Street, Nashua, New Hampshire
03062-1373 (the "Borrower") and STATE STREET BANK AND TRUST COMPANY, a
Massachusetts trust company, with its principal place of business at 225
Franklin Street, Boston, Massachusetts 02110-2804 (the "Bank").

                              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, as amended as of August 20, 1996 and August 15, 1997
and amended and restated on August 28, 1998 (as so amended and restated, the
"Original Loan Agreement"), pursuant to which the Bank has extended to the
Borrower a line of credit in the maximum principal amount of $13,500,000; and

         WHEREAS, the Borrower has requested that the Bank waive certain events
of default and make certain other amendments to the line of credit; and

         WHEREAS, the Bank is willing to waive certain defaults and make such
amendments on the terms and conditions hereinafter set forth; and

         WHEREAS, the parties hereto have agreed to amend and restate the
Original Loan Agreement in its entirety to reflect the changes requested by the
Borrower.

         NOW, THEREFORE, in consideration of the premises and agreements
hereinafter set forth, and intending to be legally bound hereby, the Bank and
the Borrower hereby agree as follows:

I.       DEFINITIONS

         1.01. TERMS. As used in this Agreement, the following terms shall have
the meanings set out respectively after each such term (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

         "ADVANCE" shall have the meaning set forth at Section 2.01 (b) hereof.

         "AFFILIATE" shall mean, as applied to any Person, the spouse of such
Person, any relative of such Person within the third degree, any member,
director, officer, stockholder, warrant holder, general partner, limited
partner, manager or employee of such Person, any corporation, association,
partnership, firm or other entity of which such Person is a member, director,
officer, stockholder, general partner, limited partner, manager or employee and
any other Person directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person.

         "AFFILIATE SUBORDINATION AGREEMENT" shall have the meaning set forth in
Section 2.09 hereof.

         "AGREEMENT" shall mean this Second Amended and Restated Loan Agreement,
as the same may be amended, restated or otherwise modified from time to time by
the parties hereto.

         "BANK" shall mean State Street Bank and Trust Company, a Massachusetts
trust company, and its successors and assigns.




<PAGE>   6



         "BORROWER" shall mean Storage Computer Corporation, a Delaware
corporation, and its successors and assigns.

         "BUDGET" shall have the meaning set forth at Section 5.03(d) hereof.

         "BUSINESS DAY" means a day (other than Saturday or Sunday) on which
banks are open for business in the City of Boston, Massachusetts.

         "CAPITAL EXPENDITURE" shall mean any Capital Lease of a Person and any
plant or equipment expenditure or other expenditure by such Person which, in
accordance with generally accepted accounting principles, would be classified as
a capital expenditure and shown as a liability on the balance sheet of such
Person.

         "CAPITAL LEASE" shall mean a lease of property that is required to be
recorded as a liability on the lessee's balance sheet under generally accepted
accounting principles, with the amount of a Capital Lease to be deemed to be the
amount of the liability so recorded.

         "CLOSING" shall mean the closing of the loan transaction contemplated
by this Agreement.

         "CLOSING DATE" shall mean the date set forth at the beginning of this
Agreement.

         "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and all Treasury rules and regulations promulgated pursuant
thereto.

         "COLLATERAL ASSIGNMENT OF MATERIAL CONTRACTS" shall mean that certain
Collateral Assignment of Material Contracts dated as of November ____, 1998 by
and between the Borrower and the Bank as the same may be amended, restated or
otherwise modified from time to time.

         "CURRENT LIABILITIES" shall mean, at any date, the current liabilities
of the Borrower as determined in accordance with generally accepted accounting
principles.

         "DEFAULT RATE" shall have the meaning set forth in Section 2.02(d)
hereof.

         "DOLLARS" AND THE SIGN "$" shall mean lawful money of the United States
of America.

         "EBIT" shall mean, with respect to a fiscal period, net income or loss
of the Borrower for such period, PLUS the following: (i) interest expenses
charged to income for such period, and (ii) state and federal income taxes
charged to income for such period, and (iii) extraordinary losses for such
period, MINUS extraordinary gains for such period.

         "EBIT TO INTEREST RATIO" shall mean, with respect to a fiscal period, a
fraction, the numerator of which is equal to EBIT for such period, and the
denominator of which is equal to the Borrower's interest expense on all
Indebtedness for such period.

         "ENVIRONMENTAL LAW" means any judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, or any federal, state,
county or local statute, regulation, ordinance, order or decree relating to
public health, welfare, the environment, or to the storage, handling, use or
generation of hazardous substances in or at the workplace, worker health or
safety, whether now existing or hereafter enacted.


                                       2
<PAGE>   7

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

         "EVENT OF DEFAULT" shall have the meaning set forth at Article VIII
hereof.

         "FISCAL QUARTER" shall mean each quarterly period ending on March 31,
June 30, September 30 and December 31 in each year.

         "GUARANTORS" shall mean all of the Borrower's now existing or
after-acquired Subsidiaries.

         "GUARANTY AGREEMENTS" shall mean those certain Guaranty Agreements
dated November ____, 1998, from the Guarantors in favor of the Bank in the form
of EXHIBIT E hereto as the same may be amended, restated or otherwise modified
from time to time.

         "INDEBTEDNESS" shall mean as to any Person: (a) any indebtedness or
liability for borrowed money, or for the deferred purchase price of property or
services (including trade obligations); (b) obligations as lessee under Capital
Leases; (c) current liabilities in respect of unfunded vested benefits under any
pension plan or similar plan of such Person or maintained by such Person; (d)
obligations of such Person under letters of credit issued for the account of
such Person; (e) obligations secured by any Lien on property owned by such
Person, whether or not the obligations have been assumed; and (f) guarantees by
such Person of Indebtedness of another Person.

         "INVESTMENTS" shall mean any payment of money or property to a Person
in exchange for an equity interest or evidence of indebtedness of such Person or
in exchange for any right to acquire an interest in such person.

         "INTELLECTUAL PROPERTY SECURITY AGREEMENT" shall mean that certain
Intellectual Property Security Agreement dated November ____, 1998, by and
between the Bank and the Borrower as the same may be amended, restated or
otherwise modified from time to time.

         "LANDLORD CONSENT AND ESTOPPEL CERTIFICATE" shall mean that certain
Landlord Consent and Estoppel Certificate dated November ____, 1998, in
connection with the Borrower's property located at 11 Riverside Street, Nashua,
New Hampshire.

         "LATE PAYMENT FEE" shall have the meaning set forth in Section 2.05
hereof.

         "LIEN" shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other), preference, priority, or other security agreement or
preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement), any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction to evidence
any of the foregoing.

         "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
Five Hundred Thousand Dollars ($10,500,000).

         "LOAN DOCUMENTS" shall mean collectively, the Original Loan Agreement
as amended and restated in its entirety by this Agreement, the Original Note as
amended and restated in its entirety by the Note, the Subordination Agreements,
the Security Agreement, Intellectual Property Security Agreement, Collateral
Assignment of Material Contracts, Guaranty Agreements, Pledge Agreement, all
related financing statements, the Landlord Consent and Estoppel Certificate, as
amended, and any other document, agreement, instrument, schedule or exhibit
entered into or delivered in connection herewith or therewith or contemplated




                                       3
<PAGE>   8

hereby or thereby or related hereto or thereto or otherwise referred to herein
or therein, all as may be amended, restated or otherwise modified from time to
time, and any other note or notes issued in replacement of the Note and all
extensions, renewals, modifications, substitutions, replacements, amendments and
restatements thereof or of the Note.

         "LOANS" shall mean collectively loans made by the Bank to the Borrower
pursuant to this Agreement.

         "MATERIAL ADVERSE EFFECT" shall mean, with respect to the Borrower, a
material adverse effect on the properties, business, operations, assets or
condition (financial or otherwise) of the Borrower, or a material adverse effect
on the Borrower's ability to perform any of its obligations under any of the
Loan Documents.

         "MATURITY DATE" shall mean March 1, 1999, 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.

         "MAXIMUM LINE AVAILABILITY" shall mean Ten Million Five Hundred
Thousand Dollars ($10,500,000).

         "NOTE" shall mean the secured Amended and Restated Line of Credit Note
in the maximum principal amount of Ten Million Five Hundred Thousand Dollars
($10,500,000) dated November ___, 1998 (as amended and restated as of the
Closing Date) issued by the Borrower to the Bank on the Closing Date) in the
form of EXHIBIT A annexed hereto, and all extensions, renewals, modifications,
substitutions, replacements, amendments and restatements thereof.

         "OBLIGATIONS" shall mean collectively in each case whether now existing
or hereafter arising, direct or indirect, absolute or contingent, due or to
become due, liquidated or unliquidated, and whether or not evidenced by any
note: (i) all indebtedness, liabilities and obligations of the Borrower to the
Bank under this Agreement, the Note and the other Loan Documents, including,
without limitation, the interest accruing on the Note after the filing of any
bankruptcy or similar petition, reasonable attorneys' fees and collection costs
incurred in the enforcement or collection thereof, and any and all extensions,
renewals, modifications, substitutions, replacements, amendments and
restatements of any of the foregoing, and (ii) any and all other indebtedness,
liabilities and obligations of the Borrower to the Bank.

         "ORIGINAL LOAN AGREEMENT" shall mean the Loan Agreement dated as of
August 4, 1995, as amended as of August 20, 1996 and August 15, 1997 and as
amended and restated on August 28, 1998 between the Bank and the Borrower.

         "ORIGINAL NOTE" shall mean the secured Amended and Restated Line of
Credit Note in the maximum principal amount of Ten Million Dollars ($10,000,000)
issued by the Borrower on August 4, 1995 (as amended and restated as of August
20, 1996 and August 28, 1998).

         "PERSON" shall mean a corporation, a limited liability company, an
association, a general or limited partnership, a limited liability partnership,
a joint venture, a trust, an organization, any business entity, a natural person
or any government or agency or political subdivision thereof.

         PLANS" shall have the meaning set forth in Section 6.10 hereto.

         "PLEDGE AGREEMENTS" shall mean that certain Pledge Agreement dated
November ____, 1998, by and between the Bank and Borrower in the Form of EXHIBIT
F hereto, as the same may be amended, restated or otherwise modified from time
to time.



                                       4
<PAGE>   9

         "PRIME RATE" shall mean the rate of interest announced by the Bank in
Boston, Massachusetts from time to time as its "prime rate", as adjusted to
conform to changes as of the opening of business on the date of any such change
in the Prime Rate. Each change in the interest rate hereunder and under the Note
shall take effect simultaneously with the corresponding change in such Prime
Rate.

         "PROJECTIONS" shall have the meaning set forth in Section 3.01(b)
hereof.

         "QUALIFIED CUSTOMER ORDERS" shall mean orders from unaffiliated
customers of the Borrower evidenced by valid, enforceable, written purchase
orders or contracts.

         "QUICK RATIO" shall mean, as measured on the last day of a Fiscal
Quarter, a fraction, the numerator of which is equal to the aggregate sum of the
Borrower's cash, accounts receivable and marketable securities, and the
denominator of which is equal to the Borrower's Current Liabilities. For the
purpose of financial covenant compliance, Current Liabilities shall include the
outstanding balance under the Line of Credit as of the compliance date.

         "RESTRICTED PAYMENT" shall mean any payment, dividend or other
distribution, direct or indirect by the Borrower in cash, property, securities
or other assets to any of its partners, or stockholders, as applicable, or to
any Affiliate of any of its partners or stockholders, as applicable, including,
without limitation, distributions, reimbursements, dividends, salaries, payments
of interest or principal, and payments for the purpose of purchasing, retiring
or redeeming any ownership or other equity interests in the Borrower or making
any distribution or return of capital in respect of such interests, excluding,
however, reasonable compensation paid to any stockholder or partner who is an
existing employee of the Borrower.

         "SECURITY AGREEMENT" shall mean that certain Security Agreement dated
November ____, 1998 by and between the Bank and the Borrower, as the same may be
amended, restated or otherwise modified from time to time.

         "SHAREHOLDER NOTE" shall mean the demand promissory note issued by the
Borrower in favor of Theodore J. Goodlander during the Borrower's 1996 fiscal
year in the original principal amount of $910,000, of which $710,000 is
currently outstanding as of November, 1998, and any extension, renewal,
modification, substitution or amendment thereof, and any other promissory notes,
now or in the future, issued by the Borrower in favor of Theodore J. Goodlander,
and subject to a Subordination Agreement as set forth in Section 2.09 hereof.

         "SUBORDINATION AGREEMENT" shall have the meaning set forth in Section
2.09 hereof.

         "SUBSIDIARIES" shall mean any Person of which the Borrower or other
specified parent shall now or hereafter at the time own, directly or indirectly
through one or more Subsidiaries or otherwise, sufficient voting stock (or other
beneficial interest) to entitle it to elect at least a majority of the board of
directors or trustees or similar managing body.

         "TANGIBLE NET WORTH" shall mean the total of all assets of the Borrower
appearing on a balance sheet prepared in accordance with generally accepted
accounting principles, after deducting therefrom (without duplication of
deductions): (i) any write-up in the book carrying value of any asset resulting
from a re-evaluation thereof subsequent to December 31, 1989; (ii) all reserves,
including but not limited to reserves for liabilities, fixed or contingent,
deferred income taxes, obsolescence, depletion, insurance, and inventory
valuation, which are not deducted from assets; and (iii) all Indebtedness (after
eliminating inter-company items), MINUS, all of the Borrower's intangible
assets, including, without limitation, goodwill, intellectual property,
organizational costs, non-compete agreements, and deferred financing costs.


                                        5


<PAGE>   10



         "YEAR 2000 COMPLIANCE" OR "YEAR 2000 COMPLIANT" shall mean the
operation of computer systems material to the business and operations of the
Borrower such that dates after 12/31/99 will be properly recognized by the
computer systems.

         1.02.    OTHER DEFINITIONAL PROVISIONS.

                  (a) Except as otherwise specifically provided for herein, all
accounting terms used in this Agreement shall be construed in accordance with
generally accepted accounting principles consistently applied and all financial
data submitted pursuant to this Agreement shall be prepared in accordance with
such principles.

                  (b) All terms defined in this Agreement shall have the
above-defined meanings when used in the Note or any other Loan Document,
schedule, exhibit, certificate, report or other document made or delivered
pursuant to this Agreement or any other Loan Document, unless the context
therein shall otherwise require.

                  (c) The words "hereof", "herein", "hereunder" and similar
terms when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.

                  (d) References, if any, to any obligations or liabilities of
the "Borrower" shall refer to the joint and several obligations of such Persons,
if more than one Borrower.

                  (e) Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular and
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.

II.      THE LOANS

         2.01.    LINE OF CREDIT; ADVANCES; THE NOTE.

                  (a) LINE OF CREDIT. Subject to the terms and conditions
contained in this Agreement, and so long as there shall have been no material
adverse change in the Borrower's financial condition since the time of the
Borrower's most recent request for a disbursement hereunder, the Bank agrees to
make loans to the Borrower from time to time from the date hereof to, but not
including, the Maturity Date (collectively, the "Loans") in the aggregate
principal amount not to exceed at any time outstanding the amount of the Maximum
Line Availability (the "Line of Credit"). Prior to the Maturity Date, and except
as otherwise provided in this Agreement, the Borrower may borrow, repay and
re-borrow within the limits of the Maximum Line Availability. Each Loan shall be
made and maintained at the Bank's principal place of business.

                  (b) ADVANCES UNDER THE LINE OF CREDIT. Requests for loans
under the Line of Credit (each an "Advance" and collectively, the "Advances")
may be made by the Borrower by written notice to the Bank in the form of Exhibit
B annexed hereto (each a "Request for Advance") (effective upon receipt by the
Bank) by 2:00 p.m. Eastern time on the day each such Loan is requested,
specifying: (1) the requested date of such Loan, and (2) the amount of such
Loan. Subject to the terms and conditions of this Agreement, loans requested as
set forth herein will be funded by crediting the Borrower's demand deposit
account at the Bank by the close of business on the day such Advance or date of
borrowing, as applicable, is requested. Advances shall be in an amount of at
least Ten Thousand Dollars ($10,000), or if less, the unused portion of the
Maximum Line Availability. Any Loans for which no Request for Advance is
received shall be governed 

                                        6


<PAGE>   11


by the Borrower's LMCS Agreement, if any, with the Bank. Each Request for
Advance shall be irrevocable and binding on the Borrower.

                  (c) THE NOTE. The Loans shall be evidenced by the Note and
shall bear interest and mature as set forth in the Note and in this Agreement.

                  (d) PRINCIPAL REPAYMENT. The outstanding principal balance of
the Note shall be due and payable in full on the Maturity Date.

                  (e) VOLUNTARY PREPAYMENTS OR PERMANENT REDUCTION OF MAXIMUM
LINE AVAILABILITY. The Borrower may prepay the Note in whole or in part at any
time and from time to time, or permanently reduce or terminate the Maximum Line
Availability, PROVIDED THAT (i) any prepayment of the full amount of the Note or
permanent reduction or termination of the Maximum Line Availability shall be
accompanied by the full payment of all accrued interest and fees due thereon,
(ii) any partial prepayment of the Note shall be accompanied by the payment of
interest and fees due through the date of any such prepayment on that portion of
the Note being prepaid, and (iii) any prepayment of the Note or permanent
reduction or termination of the Maximum Line Availability shall be made upon not
less than one (1) Business Day prior written notice to the Bank. Any funds
applied to prepay the outstanding principal balance of the Note may be
readvanced, subject at all times to the terms and conditions of this Agreement.

                  (f) APPLICATION OF PREPAYMENTS. All prepayments (whether
voluntary, mandatory or permanent) shall, unless otherwise determined by the
Bank, be applied first to overdue interest and fees, second to accrued but
unpaid interest and fees, and finally, to prepayment of the outstanding
principal balance of the Note.

         2.02.    RATE OF INTEREST; PAYMENT OF INTEREST.

                  (a) RATES OF INTEREST. The Note shall bear interest on the
unpaid principal amount thereof at a rate per annum equal to the Prime Rate plus
one-quarter percent (1/4%).

                  (b) PAYMENT OF INTEREST. Interest under the Note shall be
payable monthly in arrears on the first day of each month, commencing on the
first day of the month next succeeding the Closing Date, and at maturity,
whether by reason of demand, acceleration, payment, prepayment or otherwise.

                  (c) DEFAULT RATE OF INTEREST. Notwithstanding subsection (a)
of this Section 2.02, at the Bank's option, if an Event of Default shall have
occurred and shall be continuing after the expiration of any applicable cure
period, then, in such event, the interest rate applicable to the Note (the
"Default Rate") shall be four percent (4%) in excess of the Prime Rate, which
Default Rate shall become effective on the date such Event of Default occurs and
shall continue in effect until such Event of Default is either cured by the
Borrower, waived by the Bank or in the case of incurable financial covenant
defaults under Article VII hereof, which are not waived by the Bank, the
Borrower shall have returned to being in compliance therewith.

                  (d) CHANGE IN PRIME RATE. Each change in the interest rate
payable under the Note shall take effect simultaneously with the corresponding
change in such Prime Rate.

                  (e) CALCULATION OF INTEREST. Interest shall be calculated on
the basis of a three hundred sixty (360) day year, counting the actual number of
days elapsed.

         2.03.    LINE AVAILABILITY FEE. In consideration of the Bank's entering
into this Agreement, while any portion of the Line of Credit is outstanding, the
Borrower shall pay to the Bank an annual fee (the "Line 


                                        7


<PAGE>   12


Availability Fee") in the amount of one-quarter of one-percent (1/4%) per annum
of the average daily balance of the unused portion of the Maximum Line
Availability, payable quarterly in arrears on the last day of each March, June,
September and December, commencing September 30, 1998. The Line Availability Fee
shall be calculated on the basis of a three hundred sixty (360) day year,
counting the actual number of days elapsed.

         2.04.    PAYMENTS UNDER THE NOTE. All payments made by the Borrower of
principal of, and interest on, the Note, and other sums and charges payable
hereunder shall be made to the Bank by debiting by the Bank of the demand
deposit account(s) in the name of the Borrower at the Bank, or in such other
reasonable manner as may be designated by the Bank in writing to the Borrower,
and in any event shall be made in immediately available funds. The Borrower
hereby authorizes the Bank to so debit any one or more of its demand deposit
account(s) for such payments.

         2.05.    LATE PAYMENT FEE. If any payment due hereunder or under the
Note is not paid within five (5) days after the date such payment is due, then
the Borrower shall pay to the Bank, to the extent permitted by law, a fee (the
"Late Payment Fee") equal to two percent (2%) of the amount of the late payment.

         2.06.    DAY OF PAYMENT. Whenever any payment to be made hereunder or
under the Note shall become due and payable on a day which is not a Business
Day, such payment may be made on the next succeeding Business Day and, in the
case of any payment of principal, such extension of time shall in such case be
included in computing interest on such payment.

         2.07.    USE OF PROCEEDS. The proceeds of the Loans shall be used by
the Borrower for working capital purposes (and for no other purposes without the
prior written consent of the Bank).

         2.08.    NEGATIVE PLEDGE COVENANT. The Borrower covenants and agrees
not to encumber, pledge, mortgage, hypothecate, or grant security interests in
or other liens on any of its assets (whether tangible or intangible or now owned
or hereafter acquired), other than pursuant to the Loan Documents, without the
prior written consent of the Bank.

         2.09.    SUBORDINATION OF INDEBTEDNESS TO THIRD PARTIES. The Borrower
shall deliver to the Bank, or cause to be delivered to the Bank by the
appropriate parties thereto, one or more intercreditor and subordination
agreements providing for the subordination to the Obligations of all
Indebtedness of the Borrower to Theodore J. Goodlander and if requested by the
Bank, its other Affiliates, pursuant to one or more subordination agreements
(each an "Affiliate Subordination Agreement") in form and substance satisfactory
to the Bank and its counsel.

         The agreement(s) described in this Section 2.09 are sometimes
hereinafter collectively referred to as the "Subordination Agreements" and each
individually as a "Subordination Agreement". The Borrower and each such
subordinated creditor shall take such further action and execute such documents
as may be necessary from time to time to enable the Bank to obtain and maintain
the subordination referred to herein.

III.     REPRESENTATIONS AND WARRANTIES

         In order to induce the Bank to enter into this Agreement and to make
the Loans, the Borrower represents and warrants to the Bank (which
representations and warranties shall survive the delivery of the Note and the
making of the Loans) that:

         3.01.    FINANCIAL STATEMENTS. The Borrower has heretofore delivered to
the Bank:


                                        8


<PAGE>   13
                  (a) Copies of audited balance sheets and statements of income
and loss and cash flows of the Borrower for the fiscal years ending December 31,
1995, 1996 and 1997 and unaudited interim financial statements for the
nine-month period ending September 30, 1998. Said financial statements (i) are
complete and correct in all material respects and fairly present the financial
condition and the results of operations of the Borrower at the dates thereof,
and (ii) except as otherwise disclosed in writing to the Bank, have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with that of preceding periods. Since the dates of such
financial statements, there have been no material adverse changes in the
condition of the Borrower, financial or otherwise. Except as disclosed in said
financial statements, the Borrower has no contingent obligations, liabilities
for taxes, long-term debt or other forward or long-term commitments.

                  (b) Statements of projected revenues, expenses and operating
income of the Borrower through fiscal year ending December 31, 1998 (the
"Projections"), a copy of which is attached hereto as Schedule 3.01. The
Borrower has prepared the Projections in good faith on the basis of reasonable
and prudent assumptions and believes the financial projections set forth therein
to be reasonable in light of currently available information. To the best of
Borrower's knowledge, based on available information, the Projections do not
omit to state any material fact known to the Borrower to be necessary in order
to make the Projections not misleading. The Bank agrees to use its best efforts
to retain the confidentiality of the Projections but shall incur no liability
for its failure to do so except as a result of its own wilful or gross
negligence.

         3.02.    ORGANIZATION OF THE BORROWER. The Borrower is a corporation,
duly organized, validly existing and in good standing under the laws of the
State of Delaware, (ii) has the power and authority to own its properties and to
carry on its business as now being conducted and as presently contemplated,
(iii) is duly qualified to transact business in all states where the nature of
its activities requires such qualification or where the failure to qualify would
not have a Material Adverse Effect on the Borrower, and (iv) has the power and
authority to execute, deliver and perform its obligations under the Loan
Documents.

         3.03.    AUTHORIZATION AND BINDING EFFECT. The execution, delivery of,
and performance by the Borrower of its obligations under the Loan Documents have
been duly authorized by all requisite corporate action of the Borrower and
neither the execution and performance of, nor the execution and delivery of any
of the Loan Documents will (A) violate any provision of (i) law, any order,
judgment or decree of any court or other agency of government, (ii) the
Certificate of Incorporation or Bylaws of the Borrower, (iii) any indenture,
agreement or other instrument to which the Borrower is a party, or by which the
Borrower is bound, or (B) be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or instrument, or (C) (except as may be permitted by this
Agreement) result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon any of the property or assets of the
Borrower pursuant to any such indenture, agreement or instrument. The Loan
Documents constitute the legal, valid and binding obligations of the Borrower,
and are enforceable in accordance with their respective terms.

         3.04.    LITIGATION. There is no action, suit or proceeding at law or
in equity or by or before any governmental instrumentality or other agency
(including any arbitration board or tribunal) now pending or, to the knowledge
of the Borrower, threatened against or affecting the Borrower (nor to Borrower's
knowledge does any basis exist for such an action, suit or proceeding) (a)
which, if adversely determined, would be likely to have a Material Adverse
Effect on the Borrower, or (b) which questions the validity of any of the Loan
Documents, or any action taken or to be taken pursuant thereto.

         3.05.    NO ENCUMBRANCES OR DEFAULTS. The Borrower is not a party to
any agreement or instrument or subject to any corporate, contractual or other
restriction materially adversely affecting its business, properties, assets,
operations or condition, financial or otherwise, taken as a whole. The Borrower
is not in violation of any provision of its Certificate of Incorporation. The
Borrower is not in violation of any material indenture, agreement or instrument
to which it is a party, or by which it is bound, or, to the best of 


                                        9


<PAGE>   14


the Borrower's knowledge and belief, of any provision of law, the violation of
which could have a Material Adverse Effect upon the Borrower, or any order,
judgment or decree of any court or other agency of government. Without limiting
the scope of the foregoing, the Borrower is in compliance in all material
respects with all federal, state and local laws and regulations, including all
federal and state securities laws and regulations, the violation of which could
have a Material Adverse Effect on the Borrower. There is no fact known to the
Borrower which materially adversely affects the business, operations, affairs or
condition of either of the Borrower or any of its respective properties, which
has not been set forth in this Agreement or in the exhibits and schedules to
this Agreement.

         3.06.    INDEBTEDNESS AND LIENS. The Borrower has no Indebtedness
except for Indebtedness permitted by Section 6.01 hereof, and there are no Liens
on any assets of the Borrower except Liens permitted by Section 6.02 hereof.

         3.07.    TAXES. The Borrower has filed all tax returns required by law
to be filed and has paid all taxes, assessments and other governmental charges
levied upon its properties, assets, and income, other than those not yet
delinquent. There are no unpaid assessments for additional taxes and no basis
therefor. The Borrower has paid all assessments and other charges levied upon
its properties.

         3.08.    INVESTMENTS. Other than Investments permitted by Section 6.06,
the Borrower has no Investments and does not hold or own any equity or similar
ownership interests or any rights to acquire the same in any Person.

         3.09.    BORROWER NOT AN INVESTMENT COMPANY. The Borrower is not an
"investment company", or a company "controlled" by an "investment company", as
such terms are defined in the Investment Borrower Act of 1940, as amended.

         3.10.    FEDERAL RESERVE SYSTEM REGULATIONS. The Borrower does not own
and has no present intention of acquiring, any "margin security" within the
meaning of Regulation G (12 CFR Part 207), or any "margin stock" within the
meaning of Regulation U (12 CFR Part 221), of the Board of Governors of the
Federal Reserve System (herein called "margin security" and "margin stock").
None of the proceeds of the Loans will be used, directly or indirectly, by the
Borrower for the purpose of purchasing or carrying, or for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry, any margin security or margin stock or for any other purpose which
might constitute the transactions contemplated hereby a "purpose credit" within
the meaning of said Regulation G or Regulation U, or cause this Agreement to
violate any other regulation of the Board of Governors of the Federal Reserve
System or the Securities Exchange Act of 1934, as amended, or any rules or
regulations promulgated under any of such statutes. Neither the consummation of
the Loans hereunder, nor the use, directly or indirectly, of all or any portion
of the proceeds thereof, will violate or result in a violation of any provision
of any applicable statute, regulation or order of, or any restriction imposed
by, the United States of America or by any authorized official, board,
department, instrumentality or agency thereof relating to the control of foreign
or overseas lending or investment.

         3.11.    ERISA COMPLIANCE. The Borrower has not incurred (a) any
accumulated funding deficiency within the meaning of ERISA, or (b) any material
liability to the Pension Benefit Guaranty Corporation established under ERISA
(or any successor thereto under such Act) in connection with any employee
benefit plan established or maintained by the Borrower; nor has the Borrower had
any tax assessed against it by the Internal Revenue Service for any alleged
violation under Section 4975 of the Code.

         3.12.    NO MISSTATEMENTS OR OMISSIONS. No statement of fact made by or
on behalf of the Borrower in this Agreement or in any certificate or schedule
furnished to the Bank pursuant hereto, or otherwise delivered by the Borrower to
the Bank, contains any untrue statement of a material fact or omits to state any

                                       10


<PAGE>   15

material fact necessary to make statements contained therein or herein not
misleading. There is no fact presently known to the Borrower which has not been
disclosed to the Bank which materially affects adversely, nor as far as the
Borrower can foresee, will materially affect adversely the property, business,
operations or condition (financial or otherwise) of the Borrower taken as a
whole.

         3.13.    SOLVENCY OF BORROWER. Entering into this Agreement, making and
delivering the Note and the borrowings under this Agreement, do not and will not
render the Borrower insolvent or unable to pay its debts as they become due. The
Borrower is not contemplating either the filing of a petition under any state or
federal bankruptcy or insolvency law or the liquidating of all or a major
portion of its property, and the Borrower has no knowledge of any person
contemplating the filing of any such petition against it or any of its assets.
After giving effect to the transactions contemplated by this Agreement
(including all borrowings to be made hereunder), the Borrower is and will be
able to pay its debts as such debts become due and will have and continue to
have capital sufficient to carry on its business as presently conducted and as
presently contemplated to be conducted.

         3.14.    YEAR 2000 COMPLIANCE. The Borrower has taken all necessary
action to assess and evaluate all of the hardware, software embedded microchips
and other processing capabilities that it uses, directly or indirectly, and made
inquiry of the Borrower's material suppliers and vendors, to ensure that it will
be able to function accurately and without interruption using date information
before, during and after January 1, 2000.

         3.15.    PRINCIPAL PLACE OF BUSINESS; LOCATION OF RECORDS. The
Borrower's and each of its Subsidiaries' principal place of business is as set
forth on SCHEDULE 3.15 hereto and the Borrower and each of its Subsidiaries has
had no other principal place of business during the last six months. All of the
books and records or true and complete copies thereof relating to the accounts
and contracts of the Borrower and each of its Subsidiaries are and will be kept
at such locations.

         3.16.    SUBSIDIARIES. The Borrower has no Subsidiaries except for
those listed in SCHEDULE 3.16 hereto. All of the issued and outstanding capital
stock of each Subsidiary listed on SCHEDULE 3.16 hereto is owned of record and
beneficially by the Borrower.

         3.17.    STOCK. There are presently issued by the Borrower and its
Subsidiaries and outstanding the shares of capital stock indicated on SCHEDULE
3.17 hereto. The Borrower and its Subsidiaries have received the consideration
for which such stock was authorized to be issued and have otherwise complied
with all legal requirements relating to the authorization and issuance of shares
of stock and all such shares are validly issued, fully paid and non-assessable.
The Borrower and its Subsidiaries have no other capital stock of any class
outstanding.

         3.18.    ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 3.18
hereto.

                  (a) None of the Borrower, any of its Subsidiaries, nor any
operator of any of their respective properties is in violation, or to the
Borrower's knowledge is in alleged violation, of any Environmental Law, which
violation would have a material adverse effect on the business, assets or
financial condition of the Borrower or any of its Subsidiaries.

                  (b) None of the Borrower any of its Subsidiaries or any
operator of any of their respective properties has received notice from any
third party, including without limitation any federal, state, county, or local
governmental authority, (i) that it has been identified as a potentially
responsible party under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended ("CERCLA") or any equivalent state law,
with respect to any site or location; (ii) that any hazardous waste, as defined
in 42 U.S.C. ss. 6903(5), any hazardous substances, as defined in 42 U.S.C. ss.
9601(14), any pollutant or contaminant, as defined in 42 U.S.C. ss. 9601(33), or
any toxic substance, oil or hazardous materials or other 


                                       11


<PAGE>   16

chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which it has generated, transported or disposed of, has been found
at any site at which a federal, state, county, or local agency or other third
party has conducted or has ordered the Borrower, any of its Subsidiaries or
another third party or parties (E.G. a committee of potentially responsible
parties) to conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or shall be a named party
to any claim, action, cause of action, complaint (contingent or otherwise) or
legal or administrative proceeding arising out of any actual or alleged release
or threatened release of Hazardous Substances. For purposes of this Agreement,
"release" means any past or present releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, disposing or
dumping of Hazardous Substances into the environment.

                  (c) (i) The Borrower, each of its Subsidiaries and each
operator of any real property owned or operated by the Borrower is in
compliance, in all material respects, with all provisions of the Environmental
Laws relating to the handling, manufacturing, processing, generation, storage or
disposal of any Hazardous Substances; (ii) to the best of the Borrower's
knowledge, no portion of property owned, operated or controlled by the Borrower
or any of its Subsidiaries has been used for the handling, manufacturing,
processing, generation, storage or disposal of Hazardous Substances except in
accordance with applicable Environmental Laws; (iii) to the best of the
Borrower's knowledge, there have been no releases or threatened releases of
Hazardous Substances on, upon, into or from any property owned, operated or
controlled by the Borrower or any of its Subsidiaries, which releases could have
a material adverse effect on the value of such properties or adjacent properties
or the environment; (iv) to the best of the Borrower's knowledge, there have
been no releases of Hazardous Substances on, upon, from or into any real
property in the vicinity of the real properties owned, operated or controlled by
the Borrower or any of its Subsidiaries which, through soil or groundwater
contamination, may have come to be located on the properties of the Borrower or
any of its Subsidiaries; (v) there have been no releases of Hazardous Substances
on, upon, from or into any real property formerly but no longer owned, operated
or controlled by the Borrower or any of its Subsidiaries.

                  (d) None of the properties of the Borrower nor any of its
Subsidiaries is subject to any applicable environmental cleanup responsibility
law or environmental restrictive transfer law or regulation by virtue of the
transactions set forth herein and contemplated hereby.

         3.19.    MATERIAL CONTRACTS. Except as described in SCHEDULE 3.20
hereto, there are no contracts, agreements or documents of a similar nature
which if breached or terminated could result in any material adverse change in
the business or assets or in the condition, financial or otherwise, of the
Borrower or any of its Subsidiaries.

         3.20.    QUALIFIED CUSTOMER ORDERS. The Borrower's Qualified Customer
Orders for the period of October 1, 1998 through November 9, 1998 were
$2,400,000.

IV.      CONDITIONS OF MAKING THE LOANS AND ADVANCES.

         4.01.    INITIAL ADVANCE. The Bank shall have no obligation to make the
initial Advance of Loans unless:

                  (a) The representations and warranties set forth in Article
III hereof and in the Loan Documents and each and every Exhibit, Schedule,
instrument, document or agreement delivered in connection therewith shall be
true and correct in all material respects on and as of the date hereof and shall
be true and correct in all material respects as of the date the first Advance is
made, and the Borrower shall have performed all obligations which were to have
been performed by it hereunder prior to the date the first Advance is made.


                                       12


<PAGE>   17
                  (b)      No Event of Default shall have occurred and be
continuing beyond any applicable grace or cure period set forth in Article VIII
hereof, and no event which upon notice or lapse of time, or both, would
constitute such an Event of Default, shall have occurred and be continuing
beyond any applicable grace or cure period set forth in Article VIII hereof, nor
would result from the making of such Advance.

                  (c)      The Borrower shall have executed and delivered, or
caused to be executed and delivered, to the Bank, the following:



                           (i)      This Agreement, the Note, the Security
                                    Agreement (and related UCC-1 financing
                                    statements), Intellectual Property Security
                                    Agreement, Collateral Assignment of Material
                                    Contracts, Guaranty Agreements, Pledge
                                    Agreements (and related stock certificates
                                    and stock powers), all related financing
                                    statements, the Landlord Consent and
                                    Estoppel Certificate, and the Amended and
                                    Restated Affiliate Subordination Agreement
                                    consistent with the transactions
                                    contemplated by this Agreement; together
                                    with any other documents required by the
                                    terms thereof;

                           (ii)     A certificate of the Secretary or Assistant
                                    Secretary of the Borrower and Guarantors
                                    certifying to the accuracy, conformity to
                                    prevailing law and completeness of
                                    resolutions adopted by its directors (and,
                                    if necessary, its stockholders) authorizing
                                    the execution and delivery by the Borrower
                                    of each Loan Documents to which it is a
                                    party, and certifying the names of the
                                    officers authorized to sign such Loan
                                    Documents, with the true signatures of such
                                    Persons. The Bank may conclusively rely on
                                    such certificates until it shall receive a
                                    further certificate of the Secretary or
                                    Assistant Secretary of the Borrower,
                                    canceling or amending the prior certificate
                                    and submitting the signatures of the
                                    officers named in such further certificate;

                           (iii)    A copy of the Articles of Incorporation of
                                    the Borrower, and all amendments thereto
                                    through the Closing Date, certified as of a
                                    recent date as true and correct by the
                                    Secretary of the State of its incorporation,
                                    and a copy of the by-laws of the Borrower,
                                    and all amendments thereto through the
                                    Closing Date, certified as true and correct
                                    by its Secretary or Assistant Secretary, or
                                    if no amendments thereto since previously
                                    delivered to the Bank, a certificate of the
                                    Secretary of the Borrower certifying as to
                                    the accuracy and completeness of such
                                    Certificate of Incorporation and by-laws as
                                    previously delivered to the Bank;

                           (iv)     The certificates of insurance required by
                                    Section 5.07 hereof;

                           (v)      The favorable written opinion of counsel for
                                    the Borrower and Guarantors dated the date
                                    of this Agreement, satisfactory to the Bank
                                    in scope and substance, in substantially the
                                    form of Exhibit B attached hereto;

                           (vi)     The Shareholder Note; and

                           (vii)    Such further supporting documents as the
                                    Bank may reasonably request.

                  (d)      All legal matters incident to the transactions
contemplated hereby shall be satisfactory to counsel to the Bank.


                                       13


<PAGE>   18

         4.02.    SUBSEQUENT ADVANCES. The Bank shall have no obligation to make
further Advances of Loans unless:

                  (a) The representations and warranties set forth in Article
III hereof and in the Loan Documents and each and every Exhibit, Schedule,
instrument, document or agreement delivered in connection therewith shall be
true and correct as of the date of the Advance (except to the extent affected by
transactions occurring after the date hereof and permitted hereunder);

                  (b) No Event of Default shall have occurred and be continuing
beyond any applicable grace or cure period set forth in Article VIII hereof, and
no event which upon notice or lapse of time, or both, would


constitute such an Event of Default, shall have occurred and be continuing
beyond any applicable grace or cure period set forth in Article VIII hereof, nor
would result from the making of such Advance;

                  (c) All legal matters incident to the transactions
contemplated hereby shall be satisfactory to counsel for the Bank.

V.       AFFIRMATIVE COVENANTS

         The Borrower hereby covenants and agrees that for so long as the Bank
has any obligation to extend credit to the Borrower hereunder, and so long as
there remains outstanding any of the principal of, and interest on, the Note and
any other indebtedness of the Borrower to the Bank, whether now existing or
arising hereafter, the Borrower will:

         5.01.    MAINTENANCE OF PROPERTIES; COMPLIANCE WITH LAWS. (a) Do or
cause to be done all things necessary to preserve, renew and keep in full force
and effect its legal existence, and all material rights, licenses, and permits;
(b) comply in every material respect with all laws and regulations applicable
and to all material agreements to which it is a party, including all agreements
with its stockholders, the violation of which could have a material adverse
effect upon the business or financial condition of the Borrower taken as a
whole; (c) at all times maintain, preserve and protect its trade names,
trademarks, copyrights, and similar or other intellectual or intangible property
and preserve all the remainder of its material properties (whether tangible or
intangible) used or useful in the conduct of its business and keep the same in
good repair, working order and condition; and (d) from time to time, make, or
cause to be made, all needful and proper repairs, renewals, replacements,
betterments and improvements thereto, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.

         5.02.    PAYMENT OF TAXES; DEBTS. Pay and perform all of its
Obligations hereunder and under the other Loan Documents, and pay and discharge
as they become due or before late charges accrue all of its Indebtedness and all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income and profits or upon any of its property, real, personal or mixed, or
upon any part thereof, before the same shall become in default, as well as all
lawful claims for labor, materials and supplies or otherwise, which, if unpaid,
might become a lien or charge upon such properties or any part thereof, unless
the Borrower is contesting such Indebtedness, levies, claims or charges in good
faith and has set aside adequate reserves on its books in respect thereof;
provided, however, that in any event all such Indebtedness, claims, levies and
charges shall be paid before any property of the Borrower is seized or attached
in respect thereof.

         5.03.    REPORTS TO BANK. Furnish to the Bank:

                  (a) Within ninety (90) days of the end of each fiscal year,
audited balance sheets and statement of income (operation) on a consolidated
basis and management prepared on a consolidating basis, and a statement of cash
flow, together with (i) supporting schedules, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, and
(ii) copies of auditor's management letters, 


                                       14


<PAGE>   19
in each case with an unqualified certification by a certified public accountant
selected by the Borrower and acceptable to the Bank, the form of certification
to be also satisfactory to the Bank, showing the Borrower's financial condition
at the close of such fiscal year, and the results of operations during such year
and containing a statement to the effect that such accountants have examined the
provisions of this Agreement and that, to the best of their knowledge, no Event
of Default, nor any event which upon notice or lapse of time or both would
constitute an Event of Default, has occurred (or, if such event has occurred, a
statement explaining its nature and extent); provided however, that in issuing
such statement, the accountants shall not be required to exceed the scope of
normal auditing procedures conducted in connection with their opinion referred
to above.

                  (b) Within thirty (30) days after the end of each month,
balance sheets and statement of income (operation) on a consolidated and
consolidating basis, and a statement of cash flow for such month and for the
year-to-date, together with supporting schedules setting forth in each case in
comparative form the corresponding figures for the preceding fiscal period of
the same duration in the prior fiscal year and the corresponding figures from
the Budget, in each case prepared by management of the Borrower and certified by
the Borrower's chief executive officer or chief financial officer, such balance
sheet to be as of the close of such month, and such statements of income
(operation) and cash flow to be for the month then ended and the period from the
beginning of the then current fiscal year to the end of such month (in each case
subject to normal audit and year-end adjustments).

                  (c) Within forty-five (45) days of the end of each Fiscal
Quarter, a certificate of covenant compliance in the form of Exhibit C attached
hereto, prepared and signed by the chief executive officer or chief financial
officer of the Borrower setting forth the amount required to be calculated by
the financial covenants of this Agreement and certifying to the fact that such
officer has examined the provisions of this Agreement and that no Event of
Default nor any event which upon notice or lapse of time, or both, would
constitute such an Event of Default, has occurred (or, if such an event has
occurred, a statement explaining its nature and extent).

                  (d) Prior to the commencement of each fiscal year (but no
later than December 15th of the prior year), a budget of projected income and
cash flow statement for the Borrower for the coming year detailed for each
calendar month and showing the expected results of operation of the Borrower
(the "Budget"). Such budget shall have been approved by the Borrower's Board of
Directors. The Bank agrees to use its best efforts to retain the confidentiality
of the Budget but shall incur no liability for its failure to do so except as a
result of its own wilful or gross negligence.

                  (e) Promptly upon receipt thereof, copies of all financial
reports (including, without limitation, management letters), if any, submitted
to the Borrower by its auditors in connection with each annual, interim or
special audit of its books by such auditors.

                  (f) Within fifteen (15) days of the end of each month, (i)
monthly sales reports setting forth in each case in comparative form the
corresponding figures for the preceding month, (ii) monthly backlog reports and
(iii) monthly detailed aging of accounts receivable and inventory reports, each
in detail satisfactory to the Bank.

                  (g) On or before November __, 1998, the information set forth
on SCHEDULE 5.03 hereto.

                  (h) Other information as the Bank may request from time to
time.

         5.04.    INSPECTION BY BANK. Permit agents or representatives of the
Bank to inspect, at reasonable hours and upon reasonable notice, its books and
records and to make abstracts or reproductions thereof. Absent the existence of
any default under the Loan Documents, field audit exams shall be conducted no
more frequently than quarterly, at the expense of the Borrower ($1,500 per
exam).


                                       15


<PAGE>   20


         5.05.    ACCOUNTING. Maintain a standard system of accounting
consistent with reports and financial statements previously delivered to the
Bank.

         5.06.    BANK ACCOUNTS. Maintain its principal operating and
disbursement accounts at the Bank and maintain sufficient balances on the date
payments are due to permit payment in full by the Borrower of all obligations
when due under the Note as authorized by the provisions of Section 2.07 hereof.
As soon as practical, the Borrower will establish and maintain a lock box or
similar cash management system at the Bank or another institution elected by the
Bank for cash collections satisfactory to the Bank. The Borrower shall direct
all of its customers and account debtors to make payments on all of its account
receivables to such lock box or similar account as the Bank requests. The
Borrower shall immediately transfer all cash collections it receives into such
account.

         5.07.    INSURANCE. Maintain (i) casualty insurance with such carriers
and in such amounts and on such other terms as shall be customarily carried by
comparable companies and satisfactory to the Bank, but in any event in the
amount of at least $1,000,000; (ii) public general comprehensive liability
insurance in a manner and with companies satisfactory to the Bank and
customarily carried by comparable companies, but in any event such general
comprehensive liability policies shall have a single limit of liability in an
amount not less than $1,000,000 for each occurrence of bodily injury or death
and $1,000,000 for each occurrence of property damage; (iii) extra expense
insurance and (iv) insurance required under the Security Agreement. The Bank
shall be named as a loss payee and additional insured under all such policies,
and all such policies shall include a clause prohibiting cancellation or
alteration of the policy without thirty (30) days' prior written notice to the
Bank. Certificates evidencing such insurance coverage shall be delivered to the
Bank prior to the making of the Loan hereunder. All insurance proceeds shall be
paid to the Bank to be applied to the Note as a prepayment, unless the proceeds
are less than $50,000, in which case they shall be paid to the Borrower.

         5.08.    NOTICE OF PROCEEDINGS, DEFAULTS AND ADVERSE CHANGES. Promptly
(and in any event within ten (10) Business Days after the Borrower's discovery
thereof) the Borrower shall give written notice to the Bank of (a) any
proceedings instituted or threatened against the Borrower by or in any federal,
state or local court or before any commission or other regulatory body, whether
federal, state or local, which, if adversely determined, could have a material
adverse effect upon the Borrower's business, operations, properties, assets, or
condition, financial or otherwise, taken as a whole, (b) any notices of default
received by the Borrower (together with copies thereof, if requested by the
Bank) with respect to (i) any alleged defaults under or violations of any of the
Borrower's material licenses, permits, approvals or franchises or any other
material agreements to which the Borrower is a party, or (ii) any alleged
default with respect to, or acceleration or other action under, any evidence of
material Indebtedness of the Borrower or any mortgage, indenture or other
agreement relating thereto; (c) any material adverse change in the condition,
financial or otherwise, taken as a whole, of the Borrower that is not disclosed
in the monthly or annual statements required to be furnished to the Bank
pursuant to Section 5.03 hereof, provided, however, that nothing herein shall be
construed to waive or extend the time periods set forth in such Section 5.03 for
the delivery of such financial statements; or (d) the occurrence of any Event of
Default or the occurrence of any event which, upon notice or lapse of time or
both, would constitute such an Event of Default.

         5.09.    ADDITIONAL ASSURANCES. The Borrower will, from time to time
hereafter, execute and deliver, or cause to be executed and delivered, such
additional instruments, certificates and documents, and take all such actions,
as the Bank shall reasonably request for the purpose of implementing or
effectuating the provisions of this Agreement, the Note, the negative pledge
agreement (as provided for in Section 2.08 hereof) or the Subordination
Agreements, and upon the exercise by the Bank of any power, right, privilege or
remedy pursuant to this Agreement, the negative pledge agreement (as provided
for in Section 2.08 hereof) or the Subordination Agreements which requires any
consent, approval, registration, qualification or authorization of any
governmental authority or instrumentality, exercise and deliver all
applications, certifications, instruments and other documents and papers that
the Bank may be so required to obtain.


                                       16


<PAGE>   21


         5.10.    YEAR 2000 COMPLIANCE. The Borrower acknowledges that adverse
consequences may result to its business and financial standing as a direct
result of its failure or the failure of any of its vendors, suppliers, lessors,
service providers or any other business affiliates that are material to the
business of the Borrower ("Business Affiliates"), to be Year 2000 Compliant, but
the Borrower reasonably expects that none of such consequences, either
individually or in the aggregate, would result in a Material Adverse Effect. The
Borrower further understands and agrees that the absence of a Material Adverse
Effect as a result of such adverse consequences is an integral factor in the
Bank's continuing evaluation of its credit relationship with the Borrower.
Therefore, the Borrower hereby covenants and agrees that it will assist the Bank
in assessing the status of Year 2000 Compliance and the impact of non-compliance
on its business, and to the extent the Borrower is not Year 2000 Compliant, the
Borrower will take all necessary actions to ensure compliance by 12/31/99.

         5.11.    TAX REFUND. The Borrower shall file for a tax refund for
fiscal year 1998 as soon as possible, but in no event later than March 15, 1999.
The Borrower shall file with its tax return all the necessary written requests
to have the appropriate taxing authority send all tax refunds that the Borrower
is due for fiscal year 1998 directly to the Bank. The proceeds of the tax refund
will be applied to the Loans and at the Bank's request shall permanently reduce
the Maximum Line Availability by the amount of such refund.

         5.12.    MAINTENANCE OF PROPERTIES AND LEASES. The Borrower and each of
its Subsidiaries shall maintain, keep and preserve all of its properties
(tangible and intangible) in good repair and working order, ordinary wear and
tear excepted. The Borrower and each of its Subsidiaries shall replace and
improve its properties as necessary for the conduct of its business. The
Borrower and each of its Subsidiaries shall comply in all material respects with
all leases naming it as lessee.

         5.13.    RECORDS, ACCOUNTS AND PLACES OF BUSINESS. The Borrower and
each of its Subsidiaries shall maintain comprehensive and accurate records and
accounts in accordance with generally accepted accounting principles
consistently applied. The Borrower and each of its Subsidiaries shall maintain
adequate and proper reserves. The Borrower and each of its Subsidiaries will
promptly notify the Bank of (a) any changes in the places of business of the
Borrower and its Subsidiaries and (b) any additional places of business which
may arise hereafter.

         5.14.    FINANCIAL ADVISOR. The Borrower shall complete interviews with
three (3) financial advisors prior to December 15, 1998. In the event of a
default under any of the Loan Documents, the Borrower shall engage a financial
advisor acceptable to the Bank to review its operations and formulate a business
plan to raise additional or replacement capital or financing.

VI.      NEGATIVE COVENANTS

         The Borrower hereby covenants and agrees that, so long as the Bank has
any obligation to extend credit to the Borrower hereunder, and so long as there
remains outstanding any portion of the principal of, and interest on, the Note
and any other indebtedness of the Borrower to the Bank, whether now existing or
arising hereafter, unless the Bank shall otherwise consent in writing, it will
not, directly or indirectly:

         6.01.    INDEBTEDNESS. Incur, create, assume, become or be liable in
any manner with respect to, or permit to exist, any Indebtedness or liability
(including Capital Lease obligations), except:

                  (a) Indebtedness to the Bank hereunder;

                  (b) Indebtedness with respect to trade obligations and other
normal accruals in the ordinary course of business not yet due and payable, or
with respect to which it is contesting in good faith the amount or validity
thereof by appropriate proceedings, and then only to the extent it has set aside
on its books 



                                       17


<PAGE>   22
adequate reserves therefor and only so long as no property of the Borrower is
seized or attached in satisfaction of or as security for the indebtedness;

                  (c) Indebtedness with respect to Capital Leases or purchase
money security interests in an amount not exceeding $50,000 in aggregate
principal amount outstanding at any one time; or

                  (d) Indebtedness in respect of endorsements of negotiable
instruments for collection in the ordinary course of business; or

                  (e) Unsecured Indebtedness under the Shareholder Note, subject
at all times to the Affiliate Subordination Agreement.

         6.02.    LIENS. Create, incur, assume or suffer to exist any mortgage,
pledge, Lien, charge or other encumbrance of any nature whatsoever on any of its
assets, now or hereafter owned, other than:

                  (a) Liens securing the payment of taxes, and other government
charges, either not yet due or the validity of which is being contested in good
faith by appropriate proceedings, and as to which it shall have set aside on its
books adequate reserves to the extent required by generally accepted accounting
principles, provided, however, that all such Liens shall be paid and discharged
before any property of the Borrower is seized, sold or attached in satisfaction
thereof or as security for the payment thereof);

                  (b) Deposits under worker's compensation, unemployment
insurance and social security laws, or to secure the performance of bids,
tenders, contracts (other than for borrowed money) or leases, or to secure
statutory obligations, or to secure surety or other similar bonds that the
Borrower is required to obtain in the ordinary course of business and that do
not exceed in the aggregate $50,000 outstanding at any time;

                  (c) Purchase money security interests and leasehold interests
under Capital Leases as permitted by and as limited in amount by Section 6.01
(c) hereof;

                  (d) Any statutory landlord's lien of a lessor under real
estate leases and the lessor's title under real estate leased by the Borrower;

                  (e) Easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect with the
Borrower's business; and

                  (f) Liens imposed by law, such as carriers, warehousemen's or
mechanics' liens, incurred by the Borrower in good faith in the ordinary course
of business and liens arising out of a judgment or award against it with respect
to which it shall currently be prosecuting an appeal, a stay of execution
pending such appeal having been secured.

         6.03.    GUARANTEES. Guarantee, endorse or otherwise in any way become
or be responsible for obligations of any other Person, whether by agreement to
purchase the indebtedness of any other Person, or agreement for the furnishing
of funds to any other Person, through purchase of goods, supplies or services,
or by way of stock purchase, capital contribution, advance or loan, for the
purpose of paying or discharging any indebtedness or obligation of such other
Person, or otherwise, except endorsements on negotiable instruments for
collection in the ordinary course of business.

         6.04.    SALE OF ASSETS AND ACCOUNTS RECEIVABLE. Sell, lease, transfer
or otherwise dispose of any of its properties or assets, except in the ordinary
course of its business, including the replacement of equipment


                                       18


<PAGE>   23

with other equipment of at least equal utility and value and the dispositions
without replacement of assets not material, individually or in the aggregate, to
the operations of its business, or sell, assign, discount or dispose in any way
of any accounts receivable, promissory note or trade acceptances held by the
Borrower, with or without recourse, except for collection (including
endorsements) in the ordinary course of business.

         6.05.    SALE AND LEASEBACK. Enter into any arrangement, directly or
indirectly, with any Person whereby the Borrower shall sell or transfer any
property, real, personal or mixed, used or useful in its business, whether now
owned or hereafter acquired, and thereafter rent or lease such property.

         6.06.    INVESTMENTS. Except the permitted Investments set forth on
SCHEDULE 6.06, purchase, invest in or otherwise acquire or hold securities,
including, without limitation, capital stock and evidences of indebtedness of,
or make loans or advances to, or enter into any arrangement for the purpose of
providing funds or credit to, any other Person, except Investments in short-term
obligations of the United States or certificates of deposit of the Bank or
another bank that has capital and unrestricted surplus of at least $450,000,000
or investment grade commercial paper rated A-1 or better by Moody's or P-1 or
better by Standard & Poor's.

         6.07.    REORGANIZATION. (a) Form any Subsidiary, (b) amend its
Articles of Incorporation in any way that could have a material adverse effect
upon its business or financial condition taken as a whole, or upon the Bank's
rights hereunder or under any other Loan Documents, (c) dissolve, liquidate,
consolidate with or merge with, or otherwise acquire all or substantially all of
the assets, properties of, or ownership interests in, any corporation,
partnership, business, firm, or other Person, or (d) make any change in its
legal name or the name under which it conducts business.

         6.08.    PAYMENTS TO STOCKHOLDERS OR AFFILIATES. Make any Restricted
Payment, declare a dividend or make any distribution or payment of cash or
property, or both, or repay any Indebtedness, to any of its Affiliates or
stockholders, or to any Affiliates of its stockholders, or directly or
indirectly redeem, purchase or otherwise acquire for consideration any of its
ownership interests, PROVIDED HOWEVER, that so long as No Event of Default
exists or would result therefrom, the Borrower may (i) make the regularly
scheduled payments of principal of and interest on the Shareholder Note, subject
at all times to the Affiliate Subordination Agreement, and (ii) repay the
Shareholder Note in full from funds other than funds generated from the
operations of the Borrower.

         6.09.    TRANSACTIONS WITH AFFILIATES. Other than as permitted by
Section 6.08 hereof, enter into any transaction, including, without limitation,
the purchase, sale or exchange of property or assets or the rendering of any
service, with or to any Affiliate of the Borrower, except in the ordinary course
of business and pursuant to the reasonable requirements of the Borrower's
business and upon fair and reasonable terms not less favorable to the Borrower
than would be obtained in a comparable arm's-length transaction with a third
party other than such Affiliate.

         6.10.    ERISA. At any time while the Borrower or any of its
Subsidiaries has a Pension Plan, permit any accumulated funding deficiency to
occur with respect to any Pension Plan or other employee benefit plans
established or maintained by the Borrower or any of its Subsidiaries or to which
contributions are made by the Borrower or any of its Subsidiaries (the "Plans"),
and which are subject to the "Pension Reform Act" and the rules and regulations
thereunder or to Section 412 of the Code, and at all times comply in all
material respects with the provisions of the Act and Code which are applicable
to the Plans. The Borrower will not permit the Pension Benefit Guaranty
Corporation to cause the termination of any Pension Plan under circumstances
which would cause the lien provided for in Section 4068 of the Pension Reform
Act to attach to the assets of the Borrower or any of its Subsidiaries.


                                       19


<PAGE>   24

VII.     FINANCIAL COVENANTS

         The Borrower hereby covenants and agrees that, so long as the Bank has
any obligation to extend credit to the Borrower hereunder, and so long as there
remains outstanding any portion of the principal of, or interest on, the Note
and any other indebtedness of the Borrower to the Bank, whether now existing or
arising hereafter, the Borrower will, for each Fiscal Quarter ending during the
term of this Agreement, maintain the following financial covenants:

         7.01.    QUICK RATIO. A Quick Ratio greater than or equal to 1.0:1.0.

         7.02.    TANGIBLE NET WORTH. Tangible Net Worth shall be greater than
or equal to $15,000,000 for the Fiscal Quarter ending 12/31/98.

         7.03.    EBIT TO INTEREST RATIO. An EBIT to Interest Ratio (i) on a
year-to-date basis as of the end of each Fiscal Quarter ending from 3/31/99
through 12/31/99 of at least 3.5:1.0, and (ii) as of the end of each Fiscal
Quarter ending thereafter for the most recently completed four Fiscal Quarters
as of such date, of at least 3.5:1.0.

         7.04.    MINIMUM QUALIFIED CUSTOMER ORDERS. The Borrower's Qualified
Customer Orders shall not fall below the following level for the periods
indicated:

         Period                                              Amount
         ------                                              ------

         October 1, 1998 through November 20, 1998           $4,240,000
         October 1, 1998 through November 30, 1998           $5,600,000
         October 1, 1998 through December 15, 1998           $7,000,000


VIII.    DEFAULTS

         In each case of happening of any of the following events (each of which
is herein and in the Loan Documents sometimes called an "Event of Default"):

                  (a) if any representation or warranty made herein, or in any
Loan Documents, or in any report, certificate, financial statement or other
instrument furnished in connection with this Agreement, or the borrowing
hereunder, shall prove to have been false or misleading when made in any
material respect;

                  (b) if a default occurs in the payment of any premium or
charge hereunder, or any installment of the principal of, or interest on, or
penalty with respect to, the Note or any other Obligation of the Borrower to the
Bank, whether at the due date thereof or at a date fixed for prepayment or by
acceleration or otherwise;

                  (c) if a default occurs in the due observance or performance
of any covenant, condition or agreement contained in any of Article VI (Negative
Covenants) or Article VII (Financial Covenants) hereof;

                  (d) if a default occurs in the due observance or performance
of any covenant, condition or agreement on the part of the Borrower to be
observed or performed pursuant to the terms of this Agreement (excluding those
specified in subparagraph (c) above) or pursuant to the terms of any of the Loan
Documents and such default shall continue unremedied for twenty (20) days
following the earlier of (i) written notice by the Bank to the Borrower, or (ii)
the date as of which the Borrower acquires actual knowledge thereof or 


                                       20


<PAGE>   25

through reasonable diligence should have acquired actual knowledge thereof,
provided however, that if such default cannot be remedied, then such default
shall be deemed an Event of Default as of the date of the occurrence thereof;

                  (e) if a default occurs with respect to any indebtedness of
the Borrower for borrowed money exceeding $100,000 in aggregate principal amount
(other than the Note) if the effect of such default is to accelerate the
maturity of such indebtedness or to permit the holder thereof to cause such
indebtedness to become due prior to the stated maturity thereof;

                  (f) if the Borrower or any other Person liable in whole or in
part for payment of the Note shall (i) apply for or consent to the appointment
of a receiver, trustee, custodian or liquidator of it or any of its property,
(ii) admit in writing its inability to pay its debts as they mature, (iii) make
a general assignment for the benefit of creditors, (iv) be adjudicated bankrupt
or insolvent or be the subject of an order for relief under Title 11 of the
United States Code or (v) file a voluntary petition in bankruptcy, or a petition
or an answer seeking reorganization or an arrangement with creditors or to take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation law or statute, or an answer admitting the material
allegations of a petition filed against it in any proceeding under any such law
or if corporate action shall be taken for the purpose of effecting any of the
foregoing;

                  (g) if an order, judgment or decree shall be entered, without
the application, approval or consent of the Borrower by any court of competent
jurisdiction, approving a petition seeking reorganization of the Borrower or
appointing a receiver, trustee, custodian or liquidator of the Borrower or of
all or a substantial part of the assets of the Borrower (any of the foregoing
petitions being hereinafter referred to as an "Involuntary Petition"); or

                  (h) if a final judgment is rendered for the payment of money
in excess of One Hundred Thousand Dollars ($100,000) against the Borrower, and
the same shall remain undischarged, unbonded or uninsured for a period of twenty
(20) consecutive days, during which period execution shall not be effectively
stayed;

                  (i) if there occurs any attachment of any deposits or other
property of the Borrower in the hands or possession of the Bank, or if there
occurs any attachment of any other property of the Borrower in an amount
exceeding Fifty Thousand Dollars ($50,000) which shall not be discharged within
thirty (30) days of the date of such attachment; or

                  (j) the occurrence of any event or condition described in
paragraphs (f) or (g) with respect any surety of the Borrower with respect to
the Borrower's Obligations; or

                  (k) if for any reason Theodore J. Goodlander shall cease to be
the beneficial and legal owner in the aggregate of at least twenty-five percent
(25%) of each class of issued and outstanding capital stock of the Borrower; or

                  (l) if for any reason Theodore J. Goodlander shall cease to be
actively involved in the management and operation of the Borrower unless a
successor or successors with comparable qualifications, experience and
reputation within the computer industry is appointed and commences management of
the Borrower within ninety (90) days after such cessation; or

                  (m) if for any reason any Loan Document shall not be in full
force and effect in all material respects or shall not be enforceable in all
material respects in accordance with its terms, or any party thereto other than
the Bank shall institute judicial proceedings to contest the validity of, or
shall disaffirm its obligations under, any Loan Document;


                                       21


<PAGE>   26
then and in every such Event of Default and at any time thereafter during the
continuance of such event, the Note and any and all other Obligations of the
Borrower to the Bank, shall, at the option of the Bank, become immediately due
and payable (except that upon the occurrence of an Event of Default described in
paragraph (f) or (g) of this Article VIII, the Obligations shall become
immediately due and payable without notice and without any action on the part of
the Bank), both as to principal and interest, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Note, or other evidence of such indebtedness
to the contrary notwithstanding. In the event of an acceleration of the
Borrower's Obligations hereunder as a result of the filing of an Involuntary
Petition as specified in paragraph (g) of this Article VIII, such acceleration
shall be rescinded, and the Borrower's rights hereunder reinstated, if, within
sixty (60) days following the filing of such Involuntary Petition, such
Involuntary Petition shall have been dismissed, and there shall exist no other
Event of Default under this Agreement.

         In addition to the foregoing, the Bank shall have the following rights
and remedies in every Event of Default:

                           (i)      At the option of the Bank, the Note shall
                  become immediately due and payable, and the Bank is hereby
                  authorized and empowered to exercise any rights granted to the
                  Bank hereunder or under any or all of the Loan Documents or
                  otherwise available at law or in equity; but the Bank may make
                  any Advances or portions of Advances, after the occurrence of
                  any such Event of Default, without thereby waiving any rights
                  whatsoever either as to payment of the Borrower's Obligations
                  or as to acceleration or enforcement thereof, and without
                  becoming liable to make any other or further Advances.

                           (ii)     Upon the occurrence of any of said Events of
                  Default, the rights, powers and privileges provided in this
                  Article VIII and all other remedies available to the Bank
                  under this Agreement or at law or in equity may be exercised
                  by the Bank at any time and from time to time, whether or not
                  the Obligations shall be due and payable, and whether or not
                  the Bank shall have instituted any proceedings or other action
                  for the enforcement of its rights under the Note or any of the
                  Loan Documents. No right conferred upon the Bank hereby or by
                  any other Loan Document shall be exclusive of any other right
                  referred to herein or therein or now or hereafter available at
                  law, in equity, by statute or otherwise.

IX.      MISCELLANEOUS

         9.01.    SURVIVAL OF WARRANTIES. This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto, shall survive the making by the Bank of the Loans
hereunder and the execution and delivery to the Bank of the Note, and shall
continue in full force and effect so long as the Obligations or any other
indebtedness of the Borrower, to the Bank is outstanding and unpaid.

         9.02.    REIMBURSEMENT OF BANK'S EXPENSES. Whether or not the
transactions contemplated by this Agreement shall be consummated, the Borrower
will reimburse the Bank upon demand for all out-of-pocket costs, fees and
expenses, such as (without limitation) filing fees, recording fees, lien
searches, title searches, patent and trademark searches, documentary stamp
taxes, mortgage recording taxes, registration taxes, intangible taxes due under
any applicable state law and any other expenses of the Bank (including, without
limitation, reasonable fees and disbursements of counsel to the Bank) in
connection with (i) the preparation, negotiation, interpretation, execution and
delivery of the Loan Documents, (ii) the making of the Loans hereunder, (iii)
any amendments, modifications, refinancing, consents or waivers in respect
thereof, (iv) any administration or enforcement or protection of the Bank's
rights under any of the Loan Documents, (v) any proceedings with respect to the
collection of the Obligations, bankruptcy, reorganization, insolvency,
readjustment of Indebtedness, dissolution or liquidation of the Borrower or any
party to any Loan Document, and (vi) any claims by third parties relating to the
foregoing. All obligations provided for in this Section 9.02 shall survive any
termination of this Agreement.


                                       22


<PAGE>   27

         9.03.    GOVERNING LAW. This Agreement and the Note shall be construed
in accordance with and governed by the substantive laws of The Commonwealth of
Massachusetts (but not the conflict of laws rules thereof).

         9.04.    WAIVERS AND AMENDMENTS. No modification or waiver of any
provisions of this Agreement, the other Loan Documents, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall be effective
only in the specific instance, and for the purpose, for which given. No notice
to or demand of the Borrower, in any case, shall entitle the Borrower to any
other or future notice or demand in the same, similar or other circumstances
except to the extent provided herein.

         9.05.    NO IMPLIED WAIVERS. Neither any failure nor any delay on the
part of the Bank in exercising any right, power or privilege hereunder, or under
the Note, or under any other instrument given as security therefor, shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or future exercise, or the exercise of any other right, power
or privilege. An Event of Default hereunder shall be deemed continuing unless
and until waived in writing by the Bank.

         9.06.    NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing (including telegraphic
communication) and shall be either hand delivered, mailed by certified or
registered mail, return receipt requested, or telegraphed or telefaxed with
instructions for confirmation of written delivery, or delivered by overnight
courier service, to the applicable party at the following addresses:

         If to the Borrower, to:

                  Storage Computer Corporation
                  11 Riverside Street
                  Nashua, NH 03062-1373
                  Attn: James C. Louney, Chief Financial Officer
                  Fax Number: 1-603-889-7232

         with a copy to:

                  Thomas A. Wooters, Esq.
                  Peabody & Arnold
                  50 Rowes Wharf
                  Boston, MA 02110-3342
                  Fax Number: 1-617-951-2125

         If to the Bank, to:

                  State Street Bank and Trust Company
                  225 Franklin Street - M2
                  Boston, Massachusetts 02110
                  Attention: Paul B. Forester, Vice President
                  Fax Number: 1-617-654-4176

         with a copy to:



                                       23


<PAGE>   28

                  Steven M. Ellis, P.C.
                  Goodwin, Procter & Hoar LLP
                  Exchange Place
                  Boston, MA 02109
                  Fax Number: 1-617-523-1231

or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section. All such notices, requests, demands and other communication
shall be effective when actually received if hand delivered, or, in the case of
registered or certified mail, return receipt requested or in the case of a
telegram accompanied by instructions for confirmation of written delivery, two
days after deposited in the mails or delivered to the telegraph company, or in
the case of a telefax, upon written confirmation of transmission, addressed as
aforesaid.

         9.07.    SET-OFF. In addition to any rights now or hereafter existing
under law, and without limiting such rights, upon and after the occurrence of an
Event of Default, the Bank is hereby authorized by the Borrower, at any time and
from time to time, without prior notice (any such notice being hereby expressly
waived), to set off and to appropriate and to apply any and all deposits,
general or special, including, without limitation, indebtedness evidenced by
matured and unmatured certificates of deposit, and any other indebtedness held
or owing by the Bank to or for the credit or account of the Borrower, to the
payment of the Borrower's Obligations, irrespective of whether the Bank has
accelerated the Borrower's Obligations.

         9.08.    SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank, which may be withheld for any reason or no reason. Whenever
in this Agreement any of the parties hereto is referred to, such reference shall
be deemed to include the successors and assigns of such party.

         9.09.    COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all the
counterparts shall together constitute one and the same instrument. This
Agreement shall become effective when the parties hereto have signed a copy
hereof (whether or not the same or different copies) and shall have delivered
the same to the Bank.

         9.10.    JURISDICTION AND VENUE; WAIVER OF JURY TRIAL.

                  (a) The Borrower, to the extent it may lawfully do so, hereby
consents (i) to the jurisdiction of the courts of The Commonwealth of
Massachusetts and the United States District Court for the District of
Massachusetts, as well as to the jurisdiction of all courts from which an appeal
may be taken from such courts, for the purpose of any suit, action or other
proceeding arising out of any of its obligations arising hereunder or with
respect to the transactions contemplated hereby, and expressly waives any and
all objections it may have as to venue in any of such courts, and (ii) to the
service of process by U.S. certified or registered mail, return receipt
requested, addressed to the Borrower at the address set forth in Section 9.06
hereof.

                  (b) THE BORROWER HEREBY WAIVES TRIAL BY JURY IN ANY ACTION
BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTE OR ANY TRANSACTION
DOCUMENT OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION THEREWITH OR HEREWITH.

         9.11.    SAVINGS CLAUSE. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability 


                                       24


<PAGE>   29

without invalidating the remaining provisions hereof or affecting the validity
or enforceability of such provision in any other jurisdiction.

         9.12.    HEADINGS. Article and Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

         9.13.    INDEMNIFICATION BY BORROWER. The Borrower shall release,
indemnify, save and hold harmless the Bank and its directors, officers, agents,
attorneys, and employees (herein each called an "indemnitee" and collectively,
the "indemnitees") from and against any and all losses, claims, damages, costs,
reasonable expenses (including, without limitation, reasonable attorneys' fees)
and liabilities (all of the foregoing being herein called the "Indemnified
Liabilities") incurred by an indemnitee in connection with or arising out of the
execution or delivery of this Agreement or any other Loan Document, the exercise
by the Bank of any right or remedy granted to it hereunder or under any other
Loan Document, the performance by the parties hereto of their respective
obligations hereunder or under any other Loan Document or the use of the
proceeds of the Loans, the collection and enforcement of the Obligations or any
of them, except for any portion of such losses, claims, damages, costs, expenses
or liabilities incurred solely as a result of the gross negligence or willful
misconduct of the applicable indemnitee. If and to the extent that the foregoing
indemnity may be unenforceable for any reason, the Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. All
obligations provided for in this Section 9.13 shall survive any termination of
this Agreement.

         9.14.    THIRD PARTY BENEFICIARIES. The parties hereto do not intend
the benefits of this Agreement or any other Loan Document to inure to any third
party, nor shall this Agreement be construed to make or render the Bank liable
to any third party on account of the Borrower's Indebtedness or obligations to
such third parties. Notwithstanding anything herein, or in the Note or the other
Loan Documents, or any conduct or course of conduct by any or all of the parties
hereto or to any other Loan Document, before or after signing this Agreement or
any other Loan Document, shall be construed as creating any right, claim or
cause of action against the Bank, or any of their officers, directors, agents or
employees, in favor of any third party other than the Borrower.

                           [intentionally left blank]



                                       25


<PAGE>   30



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

                                    BANK:

                                    STATE STREET BANK AND TRUST COMPANY


                                    By: 
                                        ----------------------------------
                                        Paul B. Forester
                                        Vice President


                                    BORROWER:

ATTEST:                             STORAGE COMPUTER CORPORATION


                                    By:
--------------------------------        ----------------------------------
Chief Executive Officer                 James C. Louney
                                        Chief Financial Officer



                                       26


<PAGE>   31



                                    EXHIBIT A

                 SECOND AMENDED AND RESTATED LINE OF CREDIT NOTE

$10,500,000                                                       August 4, 1995
                                                        (As amended and restated
                                                         as of November _, 1998)
                                                           Nashua, New Hampshire

         FOR VALUE RECEIVED, the undersigned, STORAGE COMPUTER CORPORATION, a
Delaware corporation, having a principal place of business at 11 Riverside
Street, Nashua, New Hampshire 03062-1373 (the "Maker"), does hereby
unconditionally promise to pay to the order of STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, with its principal place of business at
225 Franklin Street, Boston, Massachusetts 02110-2804 (the "Bank"), on the
Maturity Date (as defined in the Loan Agreement hereinafter defined), the
principal sum of TEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($10,500,000), or, if
less, the aggregate unpaid principal amount of loans made by the Bank to the
Maker pursuant to that certain Amended and Restated Loan Agreement of even date
herewith between the Bank and the Maker (as the same may be amended, restated or
otherwise modified from time to time, the "Loan Agreement"), together with
interest to the extent permitted by law on any and all principal amounts
remaining unpaid hereunder from the date hereof until payment in full, at the
rate of interest set forth in Section 2.02 of the Loan Agreement. Interest on
the outstanding principal balances shall be calculated on the basis of a three
hundred sixty (360) day year counting the actual number of days elapsed. Each
change in the floating interest rate applicable to this Note shall take effect
simultaneously with the corresponding change in the Prime Rate (as defined in
the Loan Agreement). To the full extent permitted by applicable law, interest
shall continue to accrue on this Note after the filing by or against the Maker
of any petition seeking any relief in bankruptcy or under any act or law
pertaining to insolvency or debtor relief, whether state, federal or foreign.

         PRINCIPAL REPAYMENT. The outstanding principal balance of this Note
shall be repaid as set forth in the Loan Agreement. If not sooner paid, this
Note shall be due and payable in full, together with all accrued and unpaid
interest thereon, whether due or overdue, on the Maturity Date.

         VOLUNTARY PREPAYMENTS. The Maker may prepay this Note as set forth in
the Loan Agreement. 

         APPLICATION OF PREPAYMENTS. All prepayments (whether voluntary,
mandatory or permanent) shall, unless otherwise determined by the Bank, be
applied first to overdue interest and fees, second to accrued but unpaid
interest and fees, and finally, to prepayments of the outstanding principal of
this Note.

         PAYMENT OF INTEREST. Interest shall be payable as set forth in the Loan
Agreement.

         CALCULATION OF INTEREST. Interest shall be calculated on the basis of a
360-day year, counting the actual number of days elapsed.

         PAYMENTS. All principal and interest hereunder shall be payable in
lawful money of the United States of America at the office of the Bank at the
address shown above in immediately available funds, and shall be made as set
forth in Section 2.04 of the Loan Agreement.

         LATE PAYMENT FEE. If any payment due hereunder is not paid within five
(5) days after the date such payment is due, then the Maker shall pay to the
Bank, to the extent permitted by law, a fee (the "Late Payment Fee") equal to
two percent (2%) of the amount of the late payment.

         DEFAULT RATE OF INTEREST. If an Event of Default shall have occurred
and shall be continuing after the expiration of any applicable cure period,
then, in such event, the interest rate applicable to this Note (the "Default
Rate") shall be four percent (4%) in excess of the highest rate of interest then
applicable to this



<PAGE>   32
Note, which Default Rate shall become effective on the date such Event of
Default occurs and shall continue in effect until such Event of Default is
either cured by the Maker, waived by the Bank or in the case of incurable
financial covenant defaults under Article VII hereof, which are not waived by
the Bank, until the Maker shall have returned to being in compliance therewith.

         WAIVERS. The Maker of this Note for itself and successors and assigns,
hereby expressly waives presentment, demand, protest, notice of protest,
presentment for the purpose of accelerating maturity, diligence in collection,
and all other demands and notices in connection with delivery, acceptance,
performance, default or enforcement of or under this Note, and expressly waives
the benefit of any exemption under the homestead exemption laws, if any, or any
other exemption or insolvency laws, and consents that the Bank may without
notice and without affecting the Maker's obligations under this Note, (i)
release or surrender, exchange or substitute any personal property or other
collateral security now held or which may hereafter be held as security for the
payment of this Note, (ii) release, add or substitute any other person or party
primarily or secondarily liable for the payment of this Note, and (iii) extend
the time for payment (regardless of the length or number thereof) or otherwise
modify the terms of payment of any part or the whole of the debt evidenced
hereby.

         BENEFITS OF OTHER AGREEMENTS. This Note is the Second Amended and
Restated Line of Credit Note referred to in and is entitled to the benefits of
the Loan Agreement and is also entitled to the benefits of all other instruments
evidencing and/or securing the indebtedness hereunder. The occurrence or
existence of an "Event of Default" as defined in the Loan Agreement or in any
other instruments securing and/or evidencing this indebtedness shall constitute
a default under this Note and shall entitle the Bank to accelerate the entire
indebtedness hereunder and take such other action as may be provided for in such
agreements.

         AMENDMENT AND RESTATEMENT. This Note is issued by the Maker pursuant to
the Loan Agreement in replacement and substitution of the Original Note defined
and described in the Loan Agreement. This Note is neither a satisfaction nor a
novation thereof.

         MAXIMUM RATE. All agreements between the Maker and the Bank are hereby
expressly limited so that in no contingency or event whatsoever, whether by
reason of acceleration of maturity of the indebtedness or otherwise, shall the
amount paid or agreed to be paid to the Bank for the use, forbearance or
detention of the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. If, for any circumstances whatsoever, fulfillment of any
provision hereof or of the Loan Agreement, at the time performance of such
provision shall be due, shall involve transcending the limit of validity
prescribed by law, then, IPSO FACTO, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any circumstance the Bank
should ever receive as interest an amount which would exceed the highest lawful
rate, such amount which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to the payment of
interest. As used herein, the term "applicable law" shall mean the law in effect
as of the date hereof, provided, however, that in the event there is a change in
the law which results in a higher permissible rate of interest, then this Note
shall be governed by such new law as of its effective date. This provision shall
control every other provision of all agreements among the Maker and the Bank.

         GOVERNING LAW. This Note and all transactions hereunder and/or
evidenced herein shall be governed by, construed, and enforced in accordance
with the substantive laws of The Commonwealth of Massachusetts.

         ATTORNEYS' FEES, COSTS OF COLLECTION; APPOINTMENT OF RECEIVER. If this
Note shall not be paid when due and shall be placed by the holder hereof in the
hands of any attorney for collection, through legal proceedings or otherwise,
the Maker will pay attorneys' fees to the holder hereof together with reasonable
costs and expenses of collection.


                                        2


<PAGE>   33
         IN WITNESS WHEREOF, the Maker has caused this Note to be executed as an
instrument under seal by its duly authorized officer all as of the day and year
first above written.

ATTEST:                             STORAGE COMPUTER CORPORATION


                                    By: 
------------------------------          -------------------------------------
Chief Executive Officer                 James C. Louney
                                        Chief Financial Officer




                                        3


<PAGE>   34



                                    EXHIBIT B

November ___, 1998

State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110-2804
Attn:    Paul B. Forester, Vice President, Corporate Banking

Re:      Request for Advance under Second Amended and Restated Revolving Loan
         Agreement with STORAGE COMPUTER CORPORATION (the "Borrower") dated as
         of November __, 1998 (the "Loan Agreement", to which reference is made
         therein for the meaning of capitalized terms not otherwise defined
         herein)

Ladies and Gentlemen:

This letter shall serve as a request described in the Loan Agreement for an
Advance from the Bank in the principal amount of $USD ______________ (Advance).

--------------------------------------------------------------------------------
1.       Advance                                                 $
--------------------------------------------------------------------------------
2.       Requested date of borrowing
--------------------------------------------------------------------------------

         The undersigned hereby certifies that:

         (i)      the undersigned is the duly elected, qualified and acting
chief financial officer of the Borrower and as such officer is authorized to
make and deliver this Request for Advance.

         (ii)     the representations and warranties set forth in Article III of
the Loan Agreement and in each of the other Loan Documents are true and correct
in all material respects on and as of the date hereof with the same force and
effect as though made on and as of the date hereof.

         (iii)    no Event of Default and no event which upon notice or lapse of
time, or both, would constitute an Event of Default, has occurred and is
continuing, or would result from the borrowing requested hereby.

         (iv)     the requested Advance will not cause the outstanding principal
balance of the Note to exceed the amount of the Commitment in effect as of the
date hereof.






<PAGE>   35



         (v)      the above information is true and correct as of the date 
hereof.



                                 Very truly yours,

                                 STORAGE COMPUTER CORPORATION


                                 By:
                                     -------------------------------------------
                                     Its Duly Authorized Chief Financial Officer






                                        2


<PAGE>   36



                                    EXHIBIT C

                          [FORM OF OPINION OF COUNSEL]

November __, 1998

State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attention: Paul B. Forester
           Vice President-Corporate Banking

RE:      STORAGE COMPUTER CORPORATION

Ladies and Gentlemen:

         We have acted as counsel to STORAGE COMPUTER CORPORATION, a Delaware
corporation (the "Borrower") and the Guarantors [listed separately or schedule]
in connection with an Amended and Restated Loan Agreement of even date herewith
(the "Loan Agreement") between the Borrower and you (the "Bank"), the Amended
and Restated Line of Credit Note issued pursuant thereto on the date hereof (the
"Note"), the Loan Documents (as defined in the Loan Agreement) and the
transactions to be effected in connection with the Loan Agreement. This opinion
is furnished to you pursuant to Section 4.01 (c) of the Loan Agreement.
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Loan Agreement.

         In connection with rendering this opinion, we have reviewed the Loan
Agreement, the Note and the Loan Documents referred to therein. We have also
examined the Borrower's and Guarantors' corporate charter and by-laws or
operating agreements (as the case may be), and such records, documents,
certificates and other instruments and have made such investigations of fact and
of law as we have deemed necessary to render this opinion.

         In rendering this opinion, we have assumed the genuineness of all
signatures by parties thereto on original documents, the conformity to original
documents of all documents submitted to us as certified or photostatic copies,
the accuracy and completeness of all records of the Borrower and Guarantors made
available to us, and that the Bank has all necessary power and authority to
enter in the Loan Documents to which it is a party and to perform its
obligations thereunder, and that such execution and performance has been duly
authorized by all required action on the part of the Bank, and that the Loan
Documents are the binding obligations of the Bank.

         The opinions hereinafter expressed are qualified to the extent that the
validity or enforceability of any provisions in the Loan Agreement, the Note, or
other Loan Documents or of any rights granted to you pursuant to any of those
instruments, may be subject to and affected by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally. Furthermore no opinion is expressed as to whether any
provisions thereof are specifically enforceable in equity.

         Based on the foregoing, we are of the opinion that:

         1. The Borrower (a) is a Delaware corporation duly organized, validly
existing and in good standing under the laws of the States of Delaware and New
Hampshire, (b) has the power and authority to own its properties and to carry on
its business as now being conducted and as presently contemplated, (c) has




<PAGE>   37


the power and authority to execute and deliver, and to perform its obligations
under such of the Loan Documents to which it is a party, and (d) is duly
qualified to transact business in each state where the nature of its activities
would require such qualification.

         2. The Guarantors (a) are duly organized, validly existing and in good
standing under the laws of the jurisdiction of their organization or creation,
(b) have the power and authority to own their properties and to carry on their
business as now being conducted and as presently contemplated, (c) have the
power and authority to execute and deliver, and to perform their obligations
under such of the Loan Documents to which each is a party, and (d) is duly
qualified to transact business in each jurisdiction where the nature of its
activities would require such qualification.

         3. The execution and delivery of, and performance by the Borrower and
the Guarantors of their obligations under the Loan Documents, have been duly
authorized by all requisite corporate or partnership action and will not violate
any provision of law, order, judgment or decree of any court or other agency of
government, its Articles of Incorporation, by-laws or operating agreement, or,
to the best of counsel's knowledge after due inquiry, any indenture, agreement
or other instrument to which the Borrower or the Guarantors are a party, or by
which the Borrower or the Guarantors are bound, or be in conflict with, result
in a breach of, or constitute (with due notice or lapse of time or both) a
default under, or except as may be permitted by the Loan Documents, result in
the creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon the properties or assets of any of the Borrower or Guarantors
pursuant to any such indenture, agreement or instrument.

         4. Each of the Loan Documents (to which the Borrowers and Guarantors
are a party) has been duly authorized, executed and delivered by the Borrower
and Guarantors and constitute the legal, valid and binding obligation of the
Borrower and Guarantors, enforceable in accordance with its terms.

         5. To the best of our knowledge after due inquiry and our own
familiarity with the affairs of the Borrower and Guarantors as their counsel,
there is no action, suit, proceeding at law or in equity or by or before any
governmental agency pending or threatened against the Borrower or Guarantors,
which if adversely determined would, either in any single case or in the
aggregate, materially and adversely affect their properties, existence,
financial condition or business, or materially impair their rights to carry on
their businesses substantially as now conducted or as contemplated to be
conducted during the term of the Loan Agreement and the Note, or which questions
the validity of any of the Loan Documents.

         6. To the best of our knowledge after due inquiry, except as disclosed
to you in writing, each of the Borrower and Guarantors (a) are not a party to
any agreement or instrument or subject to any corporate or other restriction
materially and adversely affecting their businesses, operations, properties,
assets or financial condition; and (b) are not in violation of any provision of
their Articles of Organization or By-laws or operating agreements, or of any
material indenture, agreement or instrument to which they are a party or by
which they are bound, or of any provision of law, the violation of which could
have a material adverse effect upon them, or any order, judgment or decree of
any court or other agency of government.

         7. The execution and delivery of the Loan Documents do not, and the
performance and observance of the terms of Loan Documents will not, contravene
any provision of existing law or regulations, and will not conflict with, or
result in any breach of the terms, conditions or provisions of, or constitute a
default under or result in or permit the creation or imposition of any lien,
charge or encumbrance upon any of the properties of the Borrower or Guarantors
pursuant to any indenture, mortgage or other agreement or instrument of which
the Borrower or Guarantors have knowledge, to which the Borrower or Guarantors
are a party or by which said properties are bound.

         8. The execution and delivery by the Borrower and Guarantors of each of
the Loan Documents to which they are a party constitute transactions not
requiring registration under the Securities Act of 1933, as



                                        2


<PAGE>   38



amended (the "Securities Act"), and registration or qualification by the
Borrower or Guarantors of the Loan Documents to which they are a party is not
required under the Securities Exchange Act of 1934, as amended, or the
securities laws of the State of New Hampshire or the State of Delaware.
Qualification of an indenture under the Trust Indenture Act of 1939, as amended,
is not required with respect to the transactions contemplated by the Loan
Documents.

         9.  Assuming the accuracy of the representations and warranties made in
the Loan Agreement with respect to the intended use of the proceeds of the
Loans, the transactions and arrangements contemplated by the Loan Documents do
not violate Regulations G, T, U or X of the Board of Governors of the Federal
Reserve Board.

         10. The Borrower is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended.

         11. We are not aware of any basis supported by applicable statutory or
decisional law on which courts of the State of New Hampshire or the State of
Delaware would refuse to honor the choice of law clause set forth in the Loan
Agreement or would apply the usury laws of the State of New Hampshire or the
State of Delaware to the Obligations.

         12. The provisions of the Security Agreement are effective under the
New Hampshire UCC to create a valid security interest in favor of the Bank, in
so much of the Collateral as constitutes personal property or fixtures to which
Article 9 of the New Hampshire UCC is applicable, securing the Obligations
purported to be secured by such Security Agreement. The Security Agreement
contains provisions which are sufficient under the laws of the State of New
Hampshire to make available to the Bank all remedies available under the New
Hampshire UCC to holders of security interests in such Collateral, and the
provisions of such Security Agreement relating to remedies are in accordance
with all requirements of law of the State of New Hampshire relating to such
remedies. Enforcement of the remedies provided in the such Security Agreement
will not deprive the Bank of its rights to seek a deficiency judgment in respect
of the Obligations, nor will it limit the right of the Bank to foreclose on
other collateral securing the Obligations.

         13. We have reviewed the contents of the Borrower's Collateral
Certificate (the "Collateral Certificate") identifying the jurisdictions in
which the Borrower and the Collateral are located. We have assumed that (i) the
Collateral Certificate is accurate and complete and that the representations of
the Borrower relating to its chief executive office and principal place of
business in such Collateral Certificate and the Loan Documents are accurate and
complete and (ii) none of the Collateral consists or will consist of consumer
goods, equipment used in farming operations, farm products, crops, timber,
minerals and the like (including oil and gas) or accounts or general intangibles
resulting from the sale thereof, or beneficial interests in a trust or a
decedents estate. We have also reviewed financing statements (the "Financing
Statements") to be filed in the offices set forth on EXHIBIT A hereto, each
listing the Borrower as debtor and the Bank as secured party and covering
certain personal property and fixtures. Based upon the foregoing, the Bank will
have, upon the filing of the Financing Statements in such filing offices, a
perfected security interest in such portion of the Collateral in which the
perfection of a security interest can be effected by the filing of financing
statements under the Uniform Commercial Code as enacted in New Hampshire,
Massachusetts and Delaware.

         14. The authorized capital stock of the Borrower consists of ___ shares
of Common Stock, $___ par value[, and ___ shares of _______________, $____ par
value], of which ____ shares of Common Stock [and ___ shares of ____________]
are issued and outstanding of record. All such outstanding shares are validly
issued and non-assessable and subject to no preemptive rights. To our knowledge,
the Borrower does not have outstanding any rights, options to subscribe for or
purchase from the Borrower, or any warrants or other agreements providing for or
requiring the issuance by the Borrower of, any capital stock or any securities
convertible into or exchangeable for its capital stock.


                                        3


<PAGE>   39



         15.      The Borrower owns the Intellectual Property Collateral (as
defined in the Intellectual Property Security Agreement defined hereafter)
listed on SCHEDULES I, II, III AND IV ("Schedules") to the Intellectual Property
Security Agreement. Furthermore, the Schedules sets forth the true and complete
listing of the Borrower's Intellectual Property Collateral. The Borrower is the
sole and exclusive legal and beneficial owner of the entire right, title and
interest in and to the Intellectual Property Collateral listed in the Schedules.

         16.      The security interests stated to be granted pursuant to the
Intellectual Property Security Agreement are valid and enforceable security
interests in the Intellectual Property Collateral securing the obligations
pursuant to the Intellectual Property Security Agreement. Upon the filing of the
Uniform Commercial Code financing statements referred to in paragraph 13 hereof
and the filing of the Intellectual Property Security Agreement with the United
States Patent and Trademark Office (the "PTO"), such security interests, to the
extent perfectible by the filing of such Uniform Commercial Code financing
statements and such Intellectual Property Security Agreement, will constitute
valid, binding and duly perfected security interests in the Intellectual
Property Collateral, including all proceeds thereof, granted to the Bank.

         17.      There are no facts which would preclude the Borrower from
exploiting the Intellectual Property Collateral.

         18.      Neither the Borrower nor any of its officers or directors have
received any notice of infringement or conflict with the rights or claims of
others with respect to the Intellectual Property Collateral, and have no reason
to believe that its use of the Intellectual Property Collateral would infringe
the rights of third parties.

         19.      The shares of the capital stock of the Guarantors pledged to
the Bank pursuant to the Pledge Agreement are held of record as set forth on
ANNEX A to the Pledge Agreement. [Such capital stock constitutes, of record,
66-2/3% of the outstanding capital stock of each of the Guarantors and, to our
knowledge, on a fully-diluted basis, 66-2/3% of such outstanding capital stock
of the Guarantors.] Upon delivery to the Bank of the stock certificates
evidencing such capital stock with stock powers executed in blank in respect of
the such capital stock in the Commonwealth of Massachusetts, and assuming
continued possession of such certificates by the Bank, the Bank will have, a
perfected security interest in such capital stock. Assuming that the Bank
acquired its security interest in such pledged capital stock in good faith and
without notice of any, adverse claims (as such term is used. in Article 8 of the
Massachusetts UCC) and that such pledged stock is either in bearer form or in
registered form, issued or endorsed in the name of the Bank or in blank, the
Bank will acquire its security interest in such pledged capital stock free of
adverse claims.

         Our opinions contained herein are subject to the following
qualifications:

                  (i)      The enforceability of obligations under any agreement
         or document subject to bankruptcy, insolvency, reorganization,
         moratorium and similar laws affecting the rights and remedies of
         creditors generally or the application of principles of equity whether
         in an action in law or proceeding in equity. In addition, we express no
         opinion regarding the availability of the remedy of specific
         performance or of any other equitable remedy or relief, to enforce any
         right under any agreement or document.

                  (ii)     The opinions expressed in this letter are based upon
         the applicable laws, regulations and ordinances in effect as of the
         date of this letter. In delivering this letter to you, we are not
         undertaking to apprize you either of any transactions, events or
         occurrences taking place after the date of this letter of which we may
         acquire any knowledge or of any change in any applicable laws taking
         place after the date of this letter which may affect our opinions set
         forth herein.


                                        4


<PAGE>   40

                  (iii)    Our opinion is limited to the specific opinions
         expressed above, and no other opinions are intended nor should they be
         inferred.


         This opinion is rendered as of the date hereof, and is for your benefit
and not for the benefit of any other party.


                                             Very truly yours,




                                        5


<PAGE>   41



                                    EXHIBIT D

November __, 1998

State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Attn:    Paul B. Forester
         Vice President-Commercial Banking

Ladies and Gentlemen:

         As required by Section 5.03 of the Second Amended and Restated Loan
Agreement dated as of November __, 1998 (the "Loan Agreement"), by and between
STORAGE COMPUTER CORPORATION (the "Borrower") and STATE STREET BANK AND TRUST
COMPANY (the "Bank"), a review of the activities of the Borrower for fiscal year
and/or fiscal period ending 19[__ ] (the "Fiscal Period") has been made under my
supervision with a view to determining whether the Borrower has kept, observed,
performed and fulfilled all of its obligations under the Loan Agreement and all
other agreements or undertakings contemplated thereby. To the best of my
knowledge, no event has occurred and is continuing which constitutes, or which
with the passage of time or service of notice, or both, would constitute an
Event of Default as defined in Article VIII of the Loan Agreement.

         I further certify that the amounts set forth below, with abbreviated
descriptions, to the best of my knowledge, accurately present amounts required
to be calculated by various covenants of the Loan Agreement as of the last day
of the Fiscal Period. Unless expressly specified herein, all terms used herein
have the identical meaning as in the Loan Agreement.

1.       Section 7.01 - Quick Ratio (Quick Assets/Current Liabilities)

         For the Fiscal Quarter Ended

================================================================================
Quick Assets:
--------------------------------------------------------------------------------
+        Cash and Cash Equivalents                      $
--------------------------------------------------------------------------------
+        Accounts Receivable                            $
--------------------------------------------------------------------------------
+        Marketable Securities                          $
--------------------------------------------------------------------------------
Total Quick Assets:                                     $
--------------------------------------------------------------------------------
Current Liabilities                                     $
--------------------------------------------------------------------------------
RATIO OF QUICK ASSETS/CURRENT
LIABILITIES (Must equal or exceed 1.0:1.0)
================================================================================






<PAGE>   42



2.       SECTION 7.02 - TANGIBLE NET WORTH

         For the Fiscal Quarter Ended __/__/__:

================================================================================
TANGIBLE NET WORTH:
--------------------------------------------------------------------------------
         Balance Sheet Assets (list):                              $
--------------------------------------------------------------------------------
MINUS:  Intangible Assets (list):                                  $
--------------------------------------------------------------------------------
TOTAL = TANGIBLE NET WORTH                                         $
(Must equal or exceed $15,000,000).
--------------------------------------------------------------------------------
Earnings After Taxes                                               $
--------------------------------------------------------------------------------
Current Liabilities
--------------------------------------------------------------------------------
RATIO OF QUICK ASSETS/CURRENT LIABILITIES (Must equal or exceed
1.0:1.0)
================================================================================

3.       SECTION 7.03 - EBIT TO INTEREST RATIO

         For the Fiscal Quarter Ended __/__/__:

================================================================================
NUMERATOR:
--------------------------------------------------------------------------------
           Net Income                                              $
--------------------------------------------------------------------------------
PLUS:      Interest Expense on all Indebtedness                    $
--------------------------------------------------------------------------------
PLUS:      Taxes                                                   $
--------------------------------------------------------------------------------
PLUS:      Extraordinary Losses                                    $
--------------------------------------------------------------------------------
MINUS:     Extraordinary Gains                                     $
--------------------------------------------------------------------------------
EBIT:                                                              $
--------------------------------------------------------------------------------
DENOMINATOR:
--------------------------------------------------------------------------------
           Interest Expense on all Indebtedness                    $
--------------------------------------------------------------------------------
RATIO:     (Maximum permitted is 3.5:1.0)
================================================================================

4.         SECTION 7.04 - MINIMUM QUALIFIED CUSTOMER ORDERS

           For the Fiscal Period Commencing October 1, 1998 and Ending __/__/__:



                                        2


<PAGE>   43



--------------------------------------------------------------------------------
Qualified Customer Orders                    $
--------------------------------------------------------------------------------




                                      STORAGE COMPUTER CORPORATION


                                      By: 
                                          ------------------------------------
                                          Chief Financial Officer



                                        3


<PAGE>   44



                                    EXHIBIT E

                               (Form of Guaranty)













<PAGE>   45



                                    EXHIBIT F

                           (Form of Pledge Agreement)