Document:

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                                                                     EXHIBIT 4.1

                         REGISTRATION RIGHTS AGREEMENT

     REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August 15,
2001, by and among Storage Computer Corporation, a Delaware corporation, with
its headquarters located at 11 Riverside Street, Nashua, New Hampshire 03062
(the "Company"), and each of the undersigned (together with their respective
affiliates and any assignee or transferee of all of their respective rights
hereunder, the "Initial Investors").

     WHEREAS:

     A.   In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "Securities Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) shares of its Series E
Convertible Preferred Stock (the "Preferred Shares"), that are convertible into
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), upon the terms and subject to the limitations and conditions set forth
in the Certificate of Designations, Rights, Preferences, Privileges and
Restrictions with respect to the Preferred Shares (the Certificate of
Designation"); and (ii) warrants (the "Warrants") to acquire Seven Hundred
Seventy-One Thousand Six Hundred and Five (771,605) shares of Common Stock, upon
the terms and conditions and subject to the limitations and conditions set forth
in the Stock Purchase Warrant, dated August 15, 2001, issuable in connection
with the Preferred Shares; and

     B.   To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and each of the
Initial Investors hereby agree as follows:

     1.   DEFINITIONS.

          a.   As used in this Agreement, the following terms shall have the
following meanings:

               (i)   "Investors" means the Initial Investors and any transferee
     or assignee who agrees to become bound by the provisions of this Agreement
     in accordance with Section 9 hereof.

               (ii)  "register," "registered," and "registration" refer to a
     registration effected by preparing and filing a Registration Statement or
     Statements in compliance with

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     the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor
     rule providing for offering securities on a continuous basis ("Rule 415"),
     and the declaration or ordering of effectiveness of such Registration
     Statement by the United States Securities and Exchange Commission (the
     "SEC").

               (iii)   "Registrable Securities" means (A) the Conversion Shares
     (as defined in the Securities Purchase Agreement) issued or issuable upon
     conversion of or otherwise pursuant to the Preferred Shares or pursuant to
     Articles V, VI.D(ii) and VI.E of the Certificate of Designation and Section
     2(c) herein); (B) the Warrant Shares (as defined in the Securities Purchase
     Agreement) issued or issuable and any shares of capital stock issued or
     issuable upon exercise of the Warrants; and (C) any shares of capital stock
     issued or issuable as a dividend on or in exchange for or otherwise with
     respect to any of the foregoing.

               (iv)    "Registration Statement(s)" means a registration
     statement(s) of the Company under the 1933 Act.

          b.   Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.

     2.   REGISTRATION.
          ------------

          a.   Mandatory Registration. The Company shall prepare, and, on or
               ----------------------
prior to the date (the "Filing Date") which is thirty (30) calendar days after
the Closing Date (as defined in the Securities Purchase Agreement), file with
the SEC a Registration Statement on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering the
resale of the Registrable Securities, which Registration Statement, to the
extent allowable under the 1933 Act and the rules and regulations promulgated
thereunder (including Rule 416), shall state that such Registration Statement
also covers such indeterminate number of additional shares of Common Stock as
may become issuable upon conversion of or otherwise pursuant to the Preferred
Shares and exercise of or otherwise pursuant to the Warrants to prevent dilution
resulting from stock splits, stock dividends or similar transactions. The number
of shares of Common Stock initially included in such Registration Statement
shall be no less than one and one-fourth (1 1/4) times the aggregate number of
Conversion Shares and Warrant Shares that are then issuable upon conversion of
or otherwise pursuant to the Preferred Shares (based on Conversion Price (as
defined in the Certificate of Designation) then in effect) and the exercise of
or otherwise pursuant to the Warrants, in each case without regard to any
limitation on the Investor's ability to convert the Preferred Shares or exercise
the Warrants. The Company acknowledges that the number of shares initially
included in the Registration Statement represents a good faith estimate of the
maximum number of shares issuable upon conversion of or otherwise pursuant to
the Preferred Shares and exercise of or otherwise pursuant to the Warrants. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be

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provided to (and subject to the approval of) the Initial Investors and their
counsel prior to its filing or other submission.

          b.   Underwritten Offering. If any offering pursuant to a Registration
               ---------------------
Statement pursuant to Section 2(a) hereof involves an underwritten offering, the
Investors who hold a majority in interest of the Registrable Securities subject
to such underwritten offering, with the consent of a majority-in-interest of the
Initial Investors, shall have the right to select one legal counsel and an
investment banker or bankers and manager or managers to administer the offering,
which investment banker or bankers or manager or managers shall be reasonably
satisfactory to the Company. In the event that any Investors elect not to
participate in such underwritten offering, the Registration Statement covering
all of the Registrable Securities shall contain appropriate plans of
distribution reasonably satisfactory to the Investors participating in such
underwritten offering and the Investors electing not to participate in such
underwritten offering (including, without limitation, the ability of non-
participating Investors to sell from time to time at any time during the
effectiveness of such Registration Statement).

          c.   Payments by the Company. The Company shall use its best efforts
               -----------------------
to obtain effectiveness of the Registration Statement as soon as practicable,
but in any event not later than the one hundred twentieth (120th) day after the
Closing Date (the "Registration Deadline"). If (i) the Registration Statement(s)
covering the Registrable Securities required to be filed by the Company pursuant
to Section 2(a) hereof is not declared effective by the SEC by the Registration
Deadline, or (ii) after the Registration Statement has been declared effective
by the SEC, sales of all of the Registrable Securities cannot be made pursuant
to the Registration Statement, or (iii) the Common Stock is not listed or
included for quotation on the Nasdaq National Market ("Nasdaq"), the Nasdaq
SmallCap Market ("Nasdaq SmallCap"), the New York Stock Exchange (the "NYSE") or
the American Stock Exchange (the "AMEX") after being so listed or included for
quotation, then the Company will make payments to the Investors in such amounts
and at such times as shall be determined pursuant to this Section 2(c) as
partial relief for the damages to the Investors by reason of any such delay in
or reduction of their ability to sell the Registrable Securities (which remedy
shall not be exclusive of any other remedies available at law or in equity). The
Company shall pay to each holder of the Preferred Shares or Registrable
Securities an amount equal to the stated value of the Preferred Shares then
outstanding (and, in the case of holders of Registrable Securities, the stated
value of Preferred Shares from which such Registrable Securities were converted
or the exercise price of the Warrants upon exercise of which such Registrable
Securities were received, as applicable) ("Aggregate Share Price") multiplied by
one hundredth (.01) times the sum of: (i) the number of months (prorated for
partial months) after the Registration Deadline and prior to the date the
Registration Statement is declared effective by the SEC; provided, however, that
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there shall be excluded from such period any delays which are solely
attributable to changes required by the Investors in the Registration Statement
with respect to information relating to the Investors, including, without
limitation, changes to the plan of distribution, or to the failure of the
Investors to conduct their review of the Registration Statement pursuant to
Section 3(h) below in a reasonably prompt manner; (ii) the number of months
(prorated for partial months) during the Registration Period (as defined below)
that sales of all of the Registrable Securities cannot be made pursuant to

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the Registration Statement after the Registration Statement has been declared
effective (including, without limitation, when sales cannot be made by reason of
the Company's failure to properly supplement or amend the prospectus included
therein in accordance with the terms of this Agreement (including Section 3(b)
hereof or otherwise), but excluding any days during an Allowed Delay (as defined
in Section 3(f)); and (iii) the number of months (prorated for partial months)
that the Common Stock is not listed or included for quotation on the Nasdaq,
Nasdaq SmallCap, NYSE or AMEX or that trading thereon is halted after the
Registration Statement has been declared effective. (For example, if the
Registration Statement becomes effective one (1) month after the end the
Registration Deadline, the Company would pay $10,000 for each $1,000,000 of
Aggregate Share Price. If thereafter, sales could not be made pursuant to the
Registration Statement for an additional period of one (1) month, the Company
would pay an additional $10,000 for each $1,000,000 of Aggregate Share Price.)
Such amounts shall be paid in cash or, at each Investor's option, may be added
to the Stated Value (as defined in the Certificate of Designation) for purposes
of determining the amounts convertible pursuant to Article VI.A(i) of the
Certificate of Designation and thereafter be convertible into Common Stock at
the "Conversion Price" (as defined in the Certificate of Designation) in
accordance with the terms of the Preferred Shares. Any shares of Common Stock
issued upon conversion of such amounts shall be Registrable Securities. If the
Investor desires to convert the amounts due hereunder into Registrable
Securities, it shall so notify the Company in writing within two (2) business
days of the date on which such amounts are first payable in cash and such
amounts shall be so convertible (pursuant to the mechanics set forth in the
Certificate of Designation), beginning on the last day upon which the cash
amount would otherwise be due in accordance with the following sentence.
Payments of cash pursuant hereto shall be made within five (5) calendar days
after the end of each period that gives rise to such obligation, provided that,
if any such period extends for more than thirty (30) calendar days, interim
payments shall be made for each such thirty (30) day period.

          d.   Piggy-Back Registrations. Subject to the last sentence of this
               ------------------------
Section 2(d), if at any time prior to the expiration of the Registration Period
(as hereinafter defined) the Company shall determine to file with the SEC a
Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans), the Company shall send to each Investor who is entitled to
registration rights under this Section 2(d) written notice of such determination
and, if within fifteen (15) calendar days after the effective date of such
notice, such Investor shall so request in writing, the Company shall include in
such Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit.

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Any exclusion of Registrable Securities shall be made pro rata among the
Investors seeking to include Registrable Securities in proportion to the number
of Registrable Securities sought to be included by such Investors; provided,
                                                                   --------
however, that the Company shall not exclude any Registrable Securities unless
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the Company has first excluded all outstanding securities, the holders of which
are not entitled by contract to inclusion of such securities in such
Registration Statement or are not entitled to pro rata inclusion with the
Registrable Securities; and provided, further, however, that, after giving
                            --------  -------  -------
effect to the immediately preceding proviso, any exclusion of Registrable
Securities shall be made pro rata with holders of other securities having the
contractual right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights. No right to
registration of Registrable Securities under this Section 2(d) shall be
construed to limit any registration required under Section 2(a) hereof. If an
offering in connection with which an Investor is entitled to registration under
this Section 2(d) is an underwritten offering, then each Investor whose
Registrable Securities are included in such Registration Statement shall, unless
otherwise agreed by the Company, offer and sell such Registrable Securities in
an underwritten offering using the same underwriter or underwriters and, subject
to the provisions of this Agreement, on the same terms and conditions as other
shares of Common Stock included in such underwritten offering. Notwithstanding
anything to the contrary set forth herein, the registration rights of the
Investors pursuant to this Section 2(d) shall only be available in the event the
Company fails to timely file, obtain effectiveness or maintain effectiveness of
any Registration Statement to be filed pursuant to Section 2(a) in accordance
with the terms of this Agreement.

          e.   Eligibility for Form S-3. Subject to Schedule 3(h) of the
               ------------------------
Disclosure Statement, the Company represents and warrants that it meets the
registrant eligibility and transaction requirements for the use of Form S-3 for
registration of the sale by the Initial Investors and any other Investors of the
Registrable Securities and the Company shall file all reports required to be
filed by the Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3. In the event the Company is not eligible
for use of Form S-3, the Company agrees to file all reports required to be filed
by the Company with the SEC in a timely manner so as to become eligible and
thereafter to maintain its eligibility for the use of Form S-3. Not later than
ten (10) days after the Company first meets the registration eligibility and
transaction requirements for the use of Form S-3 (or any successor form) for
registration of the offer and sale by the Initial Investors and any other
Investors of Registrable Securities, the Company shall file a Registration
Statement on Form S-3 (or such successor form) with respect to the Registrable
Securities covered by the Registration Statement filed on Form S-2 or Form S-1,
whichever is applicable, filed pursuant to Section 2(a) (and include in such
Registration Statement on Form S-3 the information required by Rule 429 under
the 1933 Act) or convert the Registration Statement filed on Form S-2 or Form S-
1 pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429 under the 1933 Act
and use its best efforts to have such Registration Statement (or such amendment)
declared effective as soon as practicable thereafter.

     3.   OBLIGATIONS OF THE COMPANY.
          --------------------------

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     In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

          a.   The Company shall prepare promptly, and file with the SEC as soon
as practicable after the Closing Date (but in no event later than the Filing
Date), a Registration Statement with respect to the number of Registrable
Securities provided in Section 2(a), and thereafter use its best efforts to
cause such Registration Statement relating to Registrable Securities to become
effective as soon as possible after such filing, (but in no event later than the
Registration Deadline), and keep the Registration Statement effective pursuant
to Rule 415 at all times until such date as is the earlier of (i) the date on
which all of the Registrable Securities have been sold and (ii) the date on
which the Registrable Securities (in the opinion of counsel to the Initial
Investors) may be immediately sold to the public without registration or
restriction (including without limitation as to volume by each holder thereof)
under the 1933 Act (the "Registration Period"), which Registration Statement
(including any amendments or supplements thereto and prospectuses contained
therein) shall not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein, or necessary to make the
statements therein not misleading.

          b.   The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statements and the prospectus used in connection with the Registration
Statements as may be necessary to keep the Registration Statements effective at
all times during the Registration Period, and, during such period, comply with
the provisions of the 1933 Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statements
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statements. In the event that on any
Trading Day (as defined in the Certificate of Designation) (the "Registration
Trigger Date") the number of shares available under a Registration Statement
filed pursuant to this Agreement is insufficient to cover all of the Registrable
Securities issued or issuable upon conversion of or otherwise pursuant to the
Preferred Shares (based on the Conversion Price (as defined in the Certificate
of Designation) then in effect) and exercise of or otherwise pursuant to the
Warrants, in each case without giving effect to any limitations on the
Investors' ability to convert the Preferred Shares or exercise the Warrants, the
Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover one hundred twenty-five percent (125%) of all of the Registrable
Securities so issued or issuable (without giving effect to any limitations on
conversion or exercise contained in the Certificate of Designation or Warrants,
as applicable) as of the Registration Trigger Date, in each case, as soon as
practicable, but in any event within twenty (20) business days after the
necessity therefor arises (based on the market price of the Common Stock and
other relevant factors on which the Company reasonably elects to rely). The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof, but in any event within sixty (60) calendar days of the
Registration Trigger Date. The provisions of Section 2(c) above shall be
applicable with respect to the Company's obligations under this Section 3(b).

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          c.   The Company shall furnish to each Investor whose Registrable
Securities are included in a Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of each Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company
has sought confidential treatment), and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor.  The Company will immediately notify each Investor by
facsimile of the effectiveness of each Registration Statement or any post-
effective amendment.  The Company will promptly respond to any and all comments
received from the SEC, with a view towards causing each Registration Statement
or any amendment thereto to be declared effective by the SEC as soon as
practicable and shall file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that any such Registration Statement or any
amendment thereto will not be subject to review.

          d.   The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statements under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investors who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
                                                       --------  -------
the Company shall not be required in connection therewith or as a condition
thereto to (a) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (b) subject itself
to general taxation in any such jurisdiction, (c) file a general consent to
service of process in any such jurisdiction, (d) provide any undertakings that
cause the Company undue expense or burden, or (e) make any change in its charter
or bylaws, which in each case the Board of Directors of the Company determines
to be contrary to the best interests of the Company and its stockholders.

          e.   In the event Investors who hold a majority-in-interest of the
Registrable Securities being offered in the offering (with the approval of a
majority-in-interest of the Initial Investors) select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.

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          f.   As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in any
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to any Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request; provided that, for not more than ten (10) consecutive
Trading Days (as defined in the Certificate of Designation) (or a total of not
more than thirty (30) Trading Days in any twelve (12) month period), the Company
may delay the disclosure of material non-public information concerning the
Company (as well as prospectus or Registration Statement updating) the
disclosure of which at the time is not, in the good faith opinion of the
Company, in the best interests of the Company (an "Allowed Delay"); provided,
further, that the Company shall promptly (i) notify the Investors in writing of
the existence of (but in no event, without the prior written consent of an
Investor, shall the Company disclose to such Investor any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (ii) advise the Investors in writing to cease all sales under
such Registration Statement until the end of the Allowed Delay. Upon expiration
of the Allowed Delay, the Company shall again be bound by the first sentence of
this Section 3(f) with respect to the information giving rise thereto.

          g.   The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of any Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.

          h.   The Company shall permit a single firm of counsel designated by
the Initial Investors to review such Registration Statement, and all amendments
and supplements thereto (as well as all requests for acceleration or
effectiveness thereof and any correspondence between the Company and the SEC
relating to the Registration Statement) (collectively, the "Registration
Documents") a reasonable period of time prior to their filing with the SEC, and
not file (or send) any Registration Documents in a form to which such counsel
reasonably objects and will not request acceleration of such Registration
Statement without prior notice to such counsel; provided, that, upon receipt by
the Initial Investors of any Registration Documents, the Initial Investors shall
have three (3) business days to comment on or object to the filing (or sending)
of such Registration Documents. The sections of such Registration Statement
covering information with respect to the Investors, the Investor's beneficial
ownership of securities of the Company or the Investors intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by each of the Investors.

          i.   The Company shall make generally available to its security
holders as soon as practicable, but not later than ninety (90) calendar days
after the close of the period covered thereby,

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an earnings statement (in form complying with the provisions of Rule 158 under
the 1933 Act) covering a twelve-month period beginning not later than the first
day of the Company's fiscal quarter next following the effective date of the
Registration Statement.

          j.   At the request of any Investor, the Company shall furnish, on the
date that Registrable Securities are delivered to an underwriter, if any, for
sale in connection with any Registration Statement or, if such securities are
not being sold by an underwriter, on the date of effectiveness thereof (i) an
opinion, dated as of such date, from counsel representing the Company for
purposes of such Registration Statement, in form, scope and substance as is
customarily given in an underwritten public offering, addressed to the
underwriters, if any, and the Investors and (ii) a letter, dated such date, from
the Company's independent certified public accountants in form and substance as
is customarily given by independent certified public accountants to underwriters
in an underwritten public offering, addressed to the underwriters, if any, and
the Investors.

          k.   The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Initial Investors, (iv) one firm of attorneys
and one firm of accountants or other agents retained by all other Investors, and
(v) one firm of attorneys retained by all such underwriters (collectively, the
"Inspectors") all pertinent financial and other records, and pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably deemed necessary by each Inspector to enable each Inspector to
exercise its due diligence responsibility, and cause the Company's officers,
directors and employees to supply all information which any Inspector may
reasonably request for purposes of such due diligence; provided, however, that
                                                       --------  -------
each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) the release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

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          l.   The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.

          m.   The Company shall (i) cause all the Registrable Securities
covered by the Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) to the extent the securities
of the same class or series are not then listed on a national securities
exchange, secure the designation and quotation of all the Registrable Securities
covered by the Registration Statement on Nasdaq or, if not eligible for Nasdaq
on the Nasdaq SmallCap and, without limiting the generality of the foregoing, to
arrange for at least two market makers to register with the National Association
of Securities Dealers, Inc. ("NASD") as such with respect to such Registrable
Securities.

          n.   The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.

          o.   The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to such Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as Exhibit 1 and an opinion of such counsel in the form
attached hereto as Exhibit 2.

          p.   At the request of the holders of a majority-in-interest of the
Registrable Securities, the Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in

                                       10
<PAGE>

connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.

          q.   The Company shall not, and shall not agree to, allow the holders
of any securities of the Company to include any of their securities in any
Registration Statement under Section 2(a) hereof or any amendment or supplement
thereto under Section 3(b) hereof without the consent of the holders of a
majority-in-interest of the Registrable Securities. In addition, the Company
shall not offer any securities for its own account or the account of others in
any Registration Statement under Section 2(a) hereof or any amendment or
supplement thereto under Section 3(b) hereof without the consent of the holders
of a majority-in- interest of the Registrable Securities.

          r.   The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.

          s.   The Company shall comply with all applicable laws related to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the 1933 Act and the 1934 Act and the rules and
regulations promulgated by the SEC).

     4.   OBLIGATIONS OF THE INVESTORS.
          ----------------------------

     In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:

          a.   It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.

          b.   Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statements hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statements.

          c.   In the event Investors holding a majority-in-interest of the
Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the

                                       11
<PAGE>

services of an underwriter, each Investor agrees to enter into and perform such
Investor's obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from such Registration Statement.

          d.   Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.

          e.   No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.

     5.   EXPENSES OF REGISTRATION.
          ------------------------

     All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, the fees and disbursements of
counsel for the Company, and the reasonable fees and disbursements of one
counsel selected by the Initial Investors pursuant to Sections 2(b) and 3(h)
hereof shall be borne by the Company; provided, however, that such reasonable
                                      --------  -------
fees and disbursements of the counsel selected by the Initial Investors shall be
subject to the limitation on reimbursable expenses set forth in Section 4(f) of
the Securities Purchase Agreement.

     6.   INDEMNIFICATION.
          ---------------

     In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

          a.   To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities,
(ii) the directors, officers,

                                       12
<PAGE>

partners, employees, agents and each person who controls any Investor within the
meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), if any, (iii) any underwriter (as defined in the 1933 Act) for the
Investors, and (iv) the directors, officers, partners, employees and each person
who controls any such underwriter within the meaning of the 1933 Act or the 1934
Act, if any (each, an "Indemnified Person"), against any joint or several
losses, claims, damages, liabilities or expenses (collectively, together with
actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof, "Claims") to
which any of them may become subject insofar as such Claims arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "Violations"). Subject to the restrictions
set forth in Section 6(c) with respect to the number of legal counsel, the
Company shall reimburse the Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; and (iii) with respect to any preliminary prospectus,
shall not inure to the benefit of any Indemnified Person if the untrue statement
or omission of material fact contained in the preliminary prospectus was
corrected on a timely basis in the prospectus, as then amended or supplemented,
such corrected prospectus was timely made available by the Company pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly advised in writing
not to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advice, used it. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.

          b.   In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its

                                       13
<PAGE>

directors, each of its officers who signs the Registration Statement, each
person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act, any underwriter and any other stockholder selling securities
pursuant to the Registration Statement or any of its directors or officers or
any person who controls such stockholder or underwriter within the meaning of
the 1933 Act or the 1934 Act (collectively and together with an Indemnified
Person, an "Indemnified Party"), against any Claim to which any of them may
become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such
Claim arises out of or is based upon any Violation by such Investor, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to Section 6(c), such Investor will reimburse any legal
or other expenses (promptly as such expenses are incurred and are due and
payable) reasonably incurred by them in connection with investigating or
defending any such Claim; provided, however, that the indemnity agreement
                          --------  -------
contained in this Section 6(b) shall not apply to amounts paid in settlement of
any Claim if such settlement is effected without the prior written consent of
such Investor, which consent shall not be unreasonably withheld; provided,
                                                                 --------
further, however, that the Investor shall be liable under this Agreement
-------  -------
(including this Section 6(b) and Section 7) for only that amount as does not
exceed the net proceeds to such Investor as a result of the sale of Registrable
Securities pursuant to such Registration Statement. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Indemnified Party and shall survive the transfer of the Registrable
Securities by the Investors pursuant to Section 9. Notwithstanding anything to
the contrary contained herein, the indemnification agreement contained in this
Section 6(b) with respect to any preliminary prospectus shall not inure to the
benefit of any Indemnified Party if the untrue statement or omission of material
fact contained in the preliminary prospectus was corrected on a timely basis in
the prospectus, as then amended or supplemented.

          c.   Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
             --------  -------
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates (with the

                                       14
<PAGE>

approval of a majority-in-interest of the Initial Investors), if the Investors
are entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 6,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action. The indemnification required by this Section 6
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.

     7.   CONTRIBUTION.
          ------------

     To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that (i) no
                                          --------  -------
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section
6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.

     8.   REPORTS UNDER THE 1934 ACT.
          --------------------------

     With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:

          a.   make and keep public information available, as those terms are
understood and defined in Rule 144;

          b.   file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

          c.   furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent

                                       15
<PAGE>

annual or quarterly report of the Company and such other reports and documents
so filed by the Company, and (iii) such other information as may be reasonably
requested to permit the Investors to sell such securities pursuant to Rule 144
without registration.

     9.   ASSIGNMENT OF REGISTRATION RIGHTS.
          ---------------------------------

     The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase Agreement
(including Section 8(g)), and (vi) such transferee shall be an "accredited
investor" as that term defined in Rule 501 of Regulation D promulgated under the
1933 Act.

     10.  AMENDMENT OF REGISTRATION RIGHTS.
          --------------------------------

     Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, each of the Initial
Investors (to the extent such Initial Investor still owns Registrable
Securities) and Investors who hold a majority interest of the Registrable
Securities. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon each Investor and the Company.

     11.  MISCELLANEOUS.
          -------------

          a.   A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.

          b.   Any notices required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt requested)
or delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five (5) calendar days after
being placed in the mail, if mailed by regular United States mail, or upon
receipt,

                                       16
<PAGE>

if delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile, in each case addressed to a party. The addresses for
such communications shall be:

               If to the Company:

               Storage Computer Corporation
               11 Riverside Street
               Nashua, New Hampshire 03062
               Attention: Chief Financial Officer
               Facsimile: (603) 889-7232

               With copy to:

               Peabody & Arnold, LLP
               50 Rowes Wharf
               Boston, Massachusetts 02110-3342
               Attention: William E. Kelly
               Facsimile: (617) 951-2125

If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.

               With copy to:

               Bradley D. Houser, Esq.
               Akerman, Senterfitt & Eidson, P.A.
               One Southeast Third Avenue
               Miami, Florida 33131
               Facsimile:  (305) 374-5095

          c.   Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

          d.   This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware applicable to agreements made and to be
performed in the State of Delaware (without regard to principles of conflict of
laws). Both parties irrevocably consent to the exclusive jurisdiction of the
United States federal courts and the state courts located in Delaware with
respect to any suit or proceeding based on or arising under this Agreement, the
agreements entered into in connection herewith or the transactions contemplated
hereby or thereby and irrevocably agree that all claims in respect of such suit
or proceeding may be determined in such courts. Both parties irrevocably waive
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. Both parties further agree that service of process upon a party
mailed by

                                       17
<PAGE>

first class mail shall be deemed in every respect effective service of process
upon the party in any such suit or proceeding. Nothing herein shall affect
either party's right to serve process in any other manner permitted by law. Both
parties agree that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.

          e.   This Agreement and the Securities Purchase Agreement (including
all schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof.  There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein.  This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.

          f.   Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.

          g.   The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

          h.   This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement.  This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

          i.   Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

          j.   Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if the all of the Preferred Shares then  outstanding have been converted into
for Registrable Securities.

          k.   The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to each Investor by vitiating the intent
and purpose of the transactions contemplated hereby.  Accordingly, the Company
acknowledges that the remedy at law for breach of its obligations hereunder will
be inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions hereunder, that each Investor shall be
entitled, in addition to all other available remedies in law or in equity, to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions

                                       18
<PAGE>

hereof, without the necessity of showing economic loss and without any bond or
other security being required.

          l.   The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.

          m.   In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any
provision hereof which may prove invalid or unenforceable under any law shall
not affect the validity or enforceability of any other provision hereof.

          n.   The initial number of Registrable Securities included in any
Registration Statement and each increase to the number of Registrable Securities
included therein shall be allocated pro rata among the Investors based on the
number of Registrable Securities held by each Investor at the time of such
establishment or increase, as the case may be. In the event an Investor shall
sell or otherwise transfer any of such holder's Registrable Securities, each
transferee shall be allocated a pro rata portion of the number of Registrable
Securities included in a Registration Statement for such transferor. Any shares
of Common Stock included on a Registration Statement and which remain allocated
to any person or entity which does not hold any Registrable Securities shall be
allocated to the remaining Investors, pro rata based on the number of shares of
Registrable Securities then held by such Investors. For the avoidance of doubt,
the number of Registrable Securities held by an Investor shall be determined as
if all Preferred Shares and Warrants then outstanding and held by an Investor
were converted into or exercised for Registrable Securities.

               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       19
<PAGE>

     IN WITNESS WHEREOF, the Company and the undersigned Initial Investors have
caused this Agreement to be duly executed as of the date first above written.

                                  STORAGE COMPUTER CORPORATION

                                  By:  /s/ Peter N. Hood
                                      -------------------------------------
                                      Peter N. Hood
                                      Treasurer and Chief Financial Officer

                                  RGC INTERNATIONAL INVESTORS, LDC

                                  By:  Rose Glen Capital Management, L.P.,
                                       Investment Manager
                                       By:  RGC General Partner Corp., as
                                            General Partner

                                  By:    /s/ Wayne D. Bloch
                                        ------------------------------------
                                          Wayne D. Bloch
                                          Managing Director

                                       20<PAGE>

                                                                     EXHIBIT 4.2

     THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS
     WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
     AMENDED. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES
     PURCHASE AGREEMENT DATED AS OF AUGUST 15, 2001, NEITHER THIS WARRANT
     NOR ANY OF SUCH SHARES MAY BE SOLD, TRANSFERRED OR ASSIGNED IN THE
     ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
     UNDER SAID ACT OR, AN OPINION OF COUNSEL, IN FORM, SUBSTANCE AND SCOPE,
     CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
     REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO
     RULE 144 UNDER SUCH ACT.

                                                   Right to Purchase 771,605
                                                   Shares of Common Stock,
                                                   par value $.001 per share

                             STOCK PURCHASE WARRANT

     THIS CERTIFIES THAT, for value received, RGC International Investors, LDC
("RGC") or its registered assigns, is entitled to purchase from Storage Computer
Corporation, a Delaware corporation (the "Company"), at any time or from time to
time during the period specified in Paragraph 2 hereof, Seven Hundred Seventy-
One Thousand Six Hundred Five (771,605) fully paid and nonassessable shares of
the Company's Common Stock, par value $.001 per share (the "Common Stock"), at
an exercise price of $10.80 per share (the "Exercise Price"); The term "Warrant
Shares," as used herein, refers to the shares of Common Stock purchasable
hereunder. The Warrant Shares and the Exercise Price are subject to adjustment
as provided in Paragraph 4 hereof. The term Warrants means this Warrant and the
other warrants issued pursuant to that certain Securities Purchase Agreement,
dated August 15, 2001, by and among the Company and the Buyers listed on the
execution page thereof (the "Securities Purchase Agreement").

     This Warrant is subject to the following terms, provisions, and conditions:

     1.   Manner of Exercise; Issuance of Certificates; Payment for Shares.
          ----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) if the resale of the Warrant
Shares by the holder is not then registered pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), delivery to the Company of a written notice of an election to
effect a "Cashless Exercise" (as defined in Section 11(c) below) for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the holder hereof or such holder's designee, as
the record owner of such shares, as of the close of business on the date on
which this Warrant shall have been surrendered, the completed Exercise Agreement
shall have been delivered, and payment shall have been made for such shares (or
an election to effect a Cashless Exercise has been made) as set forth above.
Certificates for the Warrant
<PAGE>

Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding two (2) business days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.

          Notwithstanding anything in this Warrant to the contrary, in no event
shall the Holder of this Warrant be entitled to exercise a number of Warrants
(or portions thereof) in excess of the number of Warrants (or portions thereof)
upon exercise of which the sum of (i) the number of shares of Common Stock
beneficially owned by the Holder and its affiliates (other than shares of Common
Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and the unexercised or unconverted portion of any other
securities of the Company (including the Series C Warrants and shares of Series
C Preferred Stock (each as defined in the Securities Purchase Agreement, dated
October 31, 2000, by and among the Company and the purchasers set forth therein
(the "October 2000 Purchase Agreement")) and shares of the Series E Preferred
Stock (as defined in the Securities Purchase Agreement) subject to a limitation
on conversion or exercise analogous to the limitation contained herein) and (ii)
the number of shares of Common Stock issuable upon exercise of the Warrants (or
portions thereof) with respect to which the determination described herein is
being made, would result in beneficial ownership by the Holder and its
affiliates of more than 4.9% of the outstanding shares of Common Stock. For
purposes of the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
in clause (i) hereof. Notwithstanding anything in this Warrant to the contrary,
the restrictions on exercise of this Warrant set forth in this paragraph shall
not be amended without (i) the written consent of the Holder and the Company and
(ii) the approval of the holders of a majority of the Common Stock present, or
represented by proxy, and voting at any meeting called to vote on the amendment
of such restriction.

     2.   Period of Exercise. This Warrant is exercisable at any time or from
          ------------------
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement (the "Issue Date")
and before 5:00 p.m., New York City time on the fourth (4th) anniversary of the
Issue Date (the "Exercise Period").

     3.   Certain Agreements of the Company. The Company hereby covenants and
          ---------------------------------
agrees as follows:

          (a)    Shares to be Fully Paid. All Warrant Shares will, upon issuance
                 -----------------------
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.

                                       2
<PAGE>

          (b)     Reservation of Shares. During the Exercise Period, the Company
                  ---------------------
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.

          (c)     Listing. The Company shall promptly secure the listing of the
                  -------
shares of Common Stock issuable upon exercise of the Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.

          (d)    Certain Actions Prohibited. The Company will not, by amendment
                 --------------------------
of its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

          (e)    Successors and Assigns. This Warrant will be binding upon any
                 ----------------------
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.

     4.   Antidilution Provisions. During the Exercise Period, the Exercise
          -----------------------
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.

     In the event that any adjustment of the Exercise Price as required herein
results in a fraction of a cent, such Exercise Price shall be rounded up to the
nearest cent.

          (a)    Adjustment of Exercise Price and Number of Shares upon Issuance
                 ---------------------------------------------------------------
of Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(e)
---------------
hereof, if and whenever on or after the Issue Date of this Warrant, the Company
issues or sells, or in accordance with Paragraph 4(b) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
greater

                                       3
<PAGE>

of (1) the Market Price (as hereinafter defined) and (2) then effective Exercise
Price on the date of issuance (or deemed issuance) of such Common Stock (a
"Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to a price determined by multiplying the Exercise Price in
effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as set forth in
Paragraph 4(b) hereof, received by the Company upon such Dilutive Issuance
divided by the greater of (1) the Market Price and (2) the Exercise Price in
effect immediately prior to the Dilutive Issuance, and (ii) the denominator of
which is the total number of shares of Common Stock Deemed Outstanding (as
defined below) immediately after the Dilutive Issuance.

          (b)    Effect on Exercise Price of Certain Events. For purposes of
                 ------------------------------------------
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:

                 (i)    Issuance of Rights or Options. If the Company in any
                        -----------------------------
     manner issues or grants any warrants, rights or options, whether or not
     immediately exercisable, to subscribe for or to purchase Common Stock or
     other securities convertible into or exchangeable for Common Stock
     ("Convertible Securities") (such warrants, rights and options to purchase
     Common Stock or Convertible Securities are hereinafter referred to as
     "Options") and the price per share for which Common Stock is issuable upon
     the exercise of such Options is less than the greater of (1) the Market
     Price and (2) the Exercise Price on the date of issuance or grant of such
     Options, then the maximum total number of shares of Common Stock issuable
     upon the exercise of all such Options will, as of the date of the issuance
     or grant of such Options, be deemed to be outstanding and to have been
     issued and sold by the Company for such price per share. For purposes of
     the preceding sentence, the "price per share for which Common Stock is
     issuable upon the exercise of such Options" is determined by dividing (i)
     the total amount, if any, received or receivable by the Company as
     consideration for the issuance or granting of all such Options, plus the
     minimum aggregate amount of additional consideration, if any, payable to
     the Company upon the exercise of all such Options, plus, in the case of
     Convertible Securities issuable upon the exercise of such Options, the
     minimum aggregate amount of additional consideration payable upon the
     conversion or exchange thereof at the time such Convertible Securities
     first become convertible or exchangeable, by (ii) the maximum total number
     of shares of Common Stock issuable upon the exercise of all such Options
     (assuming full conversion of Convertible Securities, if applicable). No
     further adjustment to the Exercise Price will be made upon the actual
     issuance of such Common Stock upon the exercise of such Options or upon the
     conversion or exchange of Convertible Securities issuable upon exercise of
     such Options.

                 (ii)   Issuance of Convertible Securities. If the Company in
                        ----------------------------------
     any manner issues or sells any Convertible Securities, whether or not
     immediately convertible (other than where the same are issuable upon the
     exercise of Options) and the price per share for which Common Stock is
     issuable upon such conversion or exchange is less than the greater of (1)
     the Market Price and (2) the Exercise Price on the date of issuance of such
     Convertible Securities, then the maximum total number of shares of Common
     Stock issuable upon the

                                       4
<PAGE>

     conversion or exchange of all such Convertible Securities will, as of the
     date of the issuance of such Convertible Securities, be deemed to be
     outstanding and to have been issued and sold by the Company for such price
     per share. For the purposes of the preceding sentence, the "price per share
     for which Common Stock is issuable upon such conversion or exchange" is
     determined by dividing (i) the total amount, if any, received or receivable
     by the Company as consideration for the issuance or sale of all such
     Convertible Securities, plus the minimum aggregate amount of additional
     consideration, if any, payable to the Company upon the conversion or
     exchange thereof at the time such Convertible Securities first become
     convertible or exchangeable, by (ii) the maximum total number of shares of
     Common Stock issuable upon the conversion or exchange of all such
     Convertible Securities. No further adjustment to the Exercise Price will be
     made upon the actual issuance of such Common Stock upon conversion or
     exchange of such Convertible Securities.

               (iii)   Change in Option Price or Conversion Rate. If there is a
                       -----------------------------------------
     change at any time in (i) the amount of additional consideration payable to
     the Company upon the exercise of any Options; (ii) the amount of additional
     consideration, if any, payable to the Company upon the conversion or
     exchange of any Convertible Securities; or (iii) the rate at which any
     Convertible Securities are convertible into or exchangeable for Common
     Stock (other than under or by reason of provisions designed to protect
     against dilution), the Exercise Price in effect at the time of such change
     will be readjusted to the Exercise Price which would have been in effect at
     such time had such Options or Convertible Securities still outstanding
     provided for such changed additional consideration or changed conversion
     rate, as the case may be, at the time initially granted, issued or sold.

               (iv)    Treatment of Expired Options and Unexercised Convertible
                       --------------------------------------------------------
     Securities. If, in any case, the total number of shares of Common Stock
     ----------
     issuable upon exercise of any Option or upon conversion or exchange of any
     Convertible Securities is not, in fact, issued and the rights to exercise
     such Option or to convert or exchange such Convertible Securities shall
     have expired or terminated, the Exercise Price then in effect will be
     readjusted to the Exercise Price which would have been in effect at the
     time of such expiration or termination had such Option or Convertible
     Securities, to the extent outstanding immediately prior to such expiration
     or termination (other than in respect of the actual number of shares of
     Common Stock issued upon exercise or conversion thereof), never been
     issued.

               (v)     Calculation of Consideration Received. If any Common
                       -------------------------------------
     Stock, Options or Convertible Securities are issued, granted or sold for
     cash, the consideration received therefor for purposes of this Warrant will
     be the amount received by the Company therefor, before deduction of
     reasonable commissions, underwriting discounts or allowances or other
     reasonable expenses paid or incurred by the Company in connection with such
     issuance, grant or sale. In case any Common Stock, Options or Convertible
     Securities are issued or sold for a consideration part or all of which
     shall be other than cash, the amount of the consideration other than cash
     received by the Company will be the fair value of such consideration,
     except where such consideration consists of securities, in which case the
     amount of consideration received by the Company will be the Market Price
     thereof as of the

                                       5
<PAGE>

     date of receipt. In case any Common Stock, Options or Convertible
     Securities are issued in connection with any acquisition, merger or
     consolidation in which the Company is the surviving corporation, the amount
     of consideration therefor will be deemed to be the fair value of such
     portion of the net assets and business of the non-surviving corporation as
     is attributable to such Common Stock, Options or Convertible Securities, as
     the case may be. The fair value of any consideration other than cash or
     securities will be determined in good faith by the Board of Directors of
     the Company.

                 (vi)    Exceptions to Adjustment of Exercise Price. No
                         ------------------------------------------
     adjustment to the Exercise Price will be made (i) upon the exercise of any
     warrants, options or convertible securities granted, issued and outstanding
     on the date of issuance of this Warrant; (ii) upon the grant or exercise of
     any stock or options which may hereafter be granted or exercised under any
     employee benefit plan of the Company now existing or to be implemented in
     the future, so long as the issuance of such stock or options is approved by
     a majority of the independent members of the Board of Directors of the
     Company or a majority of the members of a committee of independent
     directors established for such purpose; (iii) upon the exercise of the
     Warrants and the Series C Warrants (as defined in the October 2000 Purchase
     Agreement); (iv) the issuance or conversion of the Company's Series C
     Preferred Stock (as defined in the October 2000 Purchase Agreement), and
     the Series E Preferred Stock; (v) the issuance of any dividend in the form
     of Common Stock to the holders of the Company's Series A and Series B
     Preferred Stock pursuant to the Company's obligations under its Certificate
     of Designation of Series A 8% Convertible Preferred Stock and the
     Certificate of Designation of Series B 8% Convertible Preferred Stock.

          (c)    Subdivision or Combination of Common Stock. If the Company at
                 ------------------------------------------
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.

          (d)    Adjustment in Number of Shares. Upon each adjustment of the
                 ------------------------------
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock issuable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product so obtained by the adjusted Exercise Price.

          (e)    Consolidation, Merger or Sale. In case of any consolidation of
                 -----------------------------
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance,

                                       6
<PAGE>

adequate provision will be made whereby the holder of this Warrant will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor or acquiring entity (if other than the Company) and, if
an entity different from the successor or acquiring entity, the entity whose
capital stock or assets the holders of the Common Stock of the Company are
entitled to receive as a result of such consolidation, merger or sale or
conveyance assumes by written instrument the obligations under this Paragraph 4
and the obligations to deliver to the holder of this Warrant such shares of
stock, securities or assets as, in accordance with the foregoing provisions, the
holder may be entitled to acquire.

          (f)    Distribution of Assets. In case the Company shall declare or
                 ----------------------
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.

          (g)    Notice of Adjustment. Upon the occurrence of any event which
                 --------------------
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.

          (h)    Minimum Adjustment of Exercise Price. No adjustment of the
                 ------------------------------------
Exercise Price shall be made in an amount of less than 1% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.

          (i)    No Fractional Shares. No fractional shares of Common Stock are
                 --------------------
to be issued upon the exercise of this Warrant. If the exercise of this Warrant
would result in a fractional share of Common Stock, such fractional share shall
be disregarded and the number of shares of Common Stock issuable upon exercise
of the Warrant shall be the next higher number of shares.

                                       7
<PAGE>

          (j) Other Notices. In case at any time:
              -------------

               (i)    the Company shall declare any dividend upon the Common
     Stock payable in shares of stock of any class or make any other
     distribution (including dividends or distributions payable in cash out of
     retained earnings) to the holders of the Common Stock;

               (ii)   the Company shall offer for subscription pro rata to the
     holders of the Common Stock any additional shares of stock of any class or
     other rights;

               (iii)  there shall be any capital reorganization of the Company,
     or reclassification of the Common Stock, or consolidation or merger of the
     Company with or into, or sale of all or substantially all its assets to,
     another corporation or entity; or

               (iv)   there shall be a voluntary or involuntary dissolution,
     liquidation or winding-up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.

          (k) Certain Events. If any event occurs of the type contemplated by
              --------------
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the Holder
shall be neither enhanced nor diminished by such event.

          (l) Certain Definitions.
              -------------------

               (i) "Common Stock Deemed Outstanding" shall mean the number of
                    -------------------------------
     shares of Common Stock actually outstanding (not including shares of Common
     Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
     4(b)(i) hereof, the maximum total number of shares of Common Stock issuable
     upon the exercise of Options, as of the date of such issuance or grant of
     such Options, if any, and (y) pursuant to Paragraph 4(b)(ii)

                                       8
<PAGE>

     hereof, the maximum total number of shares of Common Stock issuable upon
     conversion or exchange of Convertible Securities, as of the date of
     issuance of such Convertible Securities, if any.

               (ii)   "Market Price," as of any date, (i) means the average of
                       ------------
     the last reported sale prices for the shares of Common Stock on the
     American Stock Exchange (the "AMEX") for the five (5) trading days
     immediately preceding such date as reported by Bloomberg Financial Markets
     or an equivalent reliable reporting service mutually acceptable to and
     hereafter designated by the holder of this Warrant and the Company
     ("Bloomberg"), or (ii) if the AMEX is not the principal trading market for
     the shares of Common Stock, the average of the last reported sale prices on
     the principal trading market for the Common Stock during the same period as
     reported by Bloomberg, or (iii) if market value cannot be calculated as of
     such date on any of the foregoing bases, the Market Price shall be the fair
     market value as reasonably determined in good faith by (a) the Board of
     Directors of the Company or, at the option of a majority-in-interest of the
     holders of the outstanding Warrants by (b) an independent investment bank
     of nationally recognized standing in the valuation of businesses similar to
     the business of the Company. The manner of determining the Market Price of
     the Common Stock set forth in the foregoing definition shall apply with
     respect to any other security in respect of which a determination as to
     market value must be made hereunder.

               (iii)  "Common Stock," for purposes of this Paragraph 4, includes
                       ------------
     the Common Stock, par value $.001 per share, and any additional class of
     stock of the Company having no preference as to dividends or distributions
     on liquidation, provided that the shares purchasable pursuant to this
     Warrant shall include only shares of Common Stock, par value $.001 per
     share, in respect of which this Warrant is exercisable, or shares resulting
     from any subdivision or combination of such Common Stock, or in the case of
     any reorganization, reclassification, consolidation, merger, or sale of the
     character referred to in Paragraph 4(e) hereof, the stock or other
     securities or property provided for in such Paragraph.

     5.   Issue Tax. The issuance of certificates for Warrant Shares upon the
          ---------
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.

     6.   No Rights or Liabilities as a Shareholder. This Warrant shall not
          -----------------------------------------
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.

     7.   Transfer, Exchange, and Replacement of Warrant.
          ----------------------------------------------

                                       9
<PAGE>

          (a) Restriction on Transfer. This Warrant and the rights granted to
              -----------------------
the holder hereof are transferable, in whole or in part, upon surrender of this
Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights described in
Paragraph 8 are assignable only in accordance with the provisions of that
certain Registration Rights Agreement, dated as of August 15, 2001, by and among
the Company and the other signatories thereto (the "Registration Rights
Agreement").

          (b) Warrant Exchangeable for Different Denominations. This Warrant is
              ------------------------------------------------
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.

          (c) Replacement of Warrant. Upon receipt of evidence reasonably
              ----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.

          (d) Cancellation; Payment of Expenses. Upon the surrender of this
              ---------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.

          (e) Register. The Company shall maintain, at its principal executive
              --------
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.

          (f) Exercise or Transfer Without Registration. If, at the time of the
              -----------------------------------------
surrender of this Warrant in connection with any exercise, transfer, or exchange
of this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares issuable hereunder), shall not be registered under the Securities Act and
under applicable state securities or blue sky laws, the Company may require, as
a condition of allowing such exercise, transfer, or exchange, (i) that the
holder or transferee of this

                                       10
<PAGE>

Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company and (iii) that the transferee be an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act; provided that no such opinion, letter or status as an "accredited investor"
shall be required in connection with a transfer pursuant to Rule 144 under the
Securities Act. The first holder of this Warrant, by taking and holding the
same, represents to the Company that such holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.

     8.   Registration Rights. The initial holder of this Warrant (and certain
          -------------------
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.

     9.   Notices. All notices, requests, and other communications required or
          -------
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 11 Riverside Street,
Nashua, New Hampshire 03062, Attention: Chief Financial Officer, or at such
other address as shall have been furnished to the holder of this Warrant by
notice from the Company. Any such notice, request, or other communication may be
sent by facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9, or, if mailed by registered or
certified mail or with a recognized overnight mail courier upon deposit with the
United States Post Office or such overnight mail courier, if postage is prepaid
and the mailing is properly addressed, as the case may be.

     10.  Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
          -------------
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN THE STATE OF DELAWARE (WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS). BOTH PARTIES IRREVOCABLY CONSENT TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES FEDERAL COURTS AND THE STATE COURTS LOCATED IN
DELAWARE WITH RESPECT TO ANY SUIT OR PROCEEDING BASED ON OR ARISING UNDER THIS
AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY AND IRREVOCABLY AGREE THAT ALL
CLAIMS IN RESPECT OF SUCH SUIT OR PROCEEDING MAY BE DETERMINED IN SUCH COURTS.
BOTH PARTIES IRREVOCABLY WAIVE THE DEFENSE

                                       11
<PAGE>

OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH SUIT OR PROCEEDING. BOTH
PARTIES FURTHER AGREE THAT SERVICE OF PROCESS UPON A PARTY MAILED BY FIRST CLASS
MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON THE
PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN SHALL AFFECT EITHER PARTY'S
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. BOTH PARTIES AGREE
THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT
OR IN ANY OTHER LAWFUL MANNER.

     11.  Miscellaneous.
          -------------

          (a) Amendments. This Warrant and any provision hereof may only be
              ----------
amended by an instrument in writing signed by the Company and the holder hereof.

          (b) Descriptive Headings. The descriptive headings of the several
              --------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.

          (c) Cashless Exercise. Notwithstanding anything to the contrary
              -----------------
contained in this Warrant, if the resale of the Warrant Shares by the holder is
not then registered pursuant to an effective registration statement under the
Securities Act, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company at its principal executive offices with a written
notice of the holder's intention to effect a cashless exercise, including a
calculation of the number of shares of Common Stock to be issued upon such
exercise in accordance with the terms hereof (a "Cashless Exercise"). In the
event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the
holder shall surrender this Warrant for that number of shares of Common Stock
determined by multiplying the number of Warrant Shares to which it would
otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.

          (d) Remedies. The Company acknowledges that a breach by it of its
              --------
obligations hereunder will cause irreparable harm to the holder of this Warrant
by vitiating the intent and purpose of the transactions contemplated hereby.
Accordingly, the Company acknowledges that the remedy at law for a breach of its
obligations under this Warrant will be inadequate and agrees, in the event of a
breach or threatened breach by the Company of the provisions of this Warrant,
that the holder of this Warrant shall be entitled, in addition to all other
available remedies in law or in equity, to an injunction or injunctions to
prevent or cure any breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions of this Warrant, without the necessity of
showing economic loss and without any bond or other security being required.

               [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       12
<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.

                                      STORAGE COMPUTER CORPORATION

                                      By: /s/ Peter N. Hood
                                          --------------------------------
                                          Peter N. Hood
                                          Treasurer and Chief Financial Officer

                          Dated as of August 16, 2001

                                       13
<PAGE>

                          FORM OF EXERCISE AGREEMENT

                                                       Dated:  ________ __, 2001

To: STORAGE COMPUTER CORPORATION

     The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:

                                                  Name: ________________________

                                                  Signature: ___________________
                                                  Address: _____________________
                                                           _____________________
                                                           _____________________

                                                  Note: The above signature
                                                        should correspond
                                                        exactly with the name on
                                                        the face of the within
                                                        Warrant.

and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.

                                       14
<PAGE>

                              FORM OF ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:

 Name of Assignee           Address                       No of Shares
 ----------------           -------                       ------------

, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.

Dated:  ______ __, 200_

In the presence of:

_______________________

                               Name:         ___________________________________

                               Signature:    ___________________________________

                               Title of Signing Officer or Agent (if any):

                               Address:      ___________________________________
                                             ___________________________________
                                             ___________________________________

                               Note: The above signature should correspond
                                     exactly with the name on the face of the
                                     within Warrant.

                                       15

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