STREAMLOGIC CORP, SC 13E4, 1996-10-07

STREAMLOGIC CORP
SC 13E4, 1996-10-07
COMPUTER STORAGE DEVICES

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)

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STREAMLOGIC CORPORATION
(Name of Issuer)

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STREAMLOGIC CORPORATION
(Name of Person(s) Filing Statement)

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6% Convertible Subordinated Debentures due March 15, 2012
(Title of Class of Securities)

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863238-AA-5
(CUSIP Number of Class of Securities)

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Lee N. Hilbert
Chief Financial Officer
21329 Nordhoff Street
Chatsworth, California 91311
(818) 701-8400

(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications on Behalf of Person(s) Filing Statement)

Copy to:

Brian G. Cartwright, Esq.
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
(213) 891-7941

October 7, 1996
(Date Tender Offer First Published, Sent or Given to Security Holders)

CALCULATION OF FILING FEE
================================================================================
Transaction valuation* Amount of
filing fee
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$42,750,000 $8,550
================================================================================

* This amount is based upon the exchange of $75,000,000 aggregate principal
amount of 6% Debentures, with a market value (determined in accordance with
Rule 0-11(a)(4)) of $42,750,000 based on the last reported sale price for
the 6% Debentures prior to the date hereof of $57 per $100 face amount,
reported on September 26, 1996. Pursuant to, and as provided by, Rule 0-
11(b)(1), the amount required to be paid with the filing of this Schedule
13E-4 is $8,550.

[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.

Amount Previously Paid: _______________
Form or Registration No.: _____________
Filing Party: _________________________
Date Filed: ___________________________

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PAGE 1 OF 6 PAGES
EXHIBIT INDEX ON PAGE 6
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ITEM 1. SECURITY AND ISSUER.

(a) The name of the Issuer is StreamLogic Corporation, a Delaware
corporation (the "Company"). The Company's principal executive office is
located at 21329 Nordhoff Street, Chatsworth, California 91311.

(b) This Issuer Tender Offer Statement on Schedule 13E-4 (this
"Statement") relates to a tender offer by the Company to exchange, for each
$1,000 principal amount of 6% Debentures, $120.00 in cash, $113.33 principal
amount of the Company's increasing rate unsecured Promissory Notes due 1998,
216.66667 shares of its Common Stock, $1.00 par value per share ("Common
Stock") and five-year warrants to purchase 40 shares of Common Stock, for any
and all of the $75 million outstanding principal amount of its 6% Convertible
Subordinated Debentures due March 15, 2012 ("6% Debentures"), upon the terms and
subject to the conditions set forth in the Offer to Exchange dated October 7,
1996 (the "Offer to Exchange") and in the related Letter of Transmittal (the
"Letter of Transmittal"). The Offer to Exchange and the Letter of Transmittal
together constitute the "Offer" and are annexed to and filed with this Statement
as Exhibits (a)(1) and (a)(2), respectively. No 6% Debentures are to be
purchased from any officer, director or affiliate of the Company pursuant to the
Offer, except as set forth in Item 4 hereof.

(c) The information set forth in "PRICE RANGE OF 6% DEBENTURES AND
COMMON STOCK" of the Offer to Exchange is incorporated herein by reference.

(d) Not applicable.

ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a) The information set forth in "THE EXCHANGE OFFER--General,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION--Liquidity and
Capital Resources," "DESCRIPTION OF CAPITAL STOCK," "DESCRIPTION OF
PROMISSORY NOTES" and "DESCRIPTION OF WARRANTS" of the Offer to Exchange is
incorporated herein by reference.

(b) Not applicable.

ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.

(a)-(j) The information set forth in the "SUMMARY" and "THE EXCHANGE OFFER
- --Acceptance of 6% Debentures; Delivery of Tender Offer Consideration," "THE
EXCHANGE OFFER--Terms of the Exchange Offer," "SPECIAL FACTORS--Purposes of the
Exchange Offer," "SPECIAL FACTORS--Consequences for Untendered 6% Debentures,"
and "BACKGROUND OF THE EXCHANGE OFFER" of the Offer to Exchange is incorporated
herein by reference.

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ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.

The information set forth in "INTERESTS IN 6% DEBENTURES" of the Offer to
Exchange is incorporated herein by reference.

ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE ISSUER'S SECURITIES.

The information set forth in "BACKGROUND OF THE EXCHANGE OFFER--Tender
Agreement" and "CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO 6% DEBENTURES" of the Offer to Exchange is incorporated herein by
reference.

ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

The information set forth in "THE EXCHANGE OFFER--Fees and Expenses" of the
Offer to Exchange is incorporated by reference herein.

ITEM 7. FINANCIAL INFORMATION.

The incorporation by reference herein of the financial information
described below does not constitute an admission that such information is
material to the Debentures holders' decision to tender, sell or hold the 6%
Debentures being sought in the Offer.

(a)-(b) The information set forth in "CAPITALIZATION," "UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" and "FINANCIAL STATEMENTS" of the
Offer to Exchange is incorporated herein by reference.

ITEM 8. ADDITIONAL INFORMATION.

(a) Not applicable.

(b) The information set forth in "THE EXCHANGE OFFER--Conditions" of
the Offer to Exchange is incorporated herein by reference. The Company must
comply with various sections of the Securities Act of 1933, as amended and the
Exchange Act, and certain of the rules promulgated thereunder. The Company must
also comply with the various requirements of state "blue sky" laws.

(d) None.

(e) The information set forth in the Offer to Exchange and the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2), respectively is incorporated herein by reference.

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ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.

Exhibit No. Description
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(a)(1) Offer to Exchange dated October 7, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Company to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Letter from the Company to 6% Debenture Holders.
(a)(7) Text of Press Releases dated June 17, 1996, September 16,
1996 and October 6, 1996.
(a)(8) Guidelines of the Internal Revenue Service for
Certification of Taxpayer Identification Number on Substitute
Form W-9.
(b) Not applicable.
(c)(1) Letter Agreement dated as of June 14, 1996 between the Company
and Loomis Sayles & Co., L.P.
(c)(2) Letter Agreement dated September 13, 1996 between the Company
and Loomis Sayles & Co., L.P.
(c)(3) Letter Agreement dated as of October 3, 1996 between the
Company and Loomis Sayles & Co., L.P.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.

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SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.

Dated: October 7, 1996 STREAMLOGIC CORPORATION

BY /s/ Lee N. Hilbert
-------------------------------------
NAME: LEE N. HILBERT
TITLE: CHIEF FINANCIAL OFFICER

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EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<S> <C> <C>
(a)(1) Offer to Exchange dated October 7, 1996.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Company to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Letter from the Company to 6% Debenture Holders.
(a)(7) Text of Press Releases dated June 17, 1996, September 16,
1996 and October 6, 1996.
(a)(8) Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
(c)(1) Agreement dated as of June 14, 1996 between the Company and Loomis
Sayles & Co., L.P.
(c)(2) Letter Agreement dated September 13, 1996 between the Company and
Loomis Sayles & Co., L.P.
(c)(3) Letter Agreement dated October 3, 1996 between the Company and
Loomis Sayles & Co., L.P.
</TABLE>

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STREAMLOGIC CORPORATION

OFFER TO EXCHANGE

FOR EACH $1,000 FACE AMOUNT OF ITS
6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2012
TENDERED BY THE EXPIRATION DATE (AS DEFINED BELOW) THE EXCHANGING HOLDER WILL
RECEIVE
$120.00 IN CASH, $113.33 PRINCIPAL AMOUNT OF THE COMPANY'S INCREASING RATE
UNSECURED PROMISSORY NOTES DUE 1998, 216.66667 SHARES OF ITS COMMON STOCK,
$1.00 PAR VALUE PER SHARE, AND FIVE-YEAR WARRANTS TO PURCHASE 40 SHARES OF
COMMON STOCK AT AN INITIAL EXERCISE PRICE PER SHARE OF $3.60.

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THIS OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME ON
NOVEMBER 4, 1996, UNLESS THIS OFFER IS EXTENDED (THE "EXPIRATION DATE").

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StreamLogic Corporation, a Delaware corporation (the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this Offer
to Exchange (the "Offer to Exchange") and the accompanying Letter of
Transmittal (the "Letter of Transmittal)," to exchange each $1,000 principal
amount of its 6% Debentures due 2012 ("6% Debentures") for (i) $120.00 in
cash, (ii) $113.33 principal amount of the Company's increasing rate unsecured
promissory notes due 1998 ("Promissory Notes"), which notes mature on the
second anniversary of the date they are issued and bear interest at 14% per
annum from the date of issuance to the first anniversary thereof and at 16%
per annum thereafter until maturity, (iii) 216.66667 shares of the Company's
Common Stock, $1.00 par value per share ("Common Stock") and (iv) five-year
warrants ("Warrants") to purchase 40 shares of Common Stock at an initial
exercise price of $3.60 per share, subject to certain rights of each Warrant
holder to reduce such exercise price under certain circumstances on a one-time
basis. The Exchange Offer is being made for the entire outstanding principal
amount of the 6% Debentures. However, the consummation of the Exchange Offer
is conditioned on, among other things, at least 95% of the outstanding
principal amount of the Exchange Debentures having been validly tendered and
not withdrawn prior to the Expiration Date. See "The Exchange Offer--
Conditions."

SEE "CERTAIN CONSIDERATIONS RELATED TO THE COMPANY" AND "SPECIAL FACTORS"
FOR A DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH THE EXCHANGE OFFER.

Subject to applicable law and the terms set forth in this Offer to Exchange,
the Company reserves the right to waive any and all conditions to the Exchange
Offer, to extend or to terminate the Exchange Offer and otherwise amend the
Exchange Offer in any respect. See "The Exchange Offer--Conditions" and "--
Expiration; Extension; Termination; Amendment."

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Tenders of 6% Debentures made pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date.

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NEITHER THIS TRANSACTION NOR THESE SECURITIES HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION. THE COMMISSION HAS
NOT PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR UPON THE
ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT.
ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

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EXCHANGE AGENT

ChaseMellon Shareholder Services, L.L.C. (the "Exchange Agent") has agreed
to provide services as exchange agent for the Exchange Offer. All deliveries
and correspondence sent to the Exchange Agent should be directed to one of its
addresses set forth on the back cover to this Offer to Exchange. Requests for
assistance or additional copies of this Offer to Exchange or the Letter of
Transmittal should be delivered to the Company at its address set forth on the
back cover page of this Offer to Exchange.

The date of this Offer to Exchange is October 7, 1996
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IMPORTANT

Any holder of 6% Debentures desiring to tender all or any portion of such
holder's 6% Debentures should either (1) complete and sign the Letter of
Transmittal or a facsimile copy thereof in accordance with the instructions in
the Letter of Transmittal, mail or deliver it with any other required
documents to the Exchange Agent and either deliver the certificates for such
6% Debentures to Exchange Agent along with the Letter of Transmittal or
deliver such 6% Debentures pursuant to the procedures for book-entry transfer
set forth in "The Exchange Offer--Procedures for Tendering" or (2) request
such holder's broker, dealer, commercial bank, trust company or other nominee
to effect the transaction for such holder. Holders whose 6% Debentures are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee if they desire to tender such 6% Debentures. Any holder of 6%
Debentures who desires to tender 6% Debentures and whose certificates for such
6% Debentures are not immediately available or who cannot comply with the
procedures for book entry transfer on a timely basis may tender such Shares by
following the procedure for guaranteed delivery set forth in "The Exchange
Offer-- Procedures for Tendering."

NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY HOLDER OF 6% DEBENTURES AS TO WHETHER TO TENDER OR TO REFRAIN FROM
TENDERING 6% DEBENTURES. EACH HOLDER OF 6% DEBENTURES MUST MAKE HIS OWN
DECISION WHETHER TO TENDER 6% DEBENTURES AND, IF SO, IN WHAT PRINCIPAL AMOUNT.

NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER HOLDERS OF 6% DEBENTURES SHOULD TENDER OR REFRAIN FROM
TENDERING 6% DEBENTURES PURSUANT TO THE EXCHANGE OFFER. NO PERSON HAS BEEN
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THE EXCHANGE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO
EXCHANGE OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH
RECOMMENDATION, INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY.

NEW HAMPSHIRE RESIDENTS ONLY: NEITHER THE FACT THAT A REGISTRATION STATEMENT
OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER THIS CHAPTER WITH THE
STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED
OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY
THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE,
COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION.
IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER,
CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF
THIS PARAGRAPH.

The delivery of this Offer to Exchange shall not, under any circumstances,
create any implication that the information herein is correct as of any time
subsequent to the date hereof.

THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT TENDERS
FROM, HOLDERS OF 6% DEBENTURES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER
OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR
BLUE SKY LAWS OF SUCH JURISDICTION.

The Exchange Offer is being made by the Company in reliance on the exemption
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act"), afforded by Section 3(a)(9) thereof. The Company,
therefore, will not pay any commission or other remuneration to any broker,
dealer, salesman or other person for soliciting tenders of the 6% Debentures.
Regular employees of the Company, who will not receive additional compensation
therefor, may solicit tenders and consents from holders of 6% Debentures.

2
<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Schedule 13E-3, which term shall encompass any amendments
thereto, and a Schedule 13E-4, which term shall encompass any amendments
thereto, under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), with respect to the Exchange Offer. This Offer to Exchange does not
contain all the information set forth in the Schedule 13E-3 and the exhibits
thereto and the Schedule 13E-4 and the exhibits thereto, to which reference is
hereby made for further information about the Company and the Exchange Offer.

The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files reports and other information with the
Commission. Information as of particular dates concerning the Company's
directors and officers, their compensation and any material interest of such
persons in transactions with the Company is set forth in the reports filed
with the Commission. Such reports and other information may be inspected and
copies may be obtained at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; its Midwest
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and its Northeast Regional Office, 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of the prescribed fees. Reports, proxy and
information statements and other information concerning the Company can also
be inspected at the Nasdaq Stock Market at 1735 K Street, N.W., Washington,
D.C. 20006.

CAUTIONARY STATEMENT

The discussion in this Offer to Exchange contains "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 that involve risks and uncertainties. Such statements can be
identified by the use of forward-looking terminology such as "may," "will,"
"should," "expect," "anticipate," "estimate," or "continue" or the negative
thereof or other variations thereon or comparable terminology. The Company's
actual results could differ materially from those discussed herein. Factors
that could cause or contribute to such differences include, but are not
limited to, those discussed in "Certain Considerations Related to the
Company," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "The Company," as well as those discussed elsewhere
in this Offer to Exchange.

3
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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Summary................................................................... 5
Special Factors........................................................... 12
Certain Considerations Related to the Company............................. 16
Capitalization............................................................ 19
Unaudited Pro Forma Condensed Consolidated Financial Statements........... 20
The Company............................................................... 25
Management................................................................ 33
Security Ownership of Certain Beneficial Owners........................... 38
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 39
Background of the Exchange Offer.......................................... 45
The Exchange Offer........................................................ 49
Description of 6% Debentures.............................................. 58
Description of Capital Stock.............................................. 61
Description of Promissory Notes........................................... 62
Description of Warrants................................................... 64
Price Range of 6% Debentures and Common Stock............................. 67
Summary of Material Federal Income Tax Consequences....................... 69
Interests in 6% Debentures................................................ 73
Contracts, Arrangements, Understandings or Relationships with Respect to
6% Debentures............................................................ 73
Appendix A-1: Initial Tender Agreement dated June 14, 1996................ A1-1
Appendix A-2: First Amendment dated September 13, 1996.................... A2-1
Appendix A-3: Second Amendment dated October 3, 1996...................... A3-1
Appendix B: Form of Note Indenture........................................ B-1
Appendix C: Form of Warrant Agreement..................................... C-1
Appendix D: Financial Statements.......................................... D-1
</TABLE>

4
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SUMMARY

The following is a summary of certain information contained elsewhere in this
Offer to Exchange and is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements and notes thereto appearing elsewhere in this Offer to Exchange. As
used herein, unless the context otherwise requires, the "Company" and
"StreamLogic" refer to StreamLogic Corporation and its consolidated
subsidiaries. Holders of the Company's 6% Convertible Subordinated Debentures
due 2012 ("6% Debentures") are urged to read this Offer to Exchange in its
entirety prior to tendering any of their 6% Debentures.

THE COMPANY

StreamLogic develops and markets leading-edge video delivery, digital media
storage, and networking RAID and data management solutions. It offers storage
subsystem products known as the RAIDION and MICRODISK, the HAMMER line of high
performance disk array products, the VIDEON line of video-on-demand server
subsystems, and a line of low cost digital video disk recorders which allow
real time record and playback of video material. The Company sells these
products and systems through independent distributors, directly to original
equipment manufacturers ("OEMs") and systems integrators and through dealer
channel partners for resale to end users.

The Company was incorporated, under the name Micropolis Corporation, in
California in December 1976. In April 1987, the Company was reincorporated in
Delaware. In March 1996 the Company sold substantially all of the assets (other
than cash and accounts receivable) related to the hard disk drive business
formerly operated by the Company to ST Chatsworth Pte Ltd, a Singapore
corporation (the "Sale"), and changed its name to StreamLogic Corporation.

BACKGROUND OF THE EXCHANGE OFFER

General. During the last three completed fiscal years and the transition
period ended March 29, 1996, the Company incurred substantial operating losses,
and total shareholders' equity fell from $89.630 million at December 30, 1994
to a deficit of $27.084 million at March 29, 1996. These losses were primarily
related to the Company's hard disk drive business, which in fiscal 1995 and the
transition period ended March 29, 1996 accounted for approximately 80% of the
Company's revenues. On March 29, 1996, following approval of the Company's
stockholders, the Company completed the Sale. The Company has received
approximately $53 million in cash proceeds from the Sale, with $1 million being
held in escrow.

As a result of the Sale, StreamLogic has become a significantly smaller,
growth-oriented business. The book value of the Company's property, plant and
equipment as of June 28, 1996 totaled approximately $6 million, and the Company
employed approximately 150 persons, as compared to approximately $54 million in
such assets and 2,000 employees immediately prior to the Sale. The Company
believes the indebtedness represented by the 6% Debentures is
disproportionately large in relation to its present assets, and inappropriate
for a growth-oriented business of the Company's size.

Prior to the Sale, the Company evaluated several alternatives with respect to
restructuring its 6% Debentures prior to or concurrently with the Sale. The
Company decided against pursuing a debt restructuring simultaneously with the
Sale transaction in large measure because completing the restructuring process
in the requisite accelerated time frame was considered to be unrealistic. At
such time, Loomis Sayles & Company, L.P. ("Loomis Sayles"), an entity which
advises investors that collectively hold approximately 79% of the aggregate
principal amount of the outstanding 6% Debentures, indicated to the Company its
potential interest in reaching an agreement with respect to a restructuring of
the 6% Debentures after the Sale.

5
<PAGE>

On May 13, 1996, the Company received an inquiry from the Nasdaq Stock
Market, Inc. ("Nasdaq") as to whether the Company met the minimum net tangible
assets requirement of the Nasdaq National Market System ("Nasdaq NMS") as of
its quarter ended March 29, 1996. The Company indicated in response that it did
not believe it met such requirement, and the Nasdaq requested that the Company
submit a written plan by May 28, 1996 for returning to compliance with the net
tangible assets requirement. The Company submitted such a plan on May 28, 1996,
an important element of which was a restructuring of the 6% Debentures through
an exchange offer for cash and equity securities of the Company. Such plan was
reviewed by Nasdaq, and Nasdaq granted the Company's request for continued
inclusion of the Common Stock on the Nasdaq NMS conditioned upon consummation
of an exchange offer on the terms of the Initial Tender Agreement (as defined
below) by October 4, 1996. On September 16, the Company requested Nasdaq to
extend the date by which it would require the Exchange Offer to be consummated
in order to allow the continued inclusion of the Common Stock on the Nasdaq NMS
to October 31, 1996. Following further telephonic conversations with
representatives of Nasdaq, on September 30, 1996, Nasdaq informed the Company
that it would not grant the Company's request for an extension of the date by
which it would require the Exchange Offer to be consummated and that effective
October 7, 1996, the Company's Common Stock would be removed from the Nasdaq
NMS. Nasdaq did, however, inform the Company that it could apply to have its
Common Stock listed on the Nasdaq SmallCap Market pending consummation of the
Exchange Offer. The Company has initiated an oral appeal of the proposed
delisting of its Common Stock from the Nasdaq NMS, and intends to apply for
listing of its Common Stock on the Nasdaq SmallCap Market, pending the
successful consummation of the Exchange Offer. Nasdaq has informed the Company
that its Common Stock will continue to trade on the Nasdaq NMS pending the
outcome of the oral appeal; however, there can be no assurances as to whether
such appeal will be successful or as to when such determination will be made by
Nasdaq. If the Company is unable to consummate the Exchange Offer, it is likely
that the Common Stock would no longer be authorized for quotation either on the
Nasdaq NMS or the Nasdaq SmallCap Market. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Market for
StreamLogic Common Stock."

The Tender Agreement. In April 1996, representatives of the Company contacted
Loomis Sayles concerning a proposal for the exchange of the 6% Debentures for
some combination of cash and securities of the Company. Following a series of
discussions and negotiations between the Company, Loomis Sayles and Chanin &
Company, an investment banking and advisory firm retained at the Company's
expense by Loomis Sayles as its financial advisor ("Chanin"), and after
approval by the Company's Board of Directors, the Company and Loomis Sayles
entered into an agreement dated June 14, 1996 (the "Initial Tender Agreement"),
a copy of which is attached as Appendix A-1 to this Offer to Exchange. One of
the several conditions to the Company's obligation to consummate the exchange
offer contemplated by the Initial Tender Agreement, and to Loomis Sayles'
obligation to advise the investors it advises to tender into such exchange
offer, was that the average closing price of the Common Stock for the five
trading days prior to the expiration of such exchange offer be between $4.00
and $7.50 per share. Subsequent to the date of the Initial Tender Agreement,
the trading price of the Common Stock fell substantially below $4.00 per share,
and the Company believed it was unlikely that an exchange offer on the terms of
the Initial Tender Agreement could be consummated. Following additional
discussions and negotiations between the Company, Loomis Sayles and Chanin, on
September 13, 1996, the Company and Loomis Sayles entered into an amendment to
the Initial Tender Agreement (the " First Amendment"), a copy of which is
attached as Appendix A-2 to this Offer to Exchange. Based on discussions with
representatives of Nasdaq, however, the Company and Loomis Sayles concluded
that Nasdaq would likely find that the Initial Tender Agreement, as amended by
the First Amendment, contravened certain of Nasdaq's rules and regulations
regarding corporate governance. Following additional discussion among the
Company, Loomis Sayles, Chanin and Nasdaq, on October 3, 1996, the Company and
Loomis Sayles entered into a Second Amendment to the Initial Tender Agreement
(the "Second Amendment"), a copy of which is attached as Appendix A-3 to this
Offer to Exchange (the Initial Tender Agreement, as amended by the First
Amendment and the Second Amendment, is referred to herein as the "Tender
Agreement").

6
<PAGE>

THE EXCHANGE OFFER

The Company is offering, upon the terms and subject to the conditions stated
in this Offer to Exchange and the accompanying Letter of Transmittal, to
exchange for each $1,000 principal amount of 6% Debentures tendered to the
Company (i) $120.00 in cash, (ii) $113.33 principal amount of the Company's
increasing rate unsecured promissory notes due 1998 ("Promissory Notes"), which
notes mature on the second anniversary of the date they are issued and bear
interest at 14% per annum from the date of issuance to the first anniversary
thereof and at 16% per annum thereafter until maturity, (iii) 216.66667 shares
of the Company's Common Stock, $1.00 par value per share ("Common Stock"), and
(iv) five-year warrants ("Warrants") to purchase 40 shares of Common Stock at
an initial exercise price of $3.60 per share, subject to certain rights of each
Warrant holder to reduce such exercise price under certain circumstances on a
one-time basis. The Exchange Offer is being made for the entire outstanding
principal amount of 6% Debentures. However, the consummation of the Exchange
Offer is conditioned upon, among other things, at least 95% of the outstanding
principal amount of the 6% Debentures having been validly tendered and not
withdrawn prior to the Expiration Date. See "The Exchange Offer--Conditions."

As of the date of this Offer to Exchange, $75 million aggregate principal
amount of 6% Debentures were outstanding. If 100% of the outstanding 6%
Debentures are accepted for exchange pursuant to the Exchange Offer, the
Company will be required to (i) pay a total of $9 million in cash, (ii) issue
$8.5 million principal amount of Promissory Notes, (iii) issue 16,250,000
shares of Common Stock, and (iv) issue Warrants to purchase 3 million shares of
Common Stock.

CONDITIONS TO THE EXCHANGE OFFER

The obligation of StreamLogic to consummate the Exchange Offer is subject to
certain conditions as described in this Offer to Exchange, including, among
others, the requirements that: (i) at least 95% in aggregate principal amount
of the 6% Debentures shall have been validly tendered for exchange and not
withdrawn (the "Minimum Tender Condition"); and (ii) there shall not have
occurred any change or development involving a prospective change in or
affecting the business or financial affairs of the Company which, in the sole
judgment of the Board of Directors of the Company, would or might prohibit,
restrict or delay consummation of the Exchange Offer or materially impair the
contemplated benefits to the Company of the Exchange Offer. The Company does
not presently intend to consummate the Exchange Offer unless the Minimum Tender
Condition is satisfied. If the Minimum Tender Condition fails to be met, the
Company shall have the right, in its sole discretion, to withdraw the Exchange
Offer. However, if the Company elects, in its sole discretion, to waive or
modify the Minimum Tender Condition, the Company will publicly announce its
decision to do so and, if that announcement is made within five business days
of the previously scheduled Expiration Date, will extend the Expiration Date
for at least five business days from the date of such announcement. Holders who
have previously tendered their securities prior to any such announcement will
be entitled to withdraw their 6% Debentures at any time prior to the Expiration
Date.

7
<PAGE>

PROMISSORY NOTES

The Promissory Notes will be unsecured general obligations of the Company.
The Promissory Notes will be issued only in fully registered form and will be
issued pursuant to an indenture. The Promissory Notes will mature on the second
anniversary of the date they are issued, and will bear interest at 14% per
annum from the date of issuance to the first anniversary thereof and at 16% per
annum thereafter until maturity. The Promissory Notes will rank senior in right
of payment to all indebtedness of the Company that by its terms is subordinate
to the Promissory Notes, and will rank pari passu in right of payment with all
other unsecured borrowings of the Company. The Company, at its option, may
prepay the Promissory Notes, in whole or in part, at any time upon not less
than 15 nor more than 60 days' notice, at a prepayment price equal to 100% of
the principal amount to be prepaid plus the interest accrued but unpaid with
respect to such principal amount as of the prepayment date. See "Description of
Promissory Notes."

COMMON STOCK

As of August 5, 1996, 16,930,790 shares of Common Stock were issued and
outstanding. The shares of Common Stock to be issued pursuant to the Exchange
Offer will be fully paid and non-assessable when issued pursuant thereto. The
holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders. See "Description of Capital
Stock--Common Stock."

WARRANTS

Each Warrant will entitle the holder thereof to purchase 40 shares of Common
Stock (each such share, a "Warrant Share"), subject to the antidilution
provisions described below. Initially, the exercise price of each Warrant shall
be $3.60 per share. The exercise price of each Warrant, however, is subject to
certain adjustments pursuant to the "Reset Election" and/or certain
antidilution provisions. Warrants will be exercisable during an "Exercise
Period" that will begin upon the Warrants' issuance pursuant to the Exchange
Offer and end at 5:00 p.m. New York City time on the fifth anniversary of such
issuance, subject to early termination pursuant to the "Early Termination
Election" or extension under certain circumstances. Unless exercised, Warrants
will automatically expire at the end of the Exercise Period. See "Description
of Warrants."

TRADING OF THE COMPANY'S SECURITIES

The 6% Debentures are traded on the Nasdaq SmallCap Market under the symbol
"STLCG." On (i) June 6, 1996, the last day prior to the date the Initial Tender
Agreement was publicly announced on which trades in the 6% Debentures were
reported, (ii) September 13, 1996, the last day prior to the date the First
Amendment was publicly announced on which trades in the 6% Debentures were
reported and (iii) September 26, 1996, the last day prior to the date the
Second Amendment was publicly announced on which trades in the 6% Debentures
were reported, the last sales prices for the 6% Debentures were $55 per $100
face value, $56 per $100 face value and $57 per $100 face value, respectively.
As of the date hereof, the Company's Common Stock is traded on the Nasdaq
National Market under the symbol "STLC." The Company does not intend to list
the Promissory Notes or the Warrants on any securities exchange or on Nasdaq.
After consummation of the Exchange Offer, the Company intends to terminate the
registration of the 6% Debentures under Section 12(g) of the Securities
Exchange Act of 1934, as amended. See "Certain Considerations--Consequences for
Untendered 6% Debentures" and "Price Range of 6% Debentures and Common Stock."

8
<PAGE>

GENERAL INFORMATION REGARDING THE EXCHANGE OFFER

Expiration Date............. 12:00 Midnight, New York City time, on November
4, 1996, unless extended by the Company. See "The
Exchange Offer--Expiration; Extensions;
Termination; Amendment."

Withdrawal of Tenders....... Tenders of 6% Debentures may be withdrawn at any
time prior to the expiration of the Exchange
Offer. Thereafter, such tenders are irrevocable,
except that they may be withdrawn after the
expiration of 40 business days from the
commencement of the Exchange Offer, unless
accepted for exchange prior to that date. See
"The Exchange Offer--Withdrawal Rights."

Accrued Interest on the 6%
Debentures................. The Company will not pay accrued interest with
respect to 6% Debentures (including without
limitation interest otherwise scheduled for
payment on September 15, 1996) that are tendered
and accepted in the Exchange Offer. Holders of 6%
Debentures that are accepted in the Exchange
Offer will have no further right to receive any
payment of accrued and unpaid interest in respect
of the tendered securities. The Company will,
however, be obligated to continue paying interest
on any 6% Debentures that remain outstanding
after the consummation of the Exchange Offer.

Registration Rights......... The Company will, prior to the consummation of
the Exchange Offer, use its best efforts to file
and cause to be declared effective a registration
statement for the issuance of shares of Common
Stock upon exercise of Warrants and the resales
of such shares. In addition, the Company will use
its best efforts to file and cause to be declared
effective, for so long as any person receiving
Tender Offer Consideration is an "affiliate" of
the Company (as such term is defined in Rule 144
promulgated pursuant to the Securities Act of
1933, as amended (the "Securities Act")), a
registration statement for the resales of the
shares of Common Stock issued to such an
affiliate pursuant to the Exchange Offer.
Promissory Notes, shares of Common Stock and
Warrants issued to non-affiliates of the Company
pursuant to the Exchange Offer are expected to be
freely tradable due to their issuance pursuant to
Section 3(a)(9) under the Securities Act in
exchange for freely tradable securities.

Acceptance of 6% Debentures
and Delivery of Tender
Offer Consideration........ Subject to the conditions described herein, the
Company will accept for exchange any and all 6%
Debentures that are properly tendered prior to
the Expiration Date. The cash to be paid and the
Promissory Notes, the Common Stock and the
Warrants to be issued pursuant to the Exchange
Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer--
Acceptance of 6% Debentures; Delivery of Tender
Offer Consideration."

9
<PAGE>

Procedures for Tendering 6%
Debentures................. Each holder of 6% Debentures wishing to accept
the Exchange Offer must complete and sign the
Letter of Transmittal, in accordance with the
instructions contained herein and therein, and
forward or hand deliver such Letter of
Transmittal, together with any signature
guarantees and any other documents required by
the Letter of Transmittal, including certificates
representing the tendered 6% Debentures or
confirmations of book entry transfers of such 6%
Debentures, to the Exchange Agent at one of its
addresses set forth on the back cover page of
this Offer to Exchange. Any beneficial owner of
6% Debentures whose securities are registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee is urged to
contact the registered holder(s) of such
securities promptly to instruct the registered
holder(s) whether to tender such beneficial
owner's securities. Holders whose certificates
representing their 6% Debentures are not
immediately available or who cannot deliver their
certificates or any other required documents to
the Exchange Agent prior to the Expiration Date
may tender their 6% Debentures pursuant to the
guaranteed delivery procedure set forth herein.
See "The Exchange Offer--Procedures for
Tendering."

Fractional Shares........... Tendering holders of 6% Debentures will not
receive fractional shares of Common Stock in the
Exchange Offer but instead will receive an
additional cash payment in lieu thereof. See "The
Exchange Offer--Fractional Shares."

Appraisal Rights............ No appraisal or other similar statutory rights
are available in connection with the Exchange
Offer.

Certain Federal Income Tax
Consequences............... For a discussion of certain federal income tax
consequences of the Exchange Offer to holders of
6% Debentures, see "Summary of Material Federal
Income Tax Consequences."

Exchange Agent.............. ChaseMellon Shareholder Services, L.L.C. See "The
Exchange Offer--Exchange Agent."

CERTAIN CONSIDERATIONS AND SPECIAL FACTORS

Prior to deciding whether to tender in the Exchange Offer, beneficial owners
of 6% Debentures should consider carefully all of the information contained in
this Offer to Exchange, especially the matters set forth in "Special Factors"
and "Certain Considerations Related to the Company."

10
<PAGE>

SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following selected financial information relating to the Company for the
periods shown should be read in conjunction with the Unaudited Pro Forma
Condensed Consolidated Financial Statements, including the notes thereto, and
the Consolidated Financial Statements, including the notes thereto, both of
which appear elsewhere herein.

<TABLE>
<CAPTION>
THREE-MONTH
PERIOD ENDED
(UNAUDITED) THREE-MONTH PERIOD ENDED
------------------------- ---------------------------------
PRO
PRO FORMA
FORMA MARCH MARCH
JUNE JUNE JUNE 1996 MARCH 1995
1996 1996 1995 (UNAUDITED) 1996 (UNAUDITED)
------- ------- ------- ----------- -------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Statement of
operations data
Net sales......... $11,189 $11,189 $70,076 $ 24,408 $ 24,408 $ 40,899
Cost of sales.... 10,467 10,467 54,707 40,799 40,799 49,768
------- ------- ------- --------- -------- --------
Gross profit
(loss)........... 722 722 15,369 (16,391) (16,391) (8,869)
Operating
expenses:
Research and
development..... 2,465 2,465 10,352 8,874 8,874 13,427
Selling, general
and admini-
strative........ 2,771 2,771 10,270 8,836 8,836 13,171
Restructuring
charge.......... -- -- -- -- -- --
------- ------- ------- --------- -------- --------
Total operating
expenses....... 5,236 5,236 20,622 17,710 17,710 26,598
------- ------- ------- --------- -------- --------
Income (loss) from
operations....... (4,514) (4,514) (5,253) (34,101) (34,101) (35,467)
Other income
(expense), net.. (198) (1,025) (1,070) (1,027) (1,854) (786)
------- ------- ------- --------- -------- --------
Income (loss)
before income
taxes............ (4,712) (5,539) (6,323) (35,128) (35,955) (36,253)
Income tax
provision
(benefit)....... 8 8 21 252 252 (1,166)
------- ------- ------- --------- -------- --------
Net income
(loss)(1)........ $(4,720) $(5,547) $(6,344) $ (35,380) $(36,207) $(35,087)
======= ======= ======= ========= ======== ========
Earnings (loss)
per share(1)..... $ (.15) $ (.36) $ (.41) $ (1.11) $ (2.32) $ (2.29)
======= ======= ======= ========= ======== ========
Weighted average
common and common
equivalent shares
outstanding...... 31,858 15,608 15,336 31,830 15,580 15,311
======= ======= ======= ========= ======== ========
Balance sheet data
Working capital... $27,976 $33,314 $81,163 $ 14,677 $ 38,140 $ 87,069
Total assets...... 60,551 71,751 184,738 64,183 92,383 191,054
Long term debt
(excluding
current portion). 8,500 71,250 78,463 8,500 71,250 77,269
Shareholders'
equity (deficit). 24,079 (32,133) 49,780 28,003 (27,084) 54,945

<CAPTION>
YEAR ENDED
-----------------------------------------------------------
PRO
FORMA
DECEMBER
1995 DECEMBER DECEMBER DECEMBER DECEMBER DECEMBER
(UNAUDITED) 1995 1994 1993 1992 1991
----------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Statement of
operations data
Net sales......... $211,264 $211,264 $346,314 $382,926 $396,579 $350,875
Cost of sales.... 205,628 205,628 286,856 315,436 306,482 285,555
-------- -------- -------- -------- -------- --------
Gross profit
(loss)........... 5,636 5,636 59,458 67,490 90,097 65,320
Operating
expenses:
Research and
development..... 42,469 42,469 43,648 36,112 27,868 24,065
Selling, general
and admini-
strative........ 44,274 44,274 43,500 41,906 38,656 33,258
Restructuring
charge.......... -- -- -- 5,496 -- --
-------- -------- -------- -------- -------- --------
Total operating
expenses....... 86,743 86,743 87,148 83,514 66,524 57,323
-------- -------- -------- -------- -------- --------
Income (loss) from
operations....... (81,107) (81,107) (27,690) (16,024) 23,573 7,997
Other income
(expense), net.. (932) (4,242) (2,985) (3,888) 2,683 3,504
-------- -------- -------- -------- -------- --------
Income (loss)
before income
taxes............ (82,039) (85,349) (30,675) (19,912) 20,890 4,493
Income tax
provision
(benefit)....... (1,061) (1,061) -- 4 1,333 150
-------- -------- -------- -------- -------- --------
Net income
(loss)(1)........ $(80,978) $(84,288) $(30,675) $(19,916) $ 19,557 $ 4,343
======== ======== ======== ======== ======== ========
Earnings (loss)
per share(1)..... $ (2.55) $ (5.46) $ (2.03) $ (1.34) $ 1.33 $ .32
======== ======== ======== ======== ======== ========
Weighted average
common and common
equivalent shares
outstanding...... 31,695 15,445 15,100 14,835 14,720 13,674
======== ======== ======== ======== ======== ========
Balance sheet data
Working capital... $ 34,295 $ 65,957 $121,022 $144,423 $163,394 $141,850
Total assets...... 152,193 180,394 233,915 250,429 259,624 244,909
Long term debt
(excluding
current portion). 46,602 113,102 75,000 75,000 75,000 75,000
Shareholders'
equity (deficit). 63,385 7,173 89,630 118,356 136,257 114,629
</TABLE>
- -------
(1) Income from the Company's Singapore and Thailand operations, sold in March,
1996, was exempt from income taxes in those countries for all periods shown
and through December 1993, respectively. The income tax exemptions in
Singapore and Thailand had no impact in 1996 nor in 1995, and had an effect
of approximately $7,401 and $.49 in 1994, $4,800 and $.33 in 1993 and
$12,879 and $.87 in 1992 on net income and earnings per share,
respectively, as compared to income taxes at the maximum statutory rates.
However, the aforementioned aggregate and per share effects were not
necessarily indicative of the Company's consolidated incremental tax
liability in the absence of such tax holidays historically (see Notes 1 and
2 to the Company's Consolidated Financial Statements).

11
<PAGE>

SPECIAL FACTORS

PURPOSES OF THE EXCHANGE OFFER

The purposes of the Exchange Offer are to: (i) enhance the Company's capital
structure by discharging up to $66.5 million principal amount of outstanding
debt ($75.0 million after repayment of the Promissory Notes); (ii) eliminate
the deficit in the Company's stockholders' equity; (iii) allow the Company to
invest its cash flow in expanding its business, through acquisitions or
otherwise, rather than to service the indebtedness represented by the 6%
Debentures; and (iv) permit the Company to continue (or become re-listed) as a
publicly-traded Nasdaq NMS Company by increasing the Company's net tangible
assets by more than $50 million.

Following completion of the Exchange Offer, the Company plans to continue to
expand its systems business, through acquisitions, joint ventures and internal
growth. While the Company has no present plans to acquire specific businesses,
the Company intends to consider acquisitions as a significant element of its
expansion plans. Such acquisitions, if made, may be financed through the
issuance of additional stock, through the incurrence of additional debt or
with existing cash reserves. The Company believes that the significant
reduction of the Company's debt obligations as a result of the Exchange Offer
will increase the Company's ability to take advantage of opportunities in the
systems business.

As a result of the Exchange Offer, the Company will, assuming all of the
outstanding 6% Debentures are exchanged pursuant to the Exchange Offer,
realize a taxable gain of approximately $17.6 million from the discharge of
the indebtedness under the Exchange Offer. At March 29, 1996, the Company had
a tax net operating loss carryforward of approximately $124.2 million
available to be carried forward to the years 2004-2011. General business tax
credit carryforwards of approximately $8,562,000, expiring between 2000 and
2009, were also available to reduce future federal income taxes as of that
date. However, under Internal Revenue Code Sections 382 and 383, the amount of
the operating loss and general business credit carryforwards that can be used
annually may be substantially limited due to certain changes in ownership. If
consummated, the issuance of Common Stock in connection with the Offer to
Exchange will cause such a change in ownership.

If all of the outstanding 6% Debentures are exchanged pursuant to the
Exchange Offer, on a pro forma basis the Company would have had net tangible
assets of approximately $24.1 million as of June 28, 1996, as compared to a
deficit of approximately $32.1 million on a historic basis. See "Unaudited Pro
Forma Financial Data."

POSITION OF THE BOARD

The Board of Directors has unanimously approved the Exchange Offer. For
information concerning the directors of the Company, see "The Company--
Management." The Board believes that the Exchange Offer is in the best
interest of the Company and its stockholders because it will improve the
Company's consolidated capitalization and increase the Company's net tangible
assets by more than $50 million, thereby enabling the Company to return to
compliance with the minimum net tangible assets standard for continued
inclusion of the Company Stock on the Nasdaq NMS. The Board further believes
that the financial structure of the Company will be better suited to the
Company's expected level of operations and profitability, and the Company will
have greater flexibility to move forward with the growth of its business if
the Exchange Offer is consummated.

The decision to tender 6% Debentures pursuant to the Exchange Offer should
be made by beneficial owners based upon individual investment objectives and
other factors affecting such beneficial owners individually, including any
federal, state, local or foreign tax consequences of tendering 6% Debentures
pursuant to the Exchange Offer. Consequently, the Board is not making any
recommendation to beneficial owners with respect to the Exchange Offer and has
not authorized any person to make any such recommendations. Beneficial owners
are urged to evaluate carefully all information contained in this Offer to
Exchange and to consult their own financial and tax advisers in order to make
their own decisions concerning whether to tender 6% Debentures in the Exchange
Offer. See "Summary of Material Federal Income Tax Consequences."

12
<PAGE>

FAIRNESS OF THE EXCHANGE OFFER

The Company believes that the Exchange Offer is fair from a financial point
of view to the beneficial owners of 6% Debentures, all of whom, other than by
ownership of securities of the Company, are unaffiliated with the Company
(with the exception of one officer of the Company, who holds 0.03% of the
total amount of 6% Debentures outstanding). The Exchange Offer was approved by
all of the directors of the Company. The Board based the terms of the Exchange
Offer upon the terms of the Tender Agreement which were arrived at as a result
of arm's-length negotiations between the Company and Loomis Sayles. See
"Background of the Exchange Offer--Tender Agreement." The terms of the
Exchange Offer are substantially equivalent to the terms set forth in the
Tender Agreement.

Other factors considered by the Board in connection with the structuring of
the Tender Agreement and the Exchange Offer were (i) the premium represented
by the Tender Offer Consideration over the price at which the 6% Debentures
traded prior to the announcement of the Exchange Offer; (ii) the degree to
which the conversion feature of the 6% Debentures is "out-of the money"; (iii)
the historical trading pattern of the 6% Debentures and the Common Stock; (iv)
recent market prices for 6% Debentures and Common Stock; (v) the pro forma
effect of acceptance of the Exchange Offer on the Company's consolidated
capitalization; and (vi) the federal income tax consequences of the Exchange
Offer on the Company and the beneficial owners of 6% Debentures. In light of
its consideration of the foregoing factors, the Board concluded that the
Exchange Offer is fair to beneficial owners of 6% Debentures.

The Company has not requested a fairness opinion, appraisal or similar
report relating to the Exchange Offer from any investment banker or financial
adviser. A fairness opinion, appraisal or similar report is sometimes
requested by a company in order to obtain an opinion on whether a transaction
is fair from a financial point of view to a particular group of persons. Based
on the cost of obtaining such an opinion, appraisal or similar report and on
the fact that the Board was not making any recommendation to beneficial owners
of 6% Debentures concerning the Exchange Offer, the Board believes it is
appropriate not to seek a fairness opinion, appraisal or similar report
relating to the Exchange Offer. In addition, the non-employee directors of the
Company have not retained an unaffiliated representative to act solely on
behalf of unaffiliated beneficial owners of 6% Debentures to negotiate the
terms of the Exchange Offer or prepare a report concerning the fairness
thereof.

The 6% Debentures have no voting rights and the approval of a majority of
the beneficial owners of 6% Debentures is not required in order for the
Company to consummate the Exchange Offer. Nonetheless, if a beneficial owner
of 6% Debentures does not approve of the terms of the Exchange Offer, such
beneficial owner can elect not to tender 6% Debentures.

For a summary of certain federal income tax consequences of the Exchange
Offer applicable to beneficial owners of the 6% Debentures and the Company,
see "Summary of Material Federal Income Tax Consequences."

CHANGE IN PRIORITY; COVENANTS AND OTHER PROVISIONS

The 6% Debentures are debt obligations of the Company and, accordingly, have
priority over the Company's Common Stock with respect to payments in
connection with any liquidation, dissolution or winding up of the Company. 6%
Debentures tendered and accepted pursuant to the Exchange Offer will be
exchanged, in part, for shares of Common Stock and Warrants to purchase Common
Stock. In any liquidation or reorganization of the Company under the United
States Bankruptcy Code, such shares of Common Stock and Warrants, as equity
securities, will rank below all debt claims, including untendered 6%
Debentures. Additionally, such shares of Common Stock and Warrants will not be
entitled to receive any payment or other distribution of assets upon the
Company's liquidation or dissolution until satisfaction of the liquidation
preference of any Preferred Stock (as defined below under the heading
"Description of Capital Stock--Description of Preferred Stock") that may then
be outstanding. In addition, tendering holders of 6% Debentures will give up
the right to a fixed return on their investment and the right to a return of
capital at a stated time. The market value of the Common Stock and

13
<PAGE>

Warrants may be expected to be dictated by factors different from those that
affect debt securities, including the Company's long-term prospects and
industry conditions.

6% Debentures tendered and accepted pursuant to the Exchange Offer will also
be exchanged, in part, for Promissory Notes. The Promissory Notes will not
contain various provisions that are included in the terms of the 6%
Debentures, and that afford certain protections to the holders thereof. For
example, the Promissory Notes will not contain the restrictive covenants
included in the Indenture governing the 6% Debentures, or any other covenants
restricting the Company's activities, other than the covenant requiring that
the proceeds of future debt financings be applied to repayment of the
Promissory Notes. In addition, as the total amount of Promissory Notes is
under $10 million, the Promissory Notes are not expected to be subject to the
Trust Indenture Act of 1939, as amended. See "Description of 6% Debentures"
and "Description of Promissory Notes."

CONSEQUENCES FOR UNTENDERED 6% DEBENTURES

The consummation of the Exchange Offer is likely to have a number of effects
on the holders of untendered 6% Debentures. To the extent that 6% Debentures
are tendered and accepted in the Exchange Offer, a smaller outstanding
principal amount of the 6% Debentures will be available for trading (a smaller
"float"). A security with a smaller float may command a lower price than would
a comparable security with a greater float. Therefore, the price for
untendered 6% Debentures may be affected adversely to the extent that the
amount of 6% Debentures exchanged pursuant to the Exchange Offer reduces the
float. The reduced float may also tend to make the trading price of such
remaining 6% Debentures more volatile. Upon Consummation of the Exchange
Offer, the 6% Debentures are unlikely to meet the minimum requirements for
quotation on the Nasdaq SmallCap Market and are expected to be delisted.
Moreover, the untendered 6% Debentures are eligible for termination of
registration pursuant to Section 12(g)(4) of the Act. After the consummation
of the Exchange Offer, the Company intends to terminate the registration of
the 6% Debentures, which termination may adversely affect the price and
marketability of the 6% Debentures.

ABSENCE OF FINANCIAL ADVISER

The Company has not retained any investment banker or financial adviser to
assist it in structuring the terms of the Exchange Offer. See "--Fairness of
the Exchange Offer."

CERTAIN INCOME TAX CONSIDERATIONS

The exchange of the 6% Debentures for the Tender Offer Consideration is
likely to be treated as a recapitalization, in which case (subject to certain
exceptions) an exchanging holder will recognize gain (but not loss) equal to
the lesser of (i) the excess of (A) the fair market value of the Common Stock,
the fair market value of the Warrants, the fair market value of the Promissory
Notes and the amount of cash received over (B) the holder's adjusted tax basis
in the 6% Debentures surrendered therefor or (ii) the fair market value of the
Warrants, the fair market value of the Promissory Notes and the amount of cash
received. The holder's initial tax basis in the Common Stock received in the
Exchange Offer will equal the holder's adjusted tax basis in the 6% Debentures
surrendered therefor, decreased by the fair market value of the Warrants, the
fair market value of the Promissory Notes and the amount of cash received in
the Exchange Offer, and increased by the amount of gain recognized on the
exchange. The holder's initial tax basis in the Warrants and the Promissory
Notes will be their fair market value. See "Summary of Material Federal Income
Tax Consequences."

DILUTION; SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

If 100% of the 6% Debentures are accepted for exchange pursuant to the
Exchange Offer, the Company will issue, in the aggregate, 16,250,000 shares of
Common Stock representing approximately 49.0% of the outstanding shares of
Common Stock, and Warrants to purchase 3,000,000 shares of Common Stock
representing, when exercised and taken together with the Common Stock issued
as part of the Tender Offer Consideration, approximately 53.2% of the
outstanding shares of Common Stock (in each case, based on the

14
<PAGE>

number of shares outstanding on August 5, 1996 and giving effect to the
issuance of shares in the Exchange Offer). In addition, 1,761,400 shares of
Common Stock are reserved for issuance under the Company's option plans (the
"Option Plans"), of which 1,596,200 are subject to outstanding options.
1,580,081 shares of Common Stock are also issuable in the aggregate upon
exercise of certain outstanding warrants. The Company has effective
Registration Statements on Form S-8 under the Securities Act with respect to
the shares of Common Stock issuable under the Option Plans. Shares of Common
Stock issued under the Option Plans, other than shares held by affiliates of
the Company, will be eligible for resale in the public market without
restriction. Moreover, the Company has agreed to use its best efforts to
register, prior to the consummation of the Exchange Offer, the 3,000,000
shares of Common Stock issuable upon exercise of the Warrants. In addition, in
connection with the Company's July 1, 1996 transaction with FWB Software, Inc.
("FWB"), FWB will receive additional shares (or return shares) of Common Stock
such that the market value (as defined in the Operating Agreement of FWB
Software, LLC) of the shares issued to FWB (1,256,123 were issued to FWB on
July 1, 1996) is equal to $7.5 million, such adjustment to occur on October
29, 1996. See Appendix D, Note 4 to the Company's Unaudited Condensed
Consolidated Financial Statements. Future sales of shares of Common Stock by
existing stockholders or the issuance of shares of Common Stock upon the
exercise of options or warrants or the Warrants or to FWB could have a
negative impact on the market price of the Common Stock.

SIGNIFICANT STOCKHOLDER

Following consummation of the Exchange Offer, Loomis Sayles will advise
investors holding approximately 38.7% of the outstanding Common Stock, and
approximately 42.0% assuming exercise of all Warrants (in each case, based on
the number of shares outstanding on August 5, 1996 and giving effect to the
issuance of shares in the Exchange Offer). In addition, the Company has agreed
to include two persons designated by investors advised by Loomis Sayles on its
Board of Directors prior to or on the Expiration Date, and to include two
persons designated by investors advised by Loomis Sayles in management's slate
of nominees in future elections, until such time investors advised by Loomis
Sayles no longer own at least 28% of the outstanding Common Stock of
StreamLogic. Nasdaq representatives have advised the Company that, under
Nasdaq rules, the consummation of the Exchange Offer may be deemed to
constitute a change in control of the Company.

CHANGE IN CASH

If all of the 6% Debentures are tendered and accepted pursuant to the
Exchange Offer, the Company will be required to pay a total of $9 million in
cash upon consummation of the Exchange Offer. Such amount will be paid from
the Company's general working capital. As of September 30, 1996, the Company
had approximately $22 million in cash and cash equivalents. Accordingly, the
consummation of the Exchange Offer will result in a significant reduction in
the cash position of the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "--StreamLogic Strategic and Financial Alternatives."

15
<PAGE>

CERTAIN CONSIDERATIONS RELATED TO THE COMPANY

Prior to deciding whether to tender 6% Debentures in the Exchange Offer,
holders of 6% Debentures should carefully consider all of the information
contained in this Offer to Exchange, especially the considerations described
or referred to in the following paragraphs and under the heading "Special
Factors."

CUSTOMER CONCENTRATION

For the three-month period ended June 28, 1996, three customers, Peripheral
Technology Group, Ingram Micro and Micropolis (S) Pte Ltd ("MPL"), accounted
for 15%, 11% and 21% of the Company's net sales, respectively. Ingram Micro
has been and is anticipated to continue to be a significant customer for the
products comprising the FWB hardware business acquired by StreamLogic
effective July 1, 1996. MPL became a customer as a European distributor
effective March 29, 1996 under the European Distribution Handling Agreement
between the Company and MPL. The Company and MPL elected to terminate the
European Distribution Handling Agreement effective August 2, 1996, at which
time the Company began shipping directly to other European distribution
customers. Accordingly, MPL is no longer a customer. The Company has no long-
term purchase commitments from its customers. Customers may cancel their
orders under certain circumstances. There can be no assurance that orders from
existing customers, including the Company's principal customers, will continue
at their historical levels, or that the Company will be able to obtain orders
from new customers. In addition, there can be no assurance that existing
customers, including the Company's principal customers, will not develop their
own storage solutions internally and as a result reduce or eliminate purchases
from the Company. Loss of one or more of the Company's current customers,
particularly a principal customer, or cancellation or rescheduling of orders
already placed, could materially and adversely affect the Company's operating
results.

SUPPLIER AND COMPONENT DEPENDENCE

The Company depends heavily on its suppliers to provide high quality
materials on a timely basis and at reasonable prices. Although many of the
components for the Company's products are available from several sources at
competitive prices, certain of the disk drives used in its products are
purchased by the Company from a single source. Furthermore, because of
increased industry demand for many of those components, their manufacturers
may, from time to time, not be able to make delivery on orders on a timely
basis. In addition, manufacturers of components on which the Company relies
may choose for numerous reasons not to continue to make components, or the
next generation of those components, available to the Company.

There can be no assurance that the Company will be able to obtain, at all or
on a timely basis, all of the components it requires. If the Company cannot
obtain essential components as required, the Company could be unable to meet
demand for its products, thereby materially adversely affecting its operating
results and allowing competitors to gain market share. In addition, scarcity
of such components could result in cost increases and adversely affect the
Company's operating results.

COMPETITION

The market for all levels of RAID disk arrays and related products is highly
competitive and characterized by price erosion over the life of a product.
Competitors in the Company's markets include other disk array manufacturers,
systems integrators that market computer systems containing general purpose
RAID disk arrays, companies offering standard computer systems with video
specific software and companies offering specially designed video server
systems. Such competitors often offer systems at lower prices than those
offered by the

16
<PAGE>

Company and the Company must compete on the basis of product performance in
specific applications. Many of these competitors have greater financial,
manufacturing and marketing resources than those of the Company.

The Company's ability to compete successfully depends upon its ability to
continue to develop high performance products that obtain market acceptance
and can be sold at increasingly competitive prices. Although the Company
believes that its disk array products have certain competitive advantages,
there can be no assurance that the Company will be able to compete
successfully in the future or that other companies may not develop products
with greater performance and thus reduce the demand for the Company's product.
Furthermore, as more companies enter the disk array market, the Company may
encounter increased price competition for such products which could materially
and adversely affect the Company's operating results. Also, the Company's OEM
customers and other manufacturers could develop their own disk arrays or could
integrate competitive disk arrays into their systems rather than the Company's
products, which could materially and adversely affect the Company's operating
results.

NEW PRODUCTS

Markets for the Company's products are characterized by rapidly changing
technology, evolving industry standards and relatively short product life
cycles. The Company's ability to compete successfully will depend on its
ability to enhance its existing products and introduce new products on a
timely and cost-effective basis. There can be no assurance that the Company
will be successful in introducing such new products or enhancements. Delays in
product enhancements and developments or the failure of the Company's new
products or enhancements to gain market acceptance would have an adverse
effect on the Company's business and operating results. In addition, there can
be no assurance that new products or technologies developed by others, or the
emergency of new industry standards, will not render the Company's products or
technologies noncompetitive or obsolete. Despite testing, new products may be
affected by quality, reliability or interoperability problems, which could
result in returns, delays in collecting accounts receivable, unexpected
service or warranty expenses, reduced orders, and a decline in the Company's
competitive position.

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

The Company has experienced and expects to continue to experience
significant fluctuations in its quarterly operating results due to a variety
of factors. Such factors may include but are not limited to the acquisition of
the FWB hardware business as of July 1, 1996, the timing of receipt and
shipment of significant orders, the cost and timing of new product releases
and product enhancements by the Company and its competitors, variations in the
Company's product mix, market acceptance of new or enhanced versions of the
Company's products, changes in pricing and promotion policies by the Company
and its competitors, the cost and availability of disk drives and other key
components, and general economic conditions. Quarterly sales depend on the
volume and timing of orders received during a quarter, which are difficult to
forecast. The Company's expenses during a quarter are based, in part, on its
expectations as to customer demand for its products. Demand falling below
expectations in any quarter could have a material adverse effect on operating
results. In addition, the need for continued expenditures for research and
development, marketing and customer service and support would have it
difficult for the Company to reduce its expenses in a particular quarter if
the Company's sales forecast for such quarter were not met.

INTERNATIONAL OPERATIONS

Net sales to customers outside the United States accounted for approximately
34% of net sales in the three months ended June 28, 1996. The Company expects
that international sales will continue to represent a significant portion of
the Company's net sales. Sales to customers outside the United States are
subject to risks, including the imposition of governmental controls, the need
to comply with a wide variety of foreign and United States import and export
laws, political and economic instability, trade restrictions, changes in
tariffs and taxes, longer payment cycles typically associated with
international sales, and the greater difficulty of administering business
overseas. In addition, fluctuations in the value of foreign currencies
relative to the U.S. dollar could make the Company's products less price
competitive and, since the Company denominates certain of its sales in foreign
currencies, losses could result from foreign currency transactions.
Furthermore, although the Company

17
<PAGE>

endeavors to meet technical standards established by foreign regulatory
bodies, there can be no assurance that the Company will be able to comply with
changes in foreign standards in the future. The inability of the Company to
design products to comply with foreign standards could have a material adverse
effect on the Company. In addition, the laws of certain foreign countries may
not protect the Company's intellectual property to the same extent as do the
laws of the United States.

DEPENDENCE ON KEY PERSONNEL

The Company's success depends to a significant degree upon the continued
contributions of key personnel, many of whom would be difficult to replace and
are not subject to noncompetition agreements. If any of these employees were
to leave the Company, the Company's operating results could be materially
adversely affected. The Company believes its future success will also depend,
in large part, upon its ability to hire and retain highly skilled engineering,
managerial, sales and marketing personnel. Competition for such personnel is
intense, and there can be no assurance that the Company will be successful in
attracting and retaining such personnel.

POSSIBLE VOLATILITY OF STOCK PRICE

The Company's Common Stock has experienced in the past, and could experience
in the future, substantial price volatility as a result of a number of
factors, including quarter to quarter variations in the actual or anticipated
financial results of the Company, announcements by the Company, its
competitors or its customers, government regulations, and developments in the
industry. In addition, the stock market has experienced extreme price and
volume fluctuations which have affected the market price of many technology
companies in particular and which have at times been unrelated to the
operating performance of the specific companies whose stock is traded. Broad
market fluctuations and general economic conditions may affect the market
price of the Company's Common Stock.

DIVIDEND POLICY

The Company has never declared or paid any dividends on the Common Stock,
and it is not contemplated that the Company will pay dividends on the Common
Stock in the foreseeable future.

INTEGRATION OF ACQUIRED BUSINESS

The Company acquired the FWB hardware business as of July 1, 1996. Such
acquisition could result in amortization expenses related to goodwill and
intangible assets that could adversely affect the Company's operating results.
In addition, gross margins of acquired products, necessary product or
technology development expenditures and other factors involved in the FWB
hardware business or any other acquired business could result in dilution to
the Company's earnings. Such acquisition also may involve numerous other
risks, including difficulties in the assimilation of the operations and
products of the acquired business, dependence on new products and processes,
the diversion of management's attention from other business concerns, risks of
entering markets in which the Company has no or limited direct prior
experience, the potential loss of key employees of the acquired business and
difficulties in attracting additional key employees necessary to absorb added
management responsibilities. The Company has commenced a number of programs to
integrate the FWB hardware business into that of StreamLogic, including the
relocation of certain of its office and possibly manufacturing space and the
upgrading of its internal computer systems. If the Company is unable to manage
the assimilation process effectively or hire and retain qualified personnel,
the Company's business and operating results could be materially and adversely
affected. No assurance can be given as to the effect of this or any future
acquisition on the Company's business or operating results.

ANTI-TAKEOVER PROVISIONS

The Company has adopted a stockholder rights plan designed to deter
potentially coercive takeover attempts. In addition, the Company has
authorized a class of preferred stock, issuable in series with such rights,
preferences, privileges and restrictions as the Board of Directors may
determine without any further stockholder approval. These provisions could
have the effect of delaying or preventing a change in control or other
corporate action.

18
<PAGE>

CAPITALIZATION

The following table sets forth the unaudited consolidated capitalization of
the Company at June 28, 1996, and as adjusted to give effect to the exchange
of all of the outstanding 6% Debentures had the exchange occurred on that
date. The following consolidated capitalization of the Company should be read
in conjunction with the Unaudited Pro Forma Condensed Consolidated Financial
Statements, including the notes thereto, and the Consolidated Financial
Statements, including the notes thereto, both of which appear elsewhere
herein.

STREAMLOGIC CORPORATION
UNAUDITED CONSOLIDATED CAPITALIZATION(1)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 28, 1996
---------------------------------
STREAMLOGIC
STREAMLOGIC EXCHANGE CORPORATION
CORPORATION OFFER PRO FORMA
----------- -------- -----------
<S> <C> <C> <C>
Current maturities of long term debt......... $ 3,750 $ (3,750) $ --
Unsecured promissory notes, due 1998......... -- 8,500 8,500
6% Convertible Subordinated Debentures due
2012........................................ 71,250 (71,250) --
--------- -------- ---------
$ 75,000 $(66,500) $ 8,500
========= ======== =========
Shareholders' equity (deficit):
Preferred stock, $1.00 par value; 2,000,000
shares authorized, none issued............ $ -- $ -- $ --
Common stock, $1.00 par value, 50,000,000
shares authorized; 15,672,967 shares
issued and outstanding(1)................. 15,673 16,250 31,923
Additional paid-in capital................. 112,735 25,750 138,485
Accumulated deficit........................ (160,541) 14,212 (146,329)
--------- -------- ---------
Total shareholders' equity (deficit)..... $ (32,133) $ 56,212 $ 24,079
========= ======== =========
</TABLE>
- --------
(1) Excludes (i) 1,446,600 shares of Common Stock reserved for issuance
pursuant to stock options outstanding as of June 28, 1996; (ii) 1,580,081
shares of Common Stock issuable in the aggregate upon exercise of certain
existing warrants; and (iii) 3,000,000 shares of Common Stock issuable
upon exercise of the Warrants. Also excludes the number of shares the
Company may issue as of October 29, 1996 in connection with the Company's
July 1, 1996 agreement with FWB Software, Inc. See "Dilution; Shares
Eligible for Future Sale; Registration Rights."

19
<PAGE>

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma condensed consolidated balance sheet of
StreamLogic Corporation as of June 28, 1996 and the unaudited pro forma
condensed consolidated statements of operations for the three-month periods
ended June 28, 1996 and March 29, 1996 and the year ended December 29, 1995
have been prepared to illustrate the effect of the proposed Exchange Offer.
The financial statements have been prepared as though the Exchange had
occurred on June 28, 1996 for purposes of the pro forma balance sheet and as
of March 30, 1996, December 30, 1995 and December 31, 1994, respectively, for
purposes of the pro forma statements of operations. The pro forma adjustments
and the assumptions on which they are based are described in the accompanying
notes to the unaudited pro forma financial statements.

The unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the consolidated financial position or consolidated results of operations of
StreamLogic Corporation that would have been reported had the Exchange
occurred on the dates indicated, nor do they represent a forecast of the
consolidated financial position of StreamLogic Corporation at any future date
or the consolidated results of operations of StreamLogic Corporation for any
future period. Amounts representing the Tender Offer Consideration,
transaction fees, fair market value of Warrants and income tax provision, as
reflected in the accompanying pro forma financial statements, are preliminary
and subject to the consummation of the Exchange. The actual amount of Tender
Offer Consideration and the estimated fair market value of the Warrants will
depend on the price of Streamlogic Common Stock on the date of the Exchange,
which cannot now be determined. The Pro Forma Gain was computed based on a
stock price of $2.40 and the actual stock price will not be determined until
the Exchange Date. The unaudited pro forma condensed consolidated financial
statements, including the Notes thereto, should be read in conjunction with
the historical consolidated financial statements of StreamLogic Corporation,
which are included herein.

20
<PAGE>

UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 28, 1996
---------------------------------
STREAMLOGIC
STREAMLOGIC EXCHANGE CORPORATION
CORPORATION OFFER(1) PRO FORMA
----------- -------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term in-
vestments................................. $ 45,859 $(10,000) $ 35,859
Accounts receivable, net................... 8,144 -- 8,144
Receivable from Singapore Technologies..... 1,000 -- 1,000
Inventories................................ 8,025 -- 8,025
Other current assets....................... 1,200 -- 1,200
--------- -------- --------
Total current assets..................... 64,228 (10,000) 54,228
Property, plant and equipment, net........... 5,639 -- 5,639
Other assets................................. 1,884 (1,200) 684
--------- -------- --------
$ 71,751 $(11,200) $ 60,551
========= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFI-
CIT)
Current liabilities:
10% Subordinated Notes..................... $ 10,000 $ -- $ 10,000
Current maturities of long-term debt....... 3,750 (3,750) --
Accounts payable........................... 6,302 -- 6,302
Other accrued liabilities.................. 10,862 (912) 9,950
--------- -------- --------
Total current liabilities.................... 30,914 (4,662) 26,252
Unsecured promissory notes, due 1998......... -- 8,500 8,500
Long term debt............................... 71,250 (71,250) --
Deferred income taxes........................ 1,720 -- 1,720
Shareholders' equity (deficit):
Common stock............................. 15,673 16,250 31,923
Additional paid-in capital............... 112,735 25,750 138,485
Accumulated deficit...................... (160,541) 14,212 (146,329)
--------- -------- --------
Total shareholders' equity (deficit)... (32,133) 56,212 24,079
--------- -------- --------
$ 71,751 $(11,200) $ 60,551
========= ======== ========
</TABLE>
- --------
(1) To give effect to the payment of cash and issuance of Common Stock and
Warrants pursuant to the Exchange assuming the holders of 100% of the
outstanding debentures accept the exchange. The pro forma gain application
to the above proposed Exchange after estimated adjustments (assuming 100%
participation by the holders) is:
<TABLE>
<S> <C>
Face value of debentures............................................ $75,000
Cash consideration.................................................. (9,000)
Unsecured promissory notes.......................................... (8,500)
Common Stock issued................................................. (39,000)
Reversal of accrued interest........................................ 1,312
Transaction fees.................................................... (1,000)
Charge off unamortized bond issuance cost........................... (1,200)
Value of Warrants issued............................................ (3,000)
-------
14,612
Book provision for income tax....................................... 400
-------
Pro forma gain...................................................... $14,212
=======
</TABLE>

21
<PAGE>

UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 28, 1996
---------------------------------
STREAMLOGIC
STREAMLOGIC EXCHANGE CORPORATION
CORPORATION OFFER(2) PRO FORMA(3)
----------- -------- ------------
<S> <C> <C> <C>
Net sales..................................... $11,189 $ -- $11,189
Cost of sales................................. 10,467 -- 10,467
------- ------ -------
Gross profit.................................. 722 -- 722
Operating expenses:
Research and development.................... 2,465 -- 2,465
Selling, general and administrative......... 2,771 -- 2,771
------- ------ -------
Total operating expenses.................... 5,236 -- 5,236
------- ------ -------
Loss from operations.......................... (4,514) -- (4,514)
Interest expense, net......................... (1,025) 827 (198)
------- ------ -------
Loss before income taxes...................... (5,539) 827 (4,712)
Income tax provision.......................... 8 -- 8
------- ------ -------
Net loss...................................... $(5,547) $ 827 $(4,720)
======= ====== =======
Loss per share................................ $ (.36) $ (.15)
======= =======
Weighted average shares outstanding........... 15,608 16,250 31,858
======= ====== =======
</TABLE>
- --------
(2) Adjustment to interest expense to give effect to Exchange at the beginning
of period presented; reduction of interest expense on Debentures of $1,125
offset by interest expense on unsecured promissory notes of $298. See Note
(1) to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
(3) The above pro forma consolidated statement of operations does not include
an extraordinary gain of $14,212 which would be recorded in the Company's
consolidated financial statements in the period in which the Exchange
Offer is consummated.

22
<PAGE>

UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 29, 1996
------------------------------------
STREAMLOGIC
STREAMLOGIC EXCHANGE CORPORATION
CORPORATION(6) OFFER(4) PRO FORMA(5)
-------------- -------- ------------
<S> <C> <C> <C>
Net sales.................................. $ 24,408 $ -- $ 24,408
Cost of sales.............................. 40,799 -- 40,799
-------- ------ --------
Gross loss................................. (16,391) -- (16,391)
Operating expenses:
Research and development................. 8,874 -- 8,874
Selling, general and administrative...... 8,836 -- 8,836
-------- ------ --------
Total operating expenses................. 17,710 -- 17,710
-------- ------ --------
Loss from operations....................... (34,101) -- (34,101)
Interest income (expense), net............. (1,854) 827 (1,027)
-------- ------ --------
Loss before income taxes................... (35,955) 827 (35,128)
Income tax provision ...................... 252 -- 252
-------- ------ --------
Net loss................................... $(36,207) $ 827 $(35,380)
======== ====== ========
Net loss per share......................... $ (2.32) $ (1.11)
======== ========
Weighted average shares outstanding........ 15,580 16,250 31,830
======== ====== ========
</TABLE>
- --------
(4) Adjustment to interest expense to give effect to Exchange at the beginning
of period presented; reduction of interest expense on Debentures of $1,125
offset by interest expense or unsecured promissory notes of $298. See Note
(1) to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
(5) The above pro forma consolidated statement of operations does not include
an extraordinary gain of $14,212 which would be recorded in the Company's
consolidated financial statements in the period in which the Exchange
Offer is consummated.
(6) Included in the historical statement of operations of StreamLogic
Corporation are the revenues, cost of sales and operating expenses of the
disk drive business which was sold as of March 29, 1996 and which amounted
to approximately $17,670, $35,109 and $14,331, respectively. (See Note 10
to the historical consolidated financial statements of StreamLogic
Corporation for the three months ended March 29, 1996, which are
incorporated herein.)

23
<PAGE>

UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 29, 1995
------------------------------------
STREAMLOGIC
STREAMLOGIC EXCHANGE CORPORATION
CORPORATION(9) OFFER(7) PRO FORMA(8)
-------------- -------- ------------
<S> <C> <C> <C>
Net sales.................................. $211,264 $ -- $211,264
Cost of sales.............................. 205,628 -- 205,628
-------- ------- --------
Gross profit............................... 5,636 -- 5,636
Operating expenses:
Research and development................. 42,469 -- 42,469
Selling, general and administrative...... 44,274 -- 44,274
-------- ------- --------
Total operating expenses................. 86,743 -- 86,743
-------- ------- --------
Loss from operations....................... (81,107) -- (81,107)
Interest expense, net...................... (4,242) 3,310 (932)
-------- ------- --------
Loss before income taxes................... (85,349) 3,310 (82,039)
Income tax benefit......................... (1,061) -- (1,061)
-------- ------- --------
Net loss................................... $(84,288) $ 3,310 $(80,978)
======== ======= ========
Net loss per share......................... $ (5.46) $ (2.55)
======== ========
Weighted average shares outstanding........ 15,445 16,250 31,695
======== ======= ========
</TABLE>
- --------
(7) Adjustment to interest expense to give effect to Exchange at the beginning
of period presented; reduction of interest expense on Debentures of $4,500
offset by interest expense on unsecured promissory notes of $1,190. See
Note (1) to Unaudited Pro Forma Condensed Consolidated Balance Sheet.
(8) The above pro forma consolidated statement of operations does not include
an extraordinary gain of $14,212 which would be recorded in the Company's
consolidated financial statements in the period in which the Exchange
Offer is consummated.
(9) Included in the historical statement of operations of StreamLogic
Corporation are the revenues, cost of sales and operating expenses of the
disk drive business which was sold as of March 29, 1996 and which amounted
to approximately $171,921, $176,336 and $59,440, respectively. (See Note
10 to the historical consolidated financial statements of StreamLogic
Corporation for the three months ended March 29, 1996, which are
incorporated herein.)

24
<PAGE>

THE COMPANY

GENERAL

StreamLogic Corporation (formerly Micropolis Corporation) was incorporated
in California in December 1976. In April 1987, the Company was reincorporated
in Delaware. In March 1996, the Company changed its name from Micropolis
Corporation to StreamLogic Corporation. Unless the context otherwise
indicates, the terms "StreamLogic" and "Company" refer to StreamLogic
Corporation and its consolidated subsidiaries. On May 13, 1996 the Company
elected to change its fiscal year end from the last Friday in December to the
last Friday in March, beginning with March 1996. Accordingly, the three-month
period ended March 29, 1996 represented a transition period (the 1996
transition period) between the fiscal year ended December 29, 1995 and the
fiscal year ending March 28, 1997.

StreamLogic develops and markets leading-edge video delivery, digital media
storage, and networking RAID and data management solutions. It offers storage
subsystem products known as the RAIDION and MICRODISK, the HAMMER line of high
performance products, the VIDEON line of video-on-demand server subsystems,
and a line of low cost digital video disk recorders which allow real time
record and playback of video material. The Company sells these products and
systems directly to original equipment manufacturers ("OEMs") and systems
integrators and through independent distributors and dealer channel partners
for resale to end users.

On March 29, 1996, the Company completed the Sale of its previously operated
hard disk drive business to ("STC"). The Company and STC have entered into an
OEM supply agreement effective upon consummation of the Sale. Among other
things, the OEM Supply Agreement allows the Company after the Sale to buy hard
disk drives at prices equal to or slightly lower than the most favored OEM
customer of STC. The Company must offer all its disk drive business and
requirements to STC on a right-of-first-refusal basis, subject to the ability
of STC to meet certain delivery and other standards. The agreement has an
initial two-year term, after which it may be renewed annually by mutual
agreement. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."

PRODUCTS

Systems Business

RAID

The Company's Systems Business competes in the local area network ("LAN")-
based redundant array of inexpensive disks ("RAID") market. RAID is a large-
scale storage technology that replaces one high-capacity hard disk drive with
an array of smaller, less expensive drives. The RAID concept provides
protection of data against the possibility of failure of any one drive in the
array by storing redundant information on different drives within the array
(mirroring), or by separating and distributing data flow with parity check
blocks across multiple drives within the array. If data is lost or corrupted,
the array can automatically reconstruct the lost or corrupted data from the
remaining data blocks using the associated parity blocks and continue with
uninterrupted operation.

The growth in the LAN RAID market has been attributable in large measure to
the trend toward requiring mainframe level functionality on LAN-based systems,
the introduction by personal computer-based server manufacturers of
symmetrical multiprocessor servers and a significant increase in multimedia
personal computers capable of displaying video compressed using the Motion
Picture Experts Group ("MPEG") standard. Competition in this market is
resulting in increased levels of system integration and product enhancements,
and decreased costs for comparable performance.

Increased system integration is achieved by pre-configuring systems to
include everything needed to "plug and play" and testing them in a systems
environment before shipment. Certain competitors (the "captive"

25
<PAGE>

market) have introduced network file servers already configured for their own
RAID products. Other competitors offer RAID products with built-in
functionality such as tape backup devices. However, opportunities for growth
in the non-captive market in which the Company participates could still be
substantial. The Company's RAID products are aimed at those end users and
systems integrators who value having the choice of supplying or buying a RAID
product tailored to their specific application or need at a reasonable cost.

The Company offers both software and hardware-based RAID products. In some
instances, software RAID products are favored over hardware products due to
the perceived cost differences between hardware and software, although
software solutions require more overhead from the system. Software solutions
are also favored, for example, on single user desktop systems where cost and
performance are important and the user has more processing power. In
situations where systems operations are very central processing unit ("CPU")
intensive, users would prefer a hardware RAID solution so that the
computational effort can be off-loaded from the CPU.

The Company's RAID products consist of the RAIDION line of fault-tolerant
disk arrays and the MICRODISK. The RAIDION line encompasses a software-based
array known as the Model LT (featuring 3 1/2-inch drives) and the Model LS
(featuring 5 1/4-inch drives), and a hardware-based array which incorporates a
proprietary disk array controller known as Gandiva. The Gandiva controller
card in the Company's current hardware RAID products performs the basic
interface between the host computer and the drive array as well as the RAID
fault tolerance, array maintenance and management functions. The software-
based RAIDION products have been optimized for use on the Novell Netware and
IBM OS/2 operating systems. The hardware-based RAIDION has been optimized to
work with a greater number of operating systems, including Netware, OS/2,
Microsoft Windows NT, Apple Macintosh and UNIX. The MICRODISK product consists
of an external storage device in a modular housing. The systems described
above accounted for 26% of total revenues in the 1996 transition period and
87% of total revenues for the three-months ended June 28, 1996.

In December 1995, the Company announced RAIDIONplus, an extension of the
current Gandiva array controller that improves performance, redundancy, array
management capability and has features that will allow RAIDIONplus to be used
in applications from on-line transaction processing (OLTP) to multimedia.
RAIDIONplus provides features such as dynamic expansion, adaptive caching, and
a Fast 20 Wide Small Computer System Interface ("SCSI") interface, advanced
dial in/dial out and network array management, and removable non-volatile
dynamic random-access memory. The RAIDIONplus began customer shipments during
the second quarter of the 1997 fiscal year.

Pursuant to the Company's acquisition of the FWB hardware business, the
Company's products also include the FWB Hammer hardware subsystems for both
Macintosh and Windows, including the SledgeHammer RAID storage line,
JackHammer PCI SCSI accelerator card line, and the Hammer DLT digital linear
tape subsystem.

Video Servers

The Company offers a line of video servers which use hard disk drives to
store and retrieve audio and full motion video signals. Such video servers,
which can replace video cassette recorder systems, are used to play back video
material that has been previously digitally encoded and compressed; they are
marketed in the hospitality, multimedia and cable TV markets. Video server
applications in the hospitality market include displaying digitally encoded
and compressed movies to guests in hotels, aircraft and cruise ships.
Multimedia applications include corporate training, campus training and video
libraries. Video servers in the cable TV market are designed to insert local
cable TV advertisements in a video stream.

The Company's initial video server, installed in hotels, was introduced in
early 1994, with product deliveries beginning in June 1994. The Company's AV
Server 50, 100 and 200, enable up to 16, 32 and 64 users, respectively, to
randomly select and view, with video cassette recorder-like functionality,
video material on demand from an on-disk library of up to 60 full length
movies. During the 1996 transition period, sales of these

26
<PAGE>

servers were made primarily to the hospitality industry and cable headends for
local cable TV advertisement insertion. The systems described above accounted
for 1% of total revenues in the 1996 transition period and 13% of total revenues
for the three months ended June 28, 1996.

Video Disk Recorders

The Company is currently developing a line of low cost digital video disk
recorders which also use hard disk drives to store and retrieve audio and full
motion video signals. Video disk recorders utilize built-in encoding and
compression circuitry, allowing real time record and playback of video
material. Applications for video disk recorders include professional editing
of video for audio, non-linear editing, linear editing, graphics and animation
and other general post-production activities.

Existing Products

StreamLogic's current product line offerings include:

. RAIDION(R) fault-tolerant disk arrays--software- and hardware-based
RAID storage solutions for network data processing environments as well
as video and multimedia applications.

. MICRODISK(R) and MICRODISK AV subsystems--modular, stackable, external
storage for desktop computing and network environments and optimized
for professional audio/video editing and desktop multimedia
applications.

. SERVRplus(R) failover protection for file servers--a low-cost
combination of software and hardware that provides standby server
failover protection for Novell NetWare and Microsoft Windows NT
servers.

. STREAMLINK(R) direct network attach module--an easy, inexpensive
addition of RAIDION directly on a network without having to add another
server and without bringing the network down or reformatting the
storage.

. SLEDGEHAMMER and SLEDGEHAMMER . Pro removable canister disk arrays--
high performance disk arrays featuring removable canister technology
supporting digital video capture and playback and RAID disk array
management utility software, for Power Macintosh with PCI and for
Windows NT.

. JACKHAMMER(R) ultra SCSI host adapters--RISC-based, fast and wide SCSI-
3 accelerators for PCI and NuBus MacOS computers and Windows systems.

. HAMMER DLT(R) digital linear tape subsystems--digital linear tape
subsystem providing fast, continuous, and unattended backup, archiving,
and retrieval of up to 200 GB of compressed data for large networks,
digital video, pre-press and high-resolution graphics applications.

. VIDEO DISK RECORDER(TM) (VDR)--digital disk recorder technology for
professional and commercial video editing and playback environments.

. VIDEON(TM)--Motion Picture Experts Group ("MPEG")-based video-on-demand
("VOD") servers for hospitality and cable television broadcast
environments.

The brand names "RAIDION," "MICRODISK" and "HAMMER" are believed to be of
significant importance to ongoing market recognition and acceptance of the
products sold under those names and their variants. StreamLogic's products are
sold to OEMs and system integrators and through distribution channels
worldwide.

In 1995, revenues attributable to the products retained by StreamLogic
amounted to $39.5 million and all but $2.5 million of these revenues came from
products sold into the LAN RAID sub-system market. In the future, and
especially in 1997, StreamLogic's revenue base will be largely dependent on
its success in the LAN RAID sub-system market.

27
<PAGE>

StreamLogic products in the LAN RAID segment will continue to focus on
Novell, Windows NT and Macintosh clustered operating environments. RAID
functionality is required to ensure both data availability and data integrity.
In addition, requirements exist for increasingly comprehensive management
features. The company currently offers RAIDION desktop and rack mount
configurations with RAID functionality in both external array controllers and
host based software subsystems. Plans to bring deskside configurations to
market in 1997 will continue the current scaleable, modular, hot swappable
characteristics of the RAIDION. The product line will continue to be optimized
for on-line transaction processing.

PRODUCT DEVELOPMENT

Future Product Development

StreamLogic's future product development will be focused on the storage,
management and movement of digital data in various networking and audio/video
related applications. StreamLogic's core technical competencies include its
RAID software, RAID controllers, optimization of disk drives for application
specific environments, enclosure packaging, control of both analog and digital
video streams ("video streaming"), Serial Switching Architecture ("SSA")
switching, MPEG encoding/decoding and network management. StreamLogic
currently expects to use these core competencies and the products it has
developed, and plans to develop in the future, to participate in five target
markets. The five markets are:

.Bundled RAID subsystems for the LAN market.

.Bundled storage systems for internet and web server markets.

.Digital output storage systems for the corporate intranet market.

.Video disk recorders for the professional editing market.

.Video servers for hospitality and cable head-end markets.

These markets vary dramatically in size and competitive characteristics.
Over the next two years, the segments expected to be of most importance to the
potential growth and profitability of StreamLogic are:

(1) Professional Video Editing. This market segment is characterized by a
single or a few users per system who need to store high data rate video
streams on hard disks. Fault tolerance is desired but RAID technology is used
primarily as a method of achieving higher data rate. Video disk recorders are
used to replace professional level video tape recorders for a wide variety of
applications. The Company has a strategic partnership with Phillips BTS
Broadcast Television Systems GmbH ("BTS"), a division of Phillips Electronics,
to develop video disk recorder products to be marketed by Phillips BTS. The
professional video market is estimated by industry sources to be approximately
a $12 billion market with video tape recorders representing half of all
revenues. Video disk recorders are expected to penetrate a small portion of
that market while video disk editing is expected to penetrate a larger
portion. Key competitors in the video disk recorder market are Tektronix and a
number of small independent suppliers. In video disk editing, the key
competitors are Avid Technology, Tektronix, Sony, Panasonic and a small number
of independent suppliers.

(2) Hospitality and Cable Head-end Video Servers. This market is made up of
multi-channel video playback systems. A video server allows multiple
simultaneous users to access video data stream stored on hard disk. Such
playback is today achieved by the installation of large numbers of video tape
recorders. In the cable head-end market, the video server provides
considerable ease-of-use benefits over conventional video cassette usage, as
well as considerable cost savings. Fault tolerance is required in the cable
head-end market, while price is more important in the hospitality market.
StreamLogic is currently the only revenue producing competitor in the video
server hospitality market. Competitors in the cable head-end market are
Digital, Sea Change, and Sony.

28
<PAGE>

Technology Strategy

StreamLogic's approach to product development is best characterized as being
market driven, using a technology strategy that incorporates the latest
reliably available components and software. Being market driven means that
StreamLogic's engineers work closely with its sales force and with its
customers to determine the appropriate prioritization of new product
development efforts, as well as to establish product specifications. In
general, this approach is designed to reduce time to market with products
which have a broader set of potential customers.

The information storage business is characterized by rapidly changing
technology and user needs which require the continual development and
introduction of new products. Although the Company believes its strategy of
focus and specialization in the high-performance segment of the market, and an
increased emphasis on time to market, improves the rate of new product
introduction, no assurance can be given that the Company will be able to
complete successfully the design or introduction of its new products in a
cost-effective and timely manner, or that such products will perform to
specifications. The introduction of new products also requires the Company to
manage its inventory carefully to minimize inventory obsolescence. The failure
to achieve any of these objectives could have, and in the past has had, a
material adverse effect on the Company's financial position and results of
operations.

Research and development expenses for the three-months ended June 28, 1996,
the 1996 transition period and fiscal 1995, 1994, 1993, 1992 and 1991 were
$2,465,000, $8,874,000, $42,469,000, $43,648,000, $36,112,000, $27,868,000 and
$24,065,000, respectively. In the 1996 transition period, approximately
$2,581,000 of the Company's research and development expenses were incurred by
the ongoing Systems Business. The Company anticipates its fiscal 1997 research
and development expenses related to the Systems Business will increase
slightly on a quarterly basis from those of the period ended June 28, 1996.
The Company plans to focus on development of professional video editing disk
recorders, bundled storage for internet and World Wide Web servers, corporate
intranet digital output servers, and bundled RAID subsystems for LANs and
video servers for hospitality and cable head-ends.

MANUFACTURING

The Company's manufacturing strategy has been to rely principally on outside
vendors to supply high-level subassemblies and component parts. StreamLogic
manufactures its storage subsystems products on production lines at its
Chatsworth, California headquarters and in Menlo Park, California. The
Company's video systems products are manufactured at the Chatsworth,
California headquarters. The Company believes that its current facilities are
adequate for its near-term production requirements.

Continued improvement in storage subsystem and video systems manufacturing
process capabilities and reduced materials and manufacturing costs are
critical factors affecting the Company's financial position and results of
operations. The Company continues to change the manufacturing processes for
many of its products and must carefully manage the development of production
processes for new products. There can be no assurance that such changes and
new processes will be implemented in a cost-effective and timely manner.
Delays or problems encountered in any of the foregoing could have a material
adverse effect on the Company's financial position and results of operations.
In addition, if for any reason the Company were to have a prolonged
interruption in its manufacturing facilities, the Company's financial position
and results of operations could be materially adversely affected.

The Company's manufacturing process requires high volumes of high quality
components, including disk drives. Several of the critical components used in
the Company's products are available only from single or limited sources. The
Company has had and continues to have difficulties in obtaining certain
components, and there can be no assurance that such difficulties will not
occur in the future. A prolonged interruption or reduction in supply of
quality components, rework costs associated with defective components or the
inability to obtain continued reduction in component prices would adversely
affect the Company's financial position and results of

29
<PAGE>

operations and could damage customer relationships. The Company has experienced
such supply interruptions, rework costs and increased component prices during
the first and second quarters of fiscal 1997 and the 1996 transition period
and, in particular during 1995. Such component and manufacturing problems have
adversely affected the Company's financial position and results of operations.

The Company and STC have entered into an OEM supply agreement, effective
March 29, 1996. Among other things, the OEM Supply Agreement allows StreamLogic
to buy at prices equal to or slightly lower than the most favored OEM customer
of MPL. StreamLogic must offer all its disk drive business and requirements to
STC on a right-of-first-refusal basis, subject to the ability of STC to meet
certain delivery and other standards. The agreement has an initial two-year
term, after which it may be renewed annually by mutual agreement.

MARKETING

During the first quarter of fiscal 1997, the Company's direct sales force
sold storage subsystems to distributors, OEMs and VARs. The Company maintained
seven domestic sales offices. During the first quarter of fiscal 1997,
approximately 70% of total sales were made to distributors, with the remainder
to OEMs and VARs. The Company's distribution customers included Peripheral
Technology Group, Tech Data Corporation, Ingram Micro, GBC-Globelle and Hammer
Distribution Ltd.

International operations are an important element of the Company's sales mix.
During the first quarter of fiscal 1997, sales to customers outside of North
America comprised approximately 34% of total sales. The Company currently
maintains two European offices which support sales in Europe to both U.S. and
European-based distributors and European-based independent OEMs.

The Company's sales force, which currently has offices in San Jose and
Irvine, California; Roswell, Georgia; New York, New York; Salem, New Hampshire;
Des Plaines, Illinois; Plano, Texas; Reading, England; and Munich, Germany. In
addition, members of senior management, together with engineering, operations
and marketing executives, participate actively in sales to major independent
distributors and OEM customers in the United States and abroad.

The Company generally warrants its products against defects for periods from
one to five years. The Company provides for estimated future product warranty
costs when products are shipped.

In addition, the Company generally grants trade credit to its customers,
typically on net 30 day terms. Historically, the Company has not experienced
significant bad debt write-offs. The Company has policies and/or contractual
agreements which allow distributors to receive price protection credit under
certain circumstances when the Company lowers its sales prices. In addition,
the Company permits customers to return products under certain circumstances.
The Company makes a provision for the estimated amount of price protection
credits and for product returns that may occur under these programs and
contracts in the period of sale.

Direct shipments from Chatsworth and Menlo Park are denominated in U.S.
dollars. Sales by the U.K. subsidiary are denominated in local currency.
Although export sales are subject to certain restrictions, including approval
by the Office of Export Administration of the United States Department of
Commerce, such restrictions have not limited such sales.

30
<PAGE>

BACKLOG AND VARIABILITY OF DEMAND

The Company's total order backlog at June 28, 1996 was approximately $1.9
million compared with approximately $9.6 million at December 29, 1995. The
decrease in backlog was primarily attributable to the sale of the disk drive
business on March 29, 1996.

Backlog includes orders for which a delivery schedule has been specified by
the customer and which the Company has agreed to ship within six months. Lead
time for the release of purchase orders varies from month to month. For this
reason and because changes in delivery schedules and cancellation of orders
occur, the Company's backlog on a particular date may not be representative of
future sales. The Company's customers place orders based on their own internal
forecasts. If demand falls below forecast, the customer may cancel or
reschedule shipments previously ordered from the Company, a process that may
be exacerbated by customers' inventory management practices. Accordingly, the
Company may, at any time and with limited notice, experience a significant
downturn in demand for its products. The Company's expectations of future net
sales are based largely on its own estimate of future demand and not on firm
customer orders. The Company's net sales may also be affected by its
distributors' decisions as to the quantity of the Company's products to be
maintained in their inventories. The Company's expenditures are based in part
on management's estimate of future sales. If orders and net sales do not meet
expectations, the Company generally will not be able to reduce expenses
commensurately in the near term and therefore profitability would be adversely
affected.

COMPETITION

The data and video storage industry is competitive and characterized by
price erosion over the life of a product. The Company believes that being
first to market with new products is a critical element in the achievement of
desired gross margins. Being first to market provides initial price advantages
to the Company and the opportunity to accelerate learning and cost reduction
curves due to increased production volumes. During 1994 and 1995 the Company
experienced significant price erosion related to several of its products as a
result of increased competition. Such pricing pressures negatively impacted
the Company's operating results for 1994 and 1995.

In the high-performance market in which the Company competes, the principal
dimensions of competition are generally data storage capacity, data transfer
rate, average access time, form factor, timely delivery in quantity,
reliability and price. Some of the Company's competitors are much larger in
size and have access to greater financial and other resources than the
Company. The Company believes that its future success hinges on its ability to
bring cost and feature-competitive products to market on a timely basis.

Competitors in the non-captive LAN RAID market include: Storage Dimensions,
Ciprico, Andataco and ECCS. The Company's market share declined in 1995 as
compared to 1994. The Company will endeavor to recapture and expand its market
share by providing RAID controller feature enhancements and by improved focus
as a result of the sale of the disk drive business.

The Company's products face competition from companies offering standard
computer systems with video server specific software, and those offering
specially designed video server systems. Competitors offering standard
computer systems with video server specific software include Digital Equipment
Corporation, Silicon Graphics Inc., Sun Microsystems and Hewlett Packard
Company. Competitors offering specially designed video server systems include
Sony Corporation, Optibase Inc., Sea Change, and The Network Connection Inc.
The Company believes its video server systems offer significant price
advantages, longer market presence and a more suitable overall solution for
the applications targeted.

EMPLOYEES

The Company currently employs approximately 200 persons, including 53 in
Engineering, 5 in Quality Assurance and Control, 74 in Manufacturing and
Operations, 42 in Sales and Marketing and 26 in General

31
<PAGE>

Management and Administration. Headcount figures include employees hired
through the acquisition of the FWB hardware business. Competition for highly
skilled employees is intense. The Company believes that its future success
will depend on its continued ability to attract and retain qualified
employees. None of the Company's employees is represented by a labor union,
and the Company has experienced no work stoppages. The Company believes that
its employee relations are good.

FOREIGN AND DOMESTIC OPERATIONS

The information relating to foreign and domestic operations is included in
Appendix D, Note 8 to the Company's Consolidated Financial Statements.

PROPERTIES

The Company's executive and engineering offices and domestic manufacturing
operations are located in the Company's owned 76,000 square foot facility in
Chatsworth, California. StreamLogic leases on a month-to-month basis, a small
amount of storage in Chatsworth. Resulting from the acquisition of the FWB
Hardware Business, the Company rents approximately 16,800 square feet of
office and manufacturing space in Menlo Park, California.

StreamLogic also leases sales office space in San Jose and Irvine,
California; New York, New York; Salem, New Hampshire; Des Plaines, Illinois;
Roswell, Georgia; Plano, Texas; Reading, England and Munich, Germany.

The Company believes that its current facilities are well maintained and are
adequate for its near-term production requirements. The Company is presently
at approximately 50% of capacity.

32
<PAGE>

MANAGEMENT

The following table sets forth certain information with respect to the
directors and executive officers of the Company:

<TABLE>
<CAPTION>
SERVED AS DIRECTOR
NAME AGE POSITION OR OFFICER SINCE
---- --- -------- ------------------
<C> <C> <S> <C>
J. Larry Smart 48 President, Chief Executive Officer 1995
and Chairman of the Board of
Directors
Barbara V. Scherer 40 Senior Vice President-Operations 1988
Lee N. Hilbert 37 Chief Financial Officer 1996
Michael C. Downs 37 Vice President, Sales 1996
Stephen Dalton 38 Vice President, Engineering 1996
Eric D. Herzog 38 Vice President, Marketing 1996
Ericson M. Dunstan 63 Director 1976
Chriss W. Street 46 Director 1995
Greg L. Reyes, Jr. 33 Director 1996
</TABLE>
- --------

MR. SMART was elected by the Board of Directors to the position of President
and Chief Executive Officer in July 1995 and serves as Chairman. He served as
President and Chief Executive Officer of Maxtor Corporation, a company that
manufactures Winchester disk drives and other mass-storage products, from
March 1994 to February 1995. He has served as Chairman of the Board of
Southwall Technologies Inc., a thin film technology company, since March 1994,
and was President and Chief Executive Officer of Southwall Technologies Inc.
from June 1991 to March 1994. He was Senior Vice President at SCE Systems, a
contract manufacturer, from November 1987 to June 1991.

MS. SCHERER joined the Company in November 1987 as Treasury Director, and
became Treasurer in October 1988. In November 1989, she became Vice President
and Treasurer and in March 1995, became Vice President-- Finance and Chief
Financial Officer. In April 1996, she was promoted to Senior Vice President--
Operations. Ms. Scherer was previously employed by the Boston Consulting Group
from May 1985 to November 1987.

MR. HILBERT joined the Company in August 1990 as Corporate Accounting
Manager and became Corporate Controller in April 1995. In April 1996 he was
appointed Chief Financial Officer of StreamLogic. Prior to joining the
Company, Mr. Hilbert held various positions with KPMG Peat Marwick, most
recently Senior Manager.

MR. DOWNS joined the Company in 1994 as Director of Sales--Western U.S.
Region. In 1996, he was named Vice President of Sales. Prior to joining the
Company, Mr. Downs was Director of Sales for Storage Dimensions from 1987 to
1994.

MR. DALTON joined the Company in July 1996 as Vice President--Engineering.
Prior to joining the Company, Mr. Dalton served as Director of Hardware
Engineering at FWB. Mr. Dalton was promoted to Vice President--Engineering
concurrent with the Company's acquisition of the FWB hardware division. Prior
to joining FWB, Mr. Dalton was Director of Engineering for I/O Development at
Storage Dimensions.

MR. HERZOG joined the Company in July 1996 as Vice President--Marketing.
Prior to joining StreamLogic, Mr. Herzog served as Vice President--Marketing
for Big Software and Vice President--Marketing for FWB. Mr. Herzog has held
senior marketing and sales management positions at Storage Dimensions, Mass
Microsystems, and Everex Systems, Inc.

33
<PAGE>

MR. DUNSTAN has served as a director of the Company since 1976. He has served
as Senior Vice President, Chatsworth Design Engineering of Micropolis (USA),
Inc. since March 1996. He served as Senior Vice President--Corporate
Engineering from October 1985 to March 1996 and Secretary of the Company since
1976.

MR. STREET has served as a Director of the Company since 1995. Mr. Street has
been a principal of Chriss Street and Company, a business involved in stock
brokerage, venture capital, and restructuring, since January 1991. He has also
served as Chairman and CEO of Comprehensive Care, a publicly traded firm which
develops, markets and manages programs for treatment of chemical dependency and
psychiatric disorders, since November 1993. In addition, Mr. Street is the
Secretary and Treasurer of Hacienda Village Modernization Corporation, a
nonprofit organization to give vocational training and assistance to the under-
privileged minority residents of a housing project, since June 1993.

MR. REYES has served as a director of the Company since 1996. He has served
as President and Chief Executive Officer of Wireless Access, Inc., a designer
and manufacturer of two-way Narrowband PCS (N-PCS), 900 MHz, belt-top
subscriber devices, sub-assemblies, and chip sets, since 1994. Mr. Reyes served
as Vice President of Radio Frequency Division of Norand Corporation, which
specialized in the design, development and manufacture of "In Premises"
microcellular RF networks and applications specific terminals, from 1992 to
1994. Mr. Reyes served as Vice President of North American Field Operations of
Banyan Systems Incorporated, which sells network operating system and data
communications products, prior to 1992.

ADDITIONAL DIRECTORS TO BE DESIGNATED BY LOOMIS SAYLES

Pursuant to the Tender Agreement, the Company will expand its board of
directors from four to seven members prior to or on the Expiration Date, and
two of the three additional directors will be persons designated by investors
advised by Loomis Sayles. As of the date of this Offer to Exchange, the
investors advised by Loomis Sayles have not designated the two persons to be
included on the Company's board of directors and the Company has not designated
the third new person to be included on the Company's board of directors. The
Company has also agreed to include two persons designated by investors advised
by Loomis Sayles in management's slate of nominees in future elections, until
such time as investors advised by Loomis Sayles no longer own at least 28% of
the outstanding Common Stock of StreamLogic.

REMUNERATION OF DIRECTORS

Each director who is not an officer of the Company is paid a retainer fee of
$3,000 per quarter, an attendance fee of $2,000 per Board meeting attended, and
a daily attendance fee of $1,000 for all committee meetings attended.

In October 1987, the Board of Directors adopted the Stock Option Plan for
Directors of Micropolis Corporation (the "Directors Plan") which was approved
by the stockholders of the Company in April 1988. As of August 31, 1996, there
were options outstanding to purchase an aggregate of 1,596,200 shares of Common
Stock. At the close of business on the date of each annual meeting of the
stockholders of the Company, each Director of the Company, who is not an
employee of the Company or of any affiliate of the Company and who is reelected
or continuing as a Director, is automatically granted an option to purchase
10,000 shares of the Company's Common Stock. In addition, when a person is
initially elected to the Board, at an annual meeting of stockholders or at any
other time, each such new Director who is not an employee of the Company or of
any affiliate of the Company is automatically granted an option to purchase
30,000 shares of the Company's Common Stock at the close of business on the
date of his or her election to the Board. Also in addition, when a Director who
is not an employee of the Company or any affiliate of the Company initially is
appointed to the position of Vice-Chairman of the Board, such Director is
automatically granted an option to purchase 20,000 shares of the Company's
Common Stock at the close of business on the date of his or her appointment.
Stockholder action is not required with respect to such automatic option
grants. Options under the Directors Plan have an exercise price equal to the
fair market value of the shares covered by the option on the date of grant,
have a term of five years and become exercisable in three equal annual
installments commencing once year after the date of grant.

34
<PAGE>

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth information regarding ownership of the
Company's Common Stock as of August 31, 1996 by all current directors and
executive officers individually, and all directors and executive officers as a
group:

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------
AMOUNT AND NATURE
OF BENEFICIAL PERCENT OF
NAME OWNERSHIP(1)(2)(3) CLASS
---- ------------------ ----------
<S> <C> <C>
DIRECTORS
J. Larry Smart................................ 60,000 *
Ericson M. Dunstan............................ 71,250 *
Chriss W. Street.............................. 36,700 *
Greg L. Reyes, Jr. ........................... 0 *
EXECUTIVE OFFICERS
Barbara V. Scherer............................ 12,213 *
Lee N. Hilbert................................ 1,419 *
Michael C. Downs.............................. 0 *
Eric D. Herzog................................ 0 *
Stephen Dalton................................ 0 *
All executive officers and directors as a
group (9 persons)............................ 181,582 1.1%
</TABLE>
- --------
* Less than 1%
(1) Information with respect to beneficial ownership is based on information
furnished to the Company by each person included in this table. Except as
indicated in the notes to the table, each stockholder included in the
table has sole voting and dispositive power with respect to the shares
shown to be beneficially owned by the stockholder.
(2) All of the stockholders included in this table reside in California.
California has community property laws under which the spouse of a
stockholder in whose name securities are registered may be entitled to
share in the management of their community property which may include the
right to vote or dispose of the shares.
(3) Includes installments of options to purchase 10,000, 12,000, and 10,000
shares of Common Stock held by Mr. Smart, Dr. Dunstan and Mr. Street,
respectively, that were exercisable on, or within 60 days after,
August 31, 1996.

35
<PAGE>

EXECUTIVE COMPENSATION

CASH AND OTHER COMPENSATION

The following table and accompanying notes show, for the Chief Executive
Officer and the other four most highly-compensated executive officers of the
Company for fiscal 1996 (the transition period from December 30, 1995 to March
29, 1996), the compensation paid by the Company and its subsidiaries to such
persons for services in all capacities during fiscal 1996 and the preceding
three fiscal years. The positions shown next to the names of the executives
are those held by such executives as of March 29, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------
OTHER OPTIONS
NAME AND ANNUAL GRANTED ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION SHARES COMPENSATION(3)
------------------ ---- --------- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
J. Larry Smart, 1996 $ 94,234 $137,500 $ -- -- $ --
President, Chief 1995 161,544 50,000 -- 380,000 --
Executive Officer and
Chairman of the Board
(4)
Taroon C. Kamdar, Presi- 1996 51,461 -- -- -- 13,468
dent, Asia 1995 237,003 60,000 -- 40,000 25,492
Pacific Division (5) 1994 200,044 25,000 2,060 25,000 48,075
1993 203,410 91,170 2,612 -- --
Barbara V. Scherer, Vice 1996 45,780 50,000 -- -- --
President--Finance and 1995 162,708 35,000 -- 40,000 --
Chief Financial Officer 1994 128,292 -- -- 5,000 --
1993 143,152 13,810 -- 5,000 --
Ericson M. Dunstan, Se- 1996 43,652 -- -- -- --
nior Vice President-- 1995 156,520 -- -- 40,000 --
Engineering (6) 1994 162,136 -- -- 10,000 6,548
1993 165,254 9,525 -- 20,000 14,966
Donald L. McDonell, Vice 1996 40,390 -- -- -- --
President--Sales (7) 1995 144,668 -- -- 19,000 --
1994 134,825 50,000 -- -- 1,375
1993 109,265 18,965 -- 20,000 7,911
</TABLE>

- --------
(1) Includes amounts contributed by each person named through salary reduction
under the Micropolis Corporation Employee Savings and Retirement Plan (the
"Section 401(k) Plan"). The 1993 salary year included 53 weeks.
(2) Amounts represent reimbursement during the fiscal year for the payment of
taxes.
(3) Amounts for Mr. Kamdar include cash payments of $13,468, $25,492 and
$48,075 in 1996, 1995 and 1994, respectively, relating to his overseas
assignment. Amounts for Dr. Dunstan and Mr. McDonell represent payoff of
accrued vacation.
(4) Mr. Smart joined the Company as president and chief executive officer in
July 1995.
(5) Mr. Kamdar resigned from the Company in May 1996.
(6) Pursuant to the sale of the disk drive business, Mr. Dunstan was named
Senior Vice President, Chatsworth Design Engineering, Micropolis (USA),
Inc. and resigned as an officer of the Company effective March 29, 1996.
Mr. Dunstan remains a director of the Company.
(7) Pursuant to the sale of the disk drive business, Mr. McDonell was named
Vice President--Sales, Micropolis (USA), Inc. and resigned as an officer
of the Company effective March 29, 1996.

36
<PAGE>

STOCK OPTIONS

In October 1987, the Board of Directors adopted the Stock Option Plan for
Executive and Key Employees of Micropolis Corporation (the "Option Plan"). The
Option Plan was approved by stockholders in April 1988. The Option Plan is
administered by the Compensation Committee of the Board of Directors of the
Company. Under the Option Plan, full-time employees of the Company and of any
subsidiary of the Company are eligible to receive grants of non-qualified
stock options and incentive stock options (as defined in Section 422 of the
Internal Revenue Code (the "Code")).

The following table sets forth information regarding stock options granted
in 1995 to each of the named executive officers. No stock options were granted
to such persons during the transition period from December 31, 1995 to March
29, 1996.

<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR

INDIVIDUAL GRANTS
----------------------------------------------
% OF TOTAL GRANT DATE
OPTIONS PRESENT VALUE(2)
OPTIONS GRANTED GRANTED TO EXERCISE EXPIRATION -------------------
NAME (SHARES)(1) EMPLOYEES PRICE DATE 5% 10%
---- --------------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. Larry Smart.......... 350,000 31.7% $5.438 4/25/00 $525,847 $1,161,984
30,000 2.7 5.375 7/05/00 44,550 98,445
Taroon C. Kamdar........ 40,000 3.6 5.375 7/05/00 50,401 131,260
Barbara V. Scherer...... 20,000 1.8 5.750 4/26/00 31,772 70,209
20,000 1.8 5.375 7/05/00 29,700 65,630
Ericson M. Dunstan...... 40,000 3.6 5.375 7/05/00 59,401 131,260
Donald L. McDonell...... 19,000 1.7 5.375 7/05/00 28,215 62,348
</TABLE>

- --------
(1) The per share exercise price of all options granted is the fair market
value of the Company's Common Stock on the date of grant. Options have a
term of five years and become exercisable in three to five equal
installments, each of which accrues at the end of each year after the
grant date except for the fifth installment, which accrues 60 days before
the expiration date.
(2) The potential realizable value is calculated from the exercise price per
share, assuming the market price of the Company's Common Stock appreciates
in value at the stated percentage rate from the date of grant to the
expiration date. Actual gains, if any, are dependent on the future market
price of the Common Stock.

The following table sets forth information regarding stock option exercises
and year-end stock option values for each of the named executive officers for
1995. No stock options were exercised by such persons during the transition
period from December 31, 1995 to March 29, 1996.

OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES
AT DECEMBER 29, 1995

<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF UNEXERCISED "IN-THE-MONEY"
SHARES STOCK OPTIONS STOCK OPTIONS
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. Larry Smart.......... -- -- -- 380,000 -- --
Taroon C. Kamdar........ -- -- 66,000 59,000 -- --
Barbara V. Scherer...... -- -- 9,000 46,000 -- --
Ericson M. Dunstan...... -- -- 12,000 58,000 -- --
Donald L. McDonell...... -- -- 10,000 29,000 -- --
</TABLE>
- --------
(1) Market value of underlying Common Stock on date of exercise or fiscal
year-end, minus the option exercise price. The share price as of December
29, 1995 was $3.75.

37
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following table sets forth certain information, as of December 31, 1995,
with respect to those known by the Company, based on a review of filings on
Schedules 13D or 13G, to be beneficial owners of more than five percent (5%)
of the outstanding shares of the Company's Common Stock.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------------------ -------------------- --------
<S> <C> <C>
Ryback Management Corporation(1)............... 5,373,748 34.3%
7711 Carondelet Avenue
Box 16900
St. Louis, Missouri 63105
State of Wisconsin Investment Board............ 1,491,000 9.6%
P.O. Box 7842
Madison, Wisconsin 53707
Loomis, Sayles & Company (2)................... 1,195,876 7.7%
One Financial Center
Boston, Massachusetts 02111
Richard C. Perry (3)........................... 1,150,000 7.3%
2635 Century Parkway, N.E.
Suite 1000
Atlanta, Georgia 30345
</TABLE>
- --------
(1) Shares held in a fiduciary capacity by Ryback Management Corporation
and/or Lindner Dividend Fund, Inc. (collectively, "Lindner") as of
December 31, 1995. Of the shares owned as of that date, 1,919,800 were
directly owned and 3,453,948 shares were indirectly owned through the
ownership of the Company's then outstanding 10% Convertible Subordinated
Notes due 1998 and the Company's 6% Debentures. On April 5, 1996, the
Company repurchased $10,000,000 aggregate principal amount of the 10%
Notes and on June 28, 1996 repurchased the remaining $10,000,000 of the
10% Notes, at par, plus accrued interest to the date of purchase, from
Lindner. The Company on March 29, 1996 issued to Lindner two-year warrants
to purchase 1,500,000 shares priced at $4 per share. As of August 28,
1996, Lindner beneficially owned 2,615,842 shares, of which 964,300 were
directly owned, 151,542 were indirectly owned through the ownership of 6%
Debentures and 1,500,000 were indirectly owned through the ownership of
warrants, based upon the Schedule 13G filed by Lindner on such date.

(2) Loomis Sayles has informed the Company that it is the advisor to, and is
believed by the Company to have either sole or shared investment power
with respect to, the shares reported in the table. All of the shares
beneficially owned as of that date were indirectly owned through the
ownership of 6% Debentures.

(3) As of June 3, 1996, Mr. Perry's holdings were reduced to 349,500 shares,
based upon the Schedule 13D filed by Mr. Perry on June 14, 1996.

38
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Three Months Ended June 28, 1996 Compared to Three Months Ended June 30, 1995

Net sales decreased 84% to $11.2 million in the June 1996 quarter as
compared to $70.1 million in the June 1995 quarter. The decline in revenues
was due to the sale of the hard disk drive business by the Company as of March
29, 1996. Revenue for the June 1996 quarter included those of the Company's
family of high performance and fault-tolerant RAID solutions and the family of
video server systems. Such June 1996 quarter revenues slightly exceeded those
of the June 1995 quarter for similar products. Backlog as of June 28, 1996 was
$1.9 million.

Cost of sales as a percent of sales increased to 93.5% in the June 1996
quarter from 78.1% in the June 1995 quarter resulting in a gross margin of
6.5% in the 1996 quarter as compared to 21.9% in the 1995 quarter. The
decrease in margin during the 1996 quarter was a result of increased costs and
inefficiencies experienced by the Company during the period of transition
following the sale of the hard disk drive business.

Research and development expenses were 22.0% of sales in the June 1996
quarter as compared to 14.8% in the June 1995 quarter. The percentage increase
in the result of lower sales, offset partially by a decrease in expense of
$7.9 million. The decrease in expense was the result of the sale of the hard
disk drive business by the Company as of March 29, 1996, and the termination
of the Company's funding of the costs incurred by Tulip Memory Systems, Inc.,
a start-up company formed to develop substrates which are to be used in the
manufacture of computer disk drives. The remaining research and development
expense was incurred for the Company's family of high performance and fault-
tolerant RAID solutions and the family of video server systems.

Selling, general and administrative expenses were 24.8% of sales in the June
1996 quarter as compared to 14.7% in the June 1995 quarter. The percentage
increase is the result of lower sales, offset by a decrease in expense of $7.5
million. The decrease in expense was the result of the sale of the hard disk
business by the Company as of March 29, 1996.

Interest expense was $1.4 million in the June 1996 quarter (12.5% of sales)
as compared to $1.5 million in the June 1995 quarter (2.1% of sales). The
decrease in expense was a result of interest incurred during the June 1996
quarter on the Company's 10% Subordinated Notes offset by fees associated with
the Company's Term Loan Facility in the June 1995 quarter. Interest income was
$377,000 in the June 1996 quarter as compared to $486,000 in the June 1995
quarter as a result of lower cash equivalent and short-term investment
balances.

As a result of the above, loss before income taxes was $5.5 million in the
June 1996 quarter as compared to $6.3 million in the June 1995 quarter. The
Company's income tax provision in the June 1995 quarter benefited from the tax
holiday afforded the Company's Singapore operation. The income tax exemption
in Singapore had no impact in the June 1995 quarter. Net loss for the June
1996 quarter was $5.5 million compared to $6.3 million in the June 1995
quarter.

Three Months Ended March 29, 1996 (The "1996 Transition Period") Compared to
Three Months Ended March 31, 1995

Net sales decreased 40% to $24.4 million in the 1996 transition period as
compared to $40.9 million in the first quarter of 1995. Drive Business
revenues declined by 45% in the 1996 transition period as compared to the 1995
quarter and sales made by the Systems Business decreased by approximately 21%.
The decrease in revenues was primarily attributable to the low volume of
shipments and high level of product returns experienced during the 1996
transition period due to uncertainties within the Company's disk drive
customer base regarding the sale of the disk drive business. The Company
discontinued manufacturing Systems Business products in its Singapore facility
during the 1996 transition period. All Systems Business products are currently
manufactured

39
<PAGE>

in the Company's Chatsworth, California facility. Such discontinuance of
manufacturing in Singapore is not expected to have a significant impact on
Systems Business revenue. Overall bookings for the 1996 transition period
decreased by 51% from those in the 1995 quarter principally due to
uncertainties within the Company's disk drive customer base regarding the sale
of the disk drive business.

Cost of sales as a percent of sales increased to 167% in the 1996 transition
period from 122% in the 1995 quarter resulting in a gross loss of 67% as
compared to 22% in the 1995 quarter. The margin loss was the result of price
declines in the Company's Javelin family of drives, operating inefficiencies
due to low volume production of the 2, 4 and 9 GB drives.

Research and development expenses increased to 36.3% of sales in the 1996
transition period as compared to 32.8% in the 1995 quarter. The percentage
increase is the result of lower sales offset by a decrease in spending of $4.6
million. The decrease in expense was a result of savings from the Company's
cost containment efforts initiated in March 1995 and termination of the
Company's funding in 1996 of the research and development costs incurred by
Tulip Memory Systems, Inc. ("TMS"), a start-up company formed to develop
substrates which are to be used in the manufacture of computer disk drives.
During the 1995 quarter, the Company recorded a provision to recognize the
guarantee obligation under its agreement with TMS. In the 1996 transition
period and the 1995 quarter, approximately one-third of the Company's research
and development expenses were incurred by the ongoing Systems Business.

Selling, general and administrative expenses were 36.2% of sales in the 1996
transition period as compared to 32.2% in the 1995 quarter. The percentage
increase is the result of lower sales offset by a decrease in expense of $4.3
million. The decrease in expense was the result of decreased expenditures for
advertising and sales promotion activities for new products, costs associated
with a work force reduction in the U.S. and Europe completed in March 1995,
and lower costs resulting from employee reductions made in early January 1996.

Interest expense increased to $2 million in the 1996 transition period (8.3%
of sales) as compared to $1.3 million (3.3% of sales) in the 1995 quarter,
primarily as a result of the interest expense on the Company's 10%
Subordinated Notes dated October 11, 1995 and fees associated with terminating
the Company's Loan Facility. Interest income was $169,000 in the 1996
transition period as compared to $547,000 in the 1995 quarter as a result of
lower cash equivalent and short-term investment balances. As a result of the
above, loss before income taxes was $36.0 million in the 1996 transition
period as compared to $36.3 million in the 1995 quarter.

The Company recorded an income tax provision of $252,000 in the 1996
transition period, primarily representing Federal taxes on undistributed
foreign earnings since such earnings would be remitted due to the Sale. In the
1995 quarter, the Company recorded an income tax benefit of $1.2 million,
primarily representing a refund of certain foreign income taxes paid in a
prior year. The Company's income tax provision benefits from the tax holiday
afforded the Company's Singapore operation. The income tax exemption in
Singapore had no impact in the 1996 transition period or the 1995 quarter. A
net operating loss of approximately $124.2 million is available to be carried
forward to the years 2004-2011. General business tax credit carryforwards of
approximately $8.6 million expiring between 2000 and 2009, are also available
to reduce future federal income taxes. However, under Internal Revenue Code
Sections 382 and 383, the amount of the operating loss and general business
tax credit carryforwards that can be used annually may be limited due to
certain changes in ownership. The potential issuance of Common Stock in
connection with the Exchange Offer, or other trading activities, may create
such a change in ownership. Net loss for the 1996 transition period was $36.2
million compared to a net loss of $35.1 million in the 1995 quarter.

Fiscal 1995 Compared to Fiscal 1994

Net sales decreased 39% to $211.3 million in 1995 as compared to $346.3
million in 1994. Drive Business revenues declined by 44% in 1995 as compared
to 1994 and sales made by the Systems Business decreased by approximately 4%.
The decrease in revenues was primarily attributable to sharply lower drive
orders than anticipated in the distribution channel during the first quarter
of 1995 for the Company's 4 GB 3 1/2-inch and

40
<PAGE>

9 GB 5 1/4-inch drives. In addition, a component problem, and other technical
issues, effectively shut down production of the Company's 2 GB 3 1/2-inch
drive for most of the first quarter of 1995. During the second quarter of
1995, the Company resumed full production of its 2 GB 3 1/2-inch drives and
met the increased demand for these drives and its SuperCapacity 4 and 9 GB
drives. During the third and fourth quarters of 1995, the Company's OEM
revenue declined due to reduced shipments to certain large customers. The
Company anticipated that such revenue reduction would be offset by new OEM
customers in qualification. However, the Company experienced delays in such
OEM qualifications and unexpected difficulties in the manufacture of 3 1/2-
inch disk drives resulting in higher manufacturing costs, excessive warranty
cost, inventory build-up and lost sales. During the fourth quarter of 1995 the
Company announced a price reduction on its Javelin family of drives. Overall
bookings for 1995 decreased by 45% from those in 1994 principally due to
manufacturing difficulties, component problems and delays in OEM
qualifications in the Company's 2, 4 and 9 GB drives.

Cost of sales as a percent of sales increased to 97.3% in 1995 from 82.8% in
1994 resulting in a gross margin of 2.7% as compared to 17.2% in 1994. The
decrease in margin was the result of price declines in the Company's Javelin
family of drives, operating inefficiencies due to low volume production of the
2 and 4 GB drives, and a provision recorded during the first quarter of 1995
for certain unusable components of the 2 GB drives.

Research and development expenses increased to 20.1% of sales in 1995 as
compared to 12.6% in 1994. The percentage increase is the result of lower
sales offset by a decrease in spending of $1.2 million. The decrease in
spending was a result of savings from the Company's cost containment efforts
initiated in March 1995, offset by the recognition of the research and
development costs incurred by TMS, and research and development on the
Company's high capacity 3 1/2-inch and 5 1/4-inch drives and subsystem
products. In 1995, approximately one-third of the Company's research and
development expenses were incurred by the ongoing Systems Business.

Selling, general and administrative expenses were 20.2% of sales in 1995 as
compared to 12.6% in 1994. The percentage increase is the result of lower
sales and an increase in expense of $774,000. The increase in expense was the
result of increased expenditures for advertising and sales promotion
activities for new products, costs associated with a work force reduction in
the U.S. and Europe completed in March 1995, and the retention of outside
assistance to help the Company in formulating and implementing its recovery
plan, offset by the Company's cost containment efforts initiated in March
1995.

Interest expense increased to $6 million in 1995 (2.8% of sales) as compared
to $5.1 million (1.5% of sales) in 1994, primarily as a result of fees
associated with the Company's Term Loan Facility and the interest expense of
the Company's 10% Convertible Subordinated Debentures dated October 11, 1995.
Interest income was $1.7 million in 1995 as compared to $2.1 million in 1994
as a result of lower cash equivalent and short-term investment balances. As a
result of the above, loss before income taxes was $85.3 million in 1995 as
compared to $30.7 million in 1994.

The Company recorded an income tax benefit of $1.1 million in 1995,
primarily representing a refund of certain foreign income taxes paid in a
prior year. The Company's income tax provision benefits from the tax holiday
afforded the Company's Singapore operation. The income tax exemption in
Singapore had no impact in 1995 and had an effect of approximately $7.4
million and $.49 on net income and earnings per share, respectively, as
compared to income taxes at the maximum statutory rates in 1994. Net loss for
1995 was $84.3 million compared to a net loss of $30.7 million in 1994.

Fiscal 1994 Compared to Fiscal 1993

Net sales decreased by 10.5% to $346.3 million in 1994 as compared to $382.9
million in 1993. OEM revenues declined substantially in 1994 as a result of a
decrease in shipments in the Company's 5 1/4-inch 3600 rpm drives and the 3
1/2-inch 5400 rpm 1 gigabyte (GB) drives. The decline in OEM sales was only
partially offset by increases in the Company's Storage Systems Division (SSD)
and Video Systems Division. The increase in SSD sales was primarily the result
of an increase in shipments of the 3 1/2-inch, 1 inch high 1 GB drive, 1.7 GB

41
<PAGE>

full height drives and storage subsystems. The increase in the Video Systems
Division, which had no sales in 1993, came primarily in the second half of
1994 and related to shipments of the AV Server 100. Backlog as of December 30,
1994 was $27.8 million, as compared to $29.2 million as of December 31, 1993.

Cost of sales as a percentage of sales was 82.8% in 1994, comparable to the
82.4% in 1993, resulting in gross margins of 17.2% (17.6% in 1993). Gross
margins in the first three quarters of 1994 were adversely impacted by
competitive pricing on the 1 GB, 1 inch high 3 1/2-inch drives. Margins
increased substantially in the fourth quarter, to 26.5%, as a result of the
increased shipments of the Company's Javelin class SuperCapacity drives and
storage and video subsystems.

Research and development as a percentage of sales increased to 12.6% in 1994
as compared to 9.4% in 1993. The increase in spending of $7.5 million relates
to increased research and development for high capacity 3 1/2-inch and 5 1/4-
inch drives, subsystem products and development of new disk substrates at TMS.

Selling, general and administrative expense increased to 12.6% in 1994 as
compared to 10.9% in 1993. The increase in spending of $1.6 million relates
primarily to increased sales and marketing costs in the Company's Storage
Systems Division.

Interest expense was $5.1 million (1.5% of sales) in 1994 which is
comparable to 1993. Interest income was $2.1 million in 1994 as compared to
$2.3 million in 1993. As a result of the above, the loss before income taxes
was $30.7 million in 1994 versus a loss of $19.9 million in 1993.

The Company provided for no income tax in 1994 versus $4,000 provided in
1993. The Company's income tax provision benefits from a tax holiday afforded
the Company's Singapore operation. The effect on net income and earnings per
share of the income tax exemptions in Singapore as compared to income taxes at
the maximum statutory rates for 1994 and 1993, was approximately $7.4 million
and $.49 and $4.8 million and $.33, respectively. Net loss was $30.7 million
in 1994, as compared to net loss of $19.9 million in 1993.

Liquidity and Capital Resources

Cash, cash equivalents and short-term investments increased to $45.9 million
as of June 28, 1996 from $40.5 million as of March 29, 1996. Net cash provided
by operations of $2.2 million is primarily due to the collection of a
substantial amount of the trade accounts receivable not sold as part of the
hard disk drive business, offset by the Company's net loss of $5.5 million and
decrease in accounts payable and other accrued liabilities of $5.6 million.

The Company's capital expenditures in the June 1996 quarter were $250,000 as
compared to $7.0 million in the June 1995 quarter. Capital expenditures in the
June 1995 quarter related primarily to the construction of a new manufacturing
facility in Singapore to replace the current leased facility and for equipment
and tooling to support new products. The new facility was completed in 1996
and sold as part of the sale of the hard disk drive business. The Company had
obtained a term loan facility to fund the expenditures associated with the
construction of the building. The buyer of the hard disk drive business
assumed the Company's term loan facility and, in addition, assumed the
Company's obligations under contracts to build an ESD safe cleanroom for the
production of MR-based disk drives, and certain other contracts for the
facilitation of the factory. The Company currently anticipates that its fiscal
1997 capital spending will be substantially less than that of fiscal 1995 and
will be principally for equipment and tooling required for the Company's new
products.

42
<PAGE>

the Notes to allow consummation of the Sale and in consideration for such
consent, agreed to repay the Notes on July 2, 1996 and issued warrants to
purchase 1,500,000 shares of the Company's Common Stock at a price of $4 per
share. On April 5, 1996, the Company repaid $10,000,000 of the Notes, and on
July 1, 1996, the Company repaid the remaining $10,000,000 of the Notes.
Interest on the Notes was payable semiannually on April 15 and October 15.

In consideration of the sale of the hard disk drive business as of March 29,
1996, the Company received total cash consideration of approximately $54
million. $39.7 million of such cash consideration was received as of the March
29, 1996 closing, $13 million in cash consideration was received on June 6,
1996, and a final payment of $1 million which is subject to certain conditions
and is expected to be received in November.

Market for StreamLogic Common Stock

As of June 28, 1996, the Company's net tangible assets did not meet the
criteria for continued inclusion on the Nasdaq National Market System ("Nasdaq
NMS"). If the Company's Common Stock is no longer approved for inclusion on
the Nasdaq NMS, and the Company cannot obtain listing elsewhere, trading, if
any, in the Company's Common Stock may thereafter be conducted in the over-
the-counter market and its stock quoted in the so-called "pink sheets" or, if
then available, the "OTC Bulletin Board Service." As a result, it could be
more difficult to trade, or to obtain accurate quotations as to the value of,
the Company's Common Stock and the spread between the "bid" and "ask" prices
for the Common Stock could materially increase. However, Nasdaq granted the
Company's request for continued inclusion of the Company's Common Stock on the
Nasdaq NMS conditioned upon consummation of the Exchange Offer by October 4,
1996. On September 16, the Company requested Nasdaq to extend the date by
which it would require the Exchange Offer to be consummated in order to allow
the continued inclusion of the Common Stock on the Nasdaq NMS to October 31,
1996. Following further telephonic conversations with representatives of
Nasdaq, on September 30, 1996, Nasdaq informed the Company that it would not
grant the Company's request for an extension of the date by which it would
require the Exchange Offer to be consummated and that effective October 7,
1996, the Company's Common Stock would be removed from the Nasdaq NMS. Nasdaq
did, however, inform the Company that it could apply to have its Common Stock
listed on the Nasdaq SmallCap Market pending consummation of the Exchange
Offer. The Company has initiated an oral appeal of the proposed delisting of
its Common Stock from the Nasdaq NMS, and has concurrently applied for listing
of its Common Stock on the Nasdaq SmallCap Market pending successful
consummation of the Exchange Offer. Nasdaq has informed the Company that its
Common Stock will remain on the Nasdaq NMS pending the outcome of the oral
appeal; however, there can be no assurances as to whether such appeal will be
successful or as to when such determination will be made by Nasdaq. If the
Company is unable to consummate the Exchange Offer, it is likely that the
Common Stock would no longer be authorized for quotation either on the Nasdaq
NMS or the Nasdaq SmallCap Market.

StreamLogic Strategic and Financial Alternatives

Although the Company anticipates operating losses in the near term, the
Company is considering and will consider strategic and financial alternatives
to improve its results of operations, cash flows and net worth, including
restructuring of debt, cost reduction measures, equity financing and other
alternatives. Management believes that, if it is successful in executing such
measures, its cash, cash equivalents, short term investments and other working
capital will be sufficient to fund operations over the next year. There can be
no assurance of such successful execution, however.

Recent Developments

The Company's preliminary results for the second quarter of fiscal 1997
indicate revenues of approximately $13 million and a net loss somewhat greater
than that of the $5.5 million loss experienced during the first quarter of
1997. Such revenues, which include those of the Hammer line of high-
performance storage products acquired by the Company as of July 1, 1996,
reflected a generally slower summer market demand during the quarter,

43
<PAGE>

issues of integrating the Hammer products into the StreamLogic business and
certain late component deliveries in September 1996 which prevented the
Company from fulfilling its entire backlog. During September 1996, as a cost
reduction measure, the Company executed a work force reduction of
approximately 10% of the U.S. work force.

As further described in Note 4 to the Condensed Consolidated Financial
Statements as of June 28, 1996, effective July 1, 1996 the Company purchased
all of the net assets related to the hardware business of FWB Software Inc.
and made an equity investment in the software business being retained by FWB
Software Inc. In consideration for such net assets and minority equity
investment, at closing the Company paid cash of approximately $5 million and
issued 1,256,123 shares of StreamLogic Common Stock. FWB Software Inc. will
receive additional shares or return shares of StreamLogic Common Stock such
that the market value (based on the average price as defined in the Operating
Agreement of FWB Software, LLC) of the shares contributed to FWB Software Inc.
is equal to $7.5 million, such adjustment to occur on October 29, 1996. Based
on the recent share price of the Company's Common Stock as compared to the
share price of approximately $6 when the acquisition was negotiated, the
Company may need to issue additional shares of StreamLogic Common Stock to FWB
Software Inc. on October 29, 1996. If the average price (as defined in the
Operating Agreement of FWB Software, LLC) is below approximately $2.40 the
Company would be required to issue additional shares pursuant to the agreement
such that more than 20% of the outstanding shares immediately prior to the
effective date of the agreement would be issued without stockholder approval
and possibly contrary to Nasdaq's rules. In order to permit the Company to
continue (or become re-listed) as a publicly-traded Nasdaq company if such
average price is below such threshold, the Company would be required to
negotiate with FWB Software, LLC to provide alternative consideration, such as
cash, in place of such shares in excess of 20%. There can be no assurance that
such negotiations would be successful and, if not, that the Company's stock
would not be delisted from Nasdaq.

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BACKGROUND OF THE EXCHANGE OFFER

GENERAL

During the last three completed fiscal years and the transition period ended
March 29, 1996, the Company incurred substantial operating losses, and total
shareholders' equity fell from $89.630 million at December 30, 1994 to a
deficit of $27.084 million at March 29, 1996. These losses were primarily
related to the Company's disk drive business, which in fiscal 1995 and the
transition period ended March 29, 1996 accounted for approximately 80% of the
Company's revenues. On March 29, 1996, following approval of the Company's
stockholders, the Company completed the sale of its disk drive business to ST
Chatsworth Pte Ltd, a Singapore corporation (the "Sale"). The Company has
received approximately $53 million in cash proceeds from the Sale, with $1
million being held in escrow.

As a result of the Sale, StreamLogic has become a significantly smaller,
growth-oriented business. The book value of the Company's property, plant and
equipment as of June 28, 1996 totaled approximately $6 million, and the
Company employed approximately 150 persons, as compared to approximately $54
million in such assets and 2,000 employees immediately prior to the Sale. The
Company's principal business is now fault tolerant disk storage subsystems,
commonly known as RAID systems, and video server and video disk recorder
systems. The Company believes the indebtedness represented by the 6%
Debentures is disproportionately large in relation to its present assets, and
inappropriate for a growth-oriented business of the Company's size.

Prior to the Sale, the Company evaluated several alternatives with respect
to restructuring its 6% Debentures prior to or concurrently with the Sale.
These alternatives included: cash redemption at a negotiated discount from
par, partial cash redemption/exchange offer and restructuring via a "pre-
packaged" Chapter 11 proceeding. The Company decided against pursuing a debt
restructuring simultaneously with the Sale transaction in large measure
because completing the restructuring process in the requisite accelerated time
frame was considered to be unrealistic. At such time, Loomis Sayles & Company,
L.P. ("Loomis Sayles"), an entity which advises investors that collectively
hold approximately 79% of the aggregate principal amount of the outstanding 6%
Debentures, indicated to the Company its potential interest in reaching an
agreement with respect to a restructuring of the 6% Debentures after the Sale.

On May 13, 1996, the Company received an inquiry from Nasdaq as to whether
the Company met the minimum net tangible assets requirement of the Nasdaq NMS
as of its quarter ended March 29, 1996. The Company indicated in response that
it did not believe it met such requirement, and Nasdaq requested that the
Company submit a written plan by May 28, 1996 for returning to compliance with
the net tangible assets requirement. The Company submitted such a plan on May
28, 1996, an important element of which was a restructuring of the 6%
Debentures through an exchange offer for cash and equity securities of the
Company. Such plan was reviewed by Nasdaq and Nasdaq granted the Company's
request for continued inclusion of the Common Stock on the Nasdaq NMS
conditioned upon consummation of the tender offer contemplated by the Initial
Tender Agreement by October 4, 1996. On September 16, the Company requested
Nasdaq to extend the date by which it would require the Exchange Offer to be
consummated in order to allow the continued inclusion of the Common Stock on
the Nasdaq NMS to October 31, 1996. Following further telephone conversations
with representatives of Nasdaq, on September 30, 1996, Nasdaq informed the
Company that it would not grant the Company's request for an extension of the
date by which it would require the Exchange Offer to be consummated and that
effective October 7, 1996, the Company's Common Stock would be removed from
the Nasdaq NMS. Nasdaq did, however, inform the Company that it could apply to
have its Common Stock listed on the Nasdaq SmallCap Market pending
consummation of the Exchange Offer. The Company has initiated an oral appeal
of the proposed delisting of its Common Stock from the Nasdaq NMS, and intends
to apply for listing of its Common Stock on the Nasdaq SmallCap Market,
pending the successful consummation of the Exchange Offer. Nasdaq has informed
the Company that its Common Stock will continue to trade on the Nasdaq NMS
pending the outcome of the oral appeal; however, there can be no assurances as
to whether such appeal will be successful or as to when such determination
will be made by Nasdaq. If the Company is unable to consummate the Exchange
Offer, it is likely that the Common Stock would no longer be authorized for
quotation either on the

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Nasdaq NMS or the Nasdaq SmallCap Market. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Market for
StreamLogic Common Stock."

THE TENDER AGREEMENT

Following the close of the Sale, in early April, the Company engaged in
frequent conversations and written correspondence with Loomis Sayles regarding
a potential restructuring of the Company's 6% Debentures. On April 12, 1996,
the Company requested Loomis Sayles legal counsel to sign a Confidentiality
Agreement.

In order to assist Loomis Sayles, proposals from financial advisory services
firms were solicited in the first half of April. On April 22, 1996, a
teleconference call was held between the Company, Loomis Sayles and their
respective legal counsels to discuss potential structures for the
restructuring, including a private exchange offer for Loomis Sayles' 6%
Debentures, or a public tender offer for all outstanding 6% Debentures.
Related shareholder approval issues were discussed. The retention of Chanin &
Company ("Chanin") as financial advisor to Loomis Sayles and Chanin's fees
were also discussed during the conference call. The Company agreed to pay
Chanin's fees and the fees of Loomis Sayles' legal counsel.

On April 24, 1996, the Company signed an agreement for the retention of
Chanin by Loomis Sayles at the Company's expense. Estimated fees to be paid by
the Company were $300,000. On May 6, Chanin met with Company management to
begin its due diligence process. Specific items discussed included the
Company's plans with regard to potential acquisitions or merger candidates,
communications with Nasdaq with regard to the on-going listing of the
Company's common stock, the Company's capital structure, the Company's
business plan and financial projections, Company stock option information, key
customers, an industry technology overview and the Company's marketing and
product strategies.

During the weeks of May 6 and 13, the Company responded to multiple requests
for information, including Company business plans, financial projections, and
a request for a copy of the "Assessment of StreamLogic" prepared by Salomon
Brothers in February of 1996 in connection with the sale of the hard disk
drive business.

On May 16, the Company received an initial proposed letter agreement
regarding a public tender offer for all of the outstanding 6% Debentures from
Loomis Sayles, detailing the proposed terms and the consideration to be
received. Loomis Sayles indicated that it was prepared to finalize the letter
agreement by May 20, 1996. During the week of May 19, the Company discussed
internally and with its legal counsel the terms of the May 16 letter
agreement, and sent a revised proposal to Chanin on May 23, 1996.

On May 24, 1996, after discussions between the Company and Loomis Sayles,
Loomis Sayles prepared and submitted a revised letter agreement. On May 28,
1996, the Company submitted a written response to the Loomis Sayles proposal
of May 24, 1996. Outstanding issues addressed included the pricing of the
Warrant component of the Offer.

During the weeks of May 27 and June 3 various conference calls were held
between Loomis Sayles, the Company and their respective legal counsels with
regard to outstanding issues, including corporate governance and Loomis
Sayles' prospective board seats, dilutive effects of employee options, and
Nasdaq requirements with regard to the calculation of the Exchange Price for
the Offer.

During the first two weeks of June, the Company received several revised
drafts of the letter agreement from Loomis Sayles. On June 14, final agreement
was reached and the letter agreement (the "Initial Tender Agreement") was
executed by both parties, a copy of which is attached as Appendix A-1 to this
Offer to Exchange.

One of the several conditions to the Company's obligation to consummate the
exchange offer contemplated by the Initial Tender Agreement, and to Loomis
Sayles' obligation to advise the institutional clients it advises to tender
into such exchange offer, was that the average closing price of the Common
Stock for the five trading

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<PAGE>

days prior to the expiration of such exchange offer be between $4.00 and $7.50
per share. Subsequent to the date of the Initial Tender Agreement, the trading
price of the Common Stock fell substantially below $4.00 per share, and the
Company believed it was unlikely that an exchange offer on the terms of the
Initial Tender Agreement could be consummated. During the week of August 20,
senior members of the Company's management initiated discussions with Loomis
Sayles and Chanin concerning an amendment to the Initial Tender Agreement. On
August 26, 1996, the Company submitted a proposed amendment to the Initial
Tender Agreement to Loomis and Chanin. On September 7, 1996, Chanin
communicated a counter-proposal to the Company's President and Chief Executive
Officer, and on September 10, 1996, Loomis Sayles submitted a written proposed
amendment to the Company. Following additional discussions and negotiations
between the Company, Loomis Sayles and Chanin, on September 13, 1996 the
Company and Loomis Sayles executed an amendment to the Initial Tender Agreement
(the "First Amendment"), a copy of which is attached as Appendix A-2 to this
Offer to Exchange. Based on discussions with representatives of Nasdaq,
however, the Company and Loomis Sayles concluded that Nasdaq would likely find
that the Initial Tender Agreement, as amended by the First Amendment,
contravened certain of Nasdaq's rules and regulations regarding corporate
governance. Following additional discussions among the Company, Loomis Sayles,
Chanin, and Nasdaq, on October 3, 1996, the Company and Loomis Sayles entered
into a Second Amendment to the Initial Tender Agreement (the "Second
Amendment"), a copy of which is attached as Appendix A-3 to this Offer to
Exchange (the Initial Tender Agreement, as amended by the First Amendment and
the Second Amendment, is referred to herein as the "Tender Agreement").

Pursuant to the Tender Agreement, and subject to certain conditions, the
Company agreed to use its reasonable best efforts to initiate and complete the
Exchange Offer on terms and conditions substantially similar to those described
in this Offer to Exchange, and Loomis Sayles agreed that it would advise the
investors it advises to tender and not withdraw the 6% Debentures held by them
pursuant to the Exchange Offer, in each case subject to the satisfaction of
certain conditions contained in the Tender Agreement. Such conditions to Loomis
Sayles' obligations under the Tender Agreement include the requirements that
(i) the Exchange Offer close no later than November 4, 1996 (or if an extension
of the closing of the Exchange Offer is required by applicable regulatory
requirements or law, by the earlier of the date of the satisfaction of such
requirements and November 14, 1996); (ii) not less than 95% of the outstanding
6% Debentures be tendered and not withdrawn; (iii) until the consummation of
the Exchange Offer, the Company (a) shall have conducted its business only in
the ordinary course and consistent with past practices and maintained its books
and records in accordance with past practices; (b) shall not have, without the
prior written consent of the Financial Advisor (after it has consulted with
Loomis Sayles), (1) issued any equity securities or debt securities other than
in connection with the transactions set forth in Exhibit A to the Tender
Agreement; (2) amended its charter documents; (3) granted or issued any
options, rights, warrants or convertible securities other than in connection
with the transactions set forth in Exhibit A to the Tender Agreement;
(4) declared or paid any dividends or made any other distribution to
shareholders, reclassified outstanding shares, or reacquired any equity
securities; (5) reorganized, sold or disposed of any significant amount of
assets; (6) materially increased the level of compensation to any officer,
director or employee; or (7) engaged in any transaction, other than the
transactions set forth in Exhibit A to the Tender Agreement and the Exchange
Offer, with the intention of affecting or influencing the trading price of
StreamLogic's traded Common Stock or with the knowledge that the transaction
could reasonably be expected to affect or influence the trading price of
StreamLogic's traded Common Stock; and (c) shall not have agreed to do anything
or take any action which could reasonably be expected to impede, prevent,
restrict or otherwise make more difficult the Exchange Offer or any of the
other transactions contemplated by the Tender Agreement; (iv) the Company's
Board of Directors shall have been expanded from four to seven members, two of
whom shall be persons designated by investors advised by Loomis Sayles, and in
elections of directors the Company's management shall include in its slate of
recommended directors two persons designated by investors advised by Loomis
Sayles (without in any way warranting that such director will be elected) until
such time as investors advised by Loomis Sayles no longer own at least 28% of
the outstanding Common Stock; (v) the Company shall have paid certain Exchange
Offer-related amounts including Loomis Sayles' legal fees and the Financial
Advisor's fees; (vi) there shall not have occurred any material and adverse
change in (a) the business, operations, properties, assets, or condition
(financial or otherwise) after the date of the Tender Agreement or (b) the
ability of StreamLogic to perform its obligations under the Letter Agreement or
to accomplish the Exchange Offer, the

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<PAGE>

Exchange, or the Issuance; (vii) all required approvals from the Company's
stockholders shall have been obtained, (viii) the continued quotation of the
Company's Common Stock on the Nasdaq NMS, and (ix) the definitive
documentation evidencing the Exchange Offer and Exchange shall be reasonably
satisfactory in form, substance and all other respects to Loomis Sayles and
its legal counsel. In addition, the holders of 6% Debentures advised by Loomis
Sayles are not obligated to participate in the Exchange Offer, nor can there
by any assurance as to whether the holders currently advised by Loomis Sayles
will continue to be clients of Loomis Sayles as of the Expiration Date. The
conditions to the Company's obligations under the Tender Agreement include the
requirements that (i) all required approvals from the Company's stockholders
shall have been obtained, and (ii) the continued quotation of the Company's
Common Stock on the Nasdaq NMS.

The foregoing is a brief summary of certain provisions of the Tender
Agreement. This summary is qualified in its entirety by reference to the
Tender Agreement, which is attached hereto as Appendix A.

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<PAGE>

THE EXCHANGE OFFER

GENERAL

The Company hereby offers, upon the terms and subject to the conditions
stated in this Offer to Exchange and the accompanying Letter of Transmittal,
to exchange for each $1,000 principal amount of 6% Debentures tendered to the
Company (i) $120.00 in cash, (ii) $113.33 principal amount of Promissory
Notes, which notes mature on the second anniversary of the date they are
issued and bear interest at 14% per annum from the date of issuance to the
first anniversary thereof and at 16% per annum thereafter until maturity,
(iii) 216.66667 shares of Common Stock and (iv) Warrants to purchase 40 shares
of Common Stock at an initial exercise price of $3.60 per share, subject to
certain rights of each Warrant holder to reduce such exercise price under
certain circumstances on a one time basis. The Exchange Offer is being made
for the entire outstanding principal amount of 6% Debentures. However, the
consummation of the Exchange Offer is conditioned upon, among other things, at
least 95% of the outstanding principal amount of the 6% Debentures having been
validly tendered and not withdrawn prior to the Expiration Date. See "The
Exchange Offer--Conditions."

As of the date of this Offer to Exchange, $75 million aggregate principal
amount of 6% Debentures were outstanding. If 100% of the outstanding 6%
Debentures are accepted for exchange pursuant to the Exchange Offer, the
Company will be required to (i) pay a total of $9 million in cash, (ii) issue
$8.5 million principal amount of Promissory Notes, (iii) issue 16,250,000
shares of Common Stock and (iv) issue Warrants to purchase 3 million shares of
Common Stock. The cash portion of the Tender Offer Consideration will be paid
from the Company's general working capital.

TERMS OF THE TENDER OFFER

6% Debentures may be tendered and will be accepted for exchange only in
denominations of $1,000 principal amount and integral multiples thereof.
Holders of 6% Debentures delivered to the Trustee for exchange are not
entitled to any payment in respect of accrued and unpaid interest on the
converted securities.

Although the Company has no present intention to do so, if it should modify
the Tender Offer Consideration offered for the 6% Debentures in the Exchange
Offer, the modified consideration would be paid with regard to all 6%
Debentures accepted in the Exchange Offer, including those tendered before the
announcement of the modification. If the Company modifies the Tender Offer
Consideration, the Exchange Offer will remain open at least 10 business days
from the date the Company first publishes, sends or gives notice, by public
announcement or otherwise, of such modification to the holders of 6%
Debentures.

Although the Company has no current plan or intention to do so, it reserves
the right, subject to applicable law, to purchase or make offers for any 6%
Debentures that remain outstanding subsequent to the Expiration Date. The
terms of any such purchases or offers could differ from the terms of the
Exchange Offer.

Tendering holders of 6% Debentures will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of 6% Debentures
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offer.

REGISTRATION RIGHTS

The Company will use its best efforts to file and cause to be declared
effective prior to the consummation of the Exchange Offer a registration
statement for the issuance of shares of Common Stock upon exercise of Warrants
and the resales of such shares. In addition, the Company will use its best
efforts to file and cause to be declared effective, for so long as any person
receiving Tender Offer Consideration is an "affiliate" of the Company (as such
term is defined in Rule 144 promulgated pursuant to the Securities Act of
1933), a registration statement for the resales of the shares of Common Stock
issued to such an affiliate pursuant to the Exchange Offer. Shares of Common
Stock, Promissory Notes and Warrants issued to non-affiliates of the Company

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<PAGE>

pursuant to the Exchange Offer are expected to be freely tradable due to their
issuance pursuant to Section 3(a)(9) under the Securities Act in exchange for
freely tradable 6% Debentures.

CONDITIONS

The obligation of StreamLogic to consummate the Exchange Offer is subject to
certain conditions, including, among others, the requirements that: (i) at
least 95% in aggregate principal amount of the 6% Debentures shall have been
validly tendered for exchange and not withdrawn (the "Minimum Tender
Condition"); and (ii) there shall not have occurred any change or development
involving a prospective change in or affecting the business or financial
affairs of the Company which, in the sole judgment of the Board of Directors
of the Company, would or might prohibit, restrict or delay consummation of the
Exchange Offer or materially impair the contemplated benefits to the Company
of the Exchange Offer. The Company does not presently intend to consummate the
Exchange Offer unless the Minimum Tender Condition is satisfied. If the
Minimum Tender Condition fails to be met, the Company shall have the right, in
its sole discretion, to withdraw the Exchange Offer. However, if the Company
elects, in its sole discretion, to waive or modify the Minimum Tender
Condition, the Company will publicly announce its decision to do so and, if
that announcement is made within five business days of the previously
scheduled Expiration Date, will extend the Expiration Date for at least five
business days from the date of such announcement. Holders who have previously
tendered their securities prior to any such announcement will be entitled to
withdraw their 6% Debentures at any time prior to the Expiration Date.

Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange or, subject to any applicable rules or
regulations of the Commission, exchange any 6% Debentures tendered for
exchange and may postpone the acceptance for exchange of any 6% Debentures
tendered and to be exchanged by it, and may terminate or amend the Exchange
Offer as provided herein if at any time on or after the date of this Offer to
Exchange and before acceptance for exchange of any 6% Debentures, any of the
following conditions shall have occurred:

(1) there shall have been instituted or threatened or be pending any
action or proceeding before or by any court or governmental, regulatory or
administrative agency or instrumentality, or by any other person, in
connection with the Exchange Offer that is, or is reasonably likely to be,
in the sole judgment of the Company, materially adverse to the business,
operations, properties, condition (financial or otherwise), assets,
liabilities or prospects of the Company;

(2) there shall have occurred any material adverse development, in the
sole judgment of the Company, with respect to any action or proceeding
concerning the Company;

(3) an order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction shall have been proposed, enacted, entered, issued,
promulgated, enforced or deemed applicable by any court or governmental,
regulatory or administrative agency or instrumentality that, in the sole
judgment of the Company, would or might prohibit, prevent, restrict or
delay consummation of the Exchange Offer that is, or is reasonably likely
to be, materially adverse to the business, operations, properties,
condition (financial or otherwise), assets, liabilities or prospects of the
Company;

(4) there shall have occurred or be likely to occur any event affecting
the business or financial affairs of the Company or which, in the sole
judgment of the Company, would or might prohibit, prevent, restrict or
delay consummation of the Exchange Offer or that will, or is reasonably
likely to, materially impair the contemplated benefits to the Company of
the Exchange Offer, or otherwise result in the consummation of the Exchange
Offer not being or not reasonably likely to be in the best interests of the
Company;

(5) the Trustee shall have objected in any respect to, or taken any
action that could, in the sole judgment of the Company, adversely affect
the consummation of the Exchange Offer or shall have taken any action that
challenges the validity or effectiveness of the procedures used by the
Company in the making of the Exchange Offer or the acceptance of, or
payment for, any of the 6% Debentures;

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<PAGE>

(6) the Company shall not have received from any federal, state or local
governmental, regulatory or administrative agency or instrumentality, any
approval, authorization or consent that, in the sole judgment of the
Company, is necessary to effect the Exchange Offer; or

(7) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in securities in the United States
securities or financial markets, (ii) any significant adverse change in the
price of the 6% Debentures in the United States securities or financial
markets, (iii) a material impairment in the trading market for debt
securities, (iv) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (v) any limitation
(whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, on,
or other event that, in the reasonable judgment of the Company, might
affect, the extension of credit by banks or other lending institutions,
(vi) a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United States,
(vii) any imposition of a general suspension of trading or limitation of
prices on the New York Stock Exchange or the Nasdaq NMS or (viii) in the
case of any of the foregoing existing on October 7, 1996, a material
acceleration or worsening thereof;

(8) the Company shall not have obtained approval of the Exchange Offer by
its stockholders; or

(9) the Company's Common Stock shall no longer be included on the Nasdaq
NMS.

All the foregoing conditions are for the sole benefit of the Company and may
be asserted by the Company regardless of the circumstances giving rise to such
conditions and may be waived by the Company, in whole or in part, at any time
and from time to time, in the sole discretion of the Company. The failure by
the Company at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right, and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.

If any of the conditions set forth in this section shall not be satisfied,
the Company may, subject to applicable law, (i) terminate the Exchange Offer
and return all 6% Debentures tendered pursuant to the Exchange Offer to
tendering holders; (ii) extend the Exchange Offer and retain all tendered 6%
Debentures until the Expiration Date for the extended Offer; (iii) amend the
terms of the Exchange Offer or modify the consideration to be paid by the
Company pursuant to the Exchange Offer; or (iv) waive the unsatisfied
conditions with respect to the Exchange Offer and accept all 6% Debentures
tendered pursuant to the Exchange Offer.

Although the Company may assert any of the conditions set forth in this
section, the conditions to the Company's obligations under the Tender
Agreement are not coextensive with such conditions. Therefore, the Company
may, in certain circumstances, be obligated to consummate the Exchange Offer
pursuant to the Tender Agreement even though certain conditions to this
Exchange Offer have not been satisfied. In addition, the obligation of Loomis
Sayles to advise the investors it advises to tender their 6% Debentures in the
Exchange Offer pursuant to the Tender Agreement is subject to various
conditions. See "Background of the Exchange Offer--The Tender Agreement."

EXPIRATION; EXTENSION; TERMINATION; AMENDMENT

The Exchange Offer will expire at 12:00 Midnight, New York City time, on
November 4, 1996 (the "Expiration Date"). The Company expressly reserves the
right, in its sole discretion, at any time or from time to time, to extend the
period of time during which the Exchange Offer is open by giving oral or
written notice of such extension to the Exchange Agent and making a public
announcement thereof. There can be no assurance that the Company will exercise
its right to extend the Exchange Offer or that the Exchange Offer will be
otherwise extended. During any extension of the Exchange Offer, all 6%
Debentures previously tendered pursuant thereto and not converted or withdrawn
will remain subject to the Exchange Offer and may be accepted for exchange by
the Company at the expiration of the Exchange Offer subject to the right of a
tendering holder to withdraw his 6% Debentures. See "The Exchange Offer--
Withdrawal of Tenders." Under no circumstances will interest on the Tender
Offer Consideration be paid by the Company by reason of any such extension.

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<PAGE>

The Company also expressly reserves the right, subject to applicable law, to
delay acceptance for the exchange of any 6% Debentures or, regardless of
whether such 6% Debentures were theretofore accepted for exchange, to delay
the exchange of any 6% Debentures pursuant to the Exchange Offer or to
terminate the Exchange Offer and not accept for exchange any 6% Debentures, if
any of the conditions to the Exchange Offer specified herein fail to be
satisfied, by giving oral or written notice of such delay or termination to
the Exchange Agent. The reservation by the Company of the right to delay the
exchange or acceptance for exchange of 6% Debentures is subject to the
provisions of Rule 13e-4(f)(5) under the Exchange Act, which requires that the
Company pay the consideration offered or return the 6% Debentures deposited by
or on behalf of holders thereof promptly after the termination or withdrawal
of the Exchange Offer.

Any extension, delay, termination or amendment of the Exchange Offer will be
followed as promptly as practicable by a public announcement thereof. Without
limiting the manner in which the Company may choose to make a public
announcement of any extension, delay, termination or amendment of the Exchange
Offer, the Company shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by issuing a release to
the Dow Jones News Service, except in the case of an announcement of an
extension of the Exchange Offer, in which case the Company shall have no
obligation to publish, advertise or otherwise communicate such announcement
other than by issuing a notice of such extension by press release or other
public announcement, which notice shall be issued no later than 9:00 A.M., New
York City time, on the next business day after the previously scheduled
Expiration Date.

If the Company increases or decreases the Tender Offer Consideration or the
amount of 6% Debentures sought in the Exchange Offer, the Exchange Offer will
remain open at least ten business days from the date that the Company first
publishes, sends or gives notice, by public announcement or otherwise, of such
increase or decrease. The Company has no current intention to increase or
decrease the Tender Offer Consideration currently offered or the amount of 6%
Debentures sought to be purchased.

If the Company materially changes the terms of the Exchange Offer or the
information concerning the Exchange Offer, the Company will extend the
Exchange Offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(2)
promulgated under the Exchange Act. These rules provide that the minimum
period during which an offer must remain open following a material change in
the terms of the offer or information concerning the offer (other than a
change in consideration offered or a change in percentage of securities
sought) will depend on the facts and circumstances, including the relative
materiality of such terms or information. The Commission has stated that as a
general rule, it is of the view that an offer should remain open for a minimum
of five business days from the date that notice of such a material change is
first published, sent or given.

PROCEDURES FOR TENDERING

Tenders of Securities.

For a holder validly to tender 6% Debentures pursuant to the Exchange Offer,
a properly completed and validly executed Letter of Transmittal (or a
facsimile thereof), together with any signature guarantees and any other
documents required by the instructions to the Letter of Transmittal, must be
received by the Exchange Agent prior to the Expiration Date at one of its
addresses set forth on the back cover page of this Offer to Exchange. In
addition, the Exchange Agent must receive either certificates for tendered 6%
Debentures at any of such addresses or such 6% Debentures must be transferred
pursuant to the procedures for book-entry transfer described below and a
confirmation of such book-entry transfer must be received by the Exchange
Agent prior to the Expiration Date. A holder who desires to tender 6%
Debentures and who cannot comply with the procedures set forth herein for
tender on a timely basis or whose 6% Debentures are not immediately available
must comply with the procedures for guaranteed delivery set forth below.
Letters of Transmittal, certificates representing 6% Debentures and
confirmations of book-entry transfer should be sent only to the Exchange
Agent, and not to the Company or the Trustee.

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Delivery of Letters of Transmittal.

If the certificates for 6% Debentures are registered in the name of a person
other than the signer of the Letter of Transmittal relating thereto, then in
order to tender such 6% Debentures pursuant to the Exchange Offer, the
certificates evidencing such 6% Debentures must be endorsed or accompanied by
appropriate bond powers signed exactly as the name or names of the registered
owner or owners appear on the certificates, with the signatures on the
certificates or bond powers guaranteed as provided below.

Any beneficial owner whose 6% Debentures are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender 6% Debentures should contact such registered holder promptly and
instruct such registered holder to tender the 6% Debentures on such beneficial
owner's behalf. If any beneficial owner wishes to tender 6% Debentures
himself, that beneficial owner must, prior to completing and executing the
Letter of Transmittal and, where applicable, delivering his 6% Debentures,
either make appropriate arrangements to register ownership of the 6%
Debentures in such beneficial owner's name or follow the procedures described
in the immediately preceding paragraph. The transfer of record ownership may
take a considerable amount of time.

The method of delivery of 6% Debentures, Letters of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holder tendering the 6% Debentures. If delivery is to be made by mail, it
is suggested that the holder use properly insured, registered mail with return
receipt requested, and that the mailing be made sufficiently in advance of the
Expiration Date to permit delivery to the Exchange Agent prior to that date
and time.

Book-Entry Transfer.

Promptly after the commencement of the Exchange Offer, the Exchange Agent
will seek to establish a new account or utilize an existing account with
respect to the 6% Debentures at each of The Depository Trust Company and the
Philadelphia Depository Trust Company (each of the foregoing, a "Book-Entry
Transfer Facility"). Any financial institution that is a participant in the
Book-Entry Transfer Facility system and whose name appears on a security
position listing as the owner of 6% Debentures may make book-entry delivery of
such 6% Debentures by causing the Book-Entry Transfer Facility to transfer
such 6% Debentures into the Exchange Agent's account in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. However, although
delivery of 6% Debentures may be effected through book-entry transfer at a
Book-Entry Transfer Facility, the applicable Letter of Transmittal (or a
facsimile thereof), properly completed and validly executed, with any required
signature guarantees and any other required documents, must, in any case, be
received by the Exchange Agent at one of its addresses set forth on the back
cover page of this Offer to Exchange on or prior to the Expiration Date, or
the tendering holder must comply with the guaranteed delivery procedures
described below. Delivery of the Letter of Transmittal and any other required
documents to a Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.

Signature Guarantees.

Signatures on the Letter of Transmittal must be guaranteed by a firm which
is a member of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., or by a commercial bank or trust
company having an office or correspondent in the United States or by any other
"eligible guarantor institution" as defined in Rule 17Ad-15 under the Exchange
Act (each of the foregoing being an "Eligible Institution") unless (a) the
Letter of Transmittal is signed by the registered holder of the 6% Debentures
tendered therewith (or by a participant in one of the Book-Entry Transfer
Facilities whose name appears on a security position listing as the owner of
such 6% Debentures) and neither the "Special Payment Instructions" box nor the
"Special Delivery Instructions" box of the Letter of Transmittal is completed,
or (b) such 6% Debentures are tendered for the account of an Eligible
Institution.

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Guaranteed Delivery.

If a holder desires to tender 6% Debentures pursuant to the Exchange Offer
and (i) certificates representing such 6% Debentures are not immediately
available, (ii) time will not permit such holder's Letter of Transmittal,
certificates evidencing such 6% Debentures or other required documents to
reach the Exchange Agent prior to the Expiration Date or (iii) such holder
cannot complete the procedures for book-entry transfer prior to the Expiration
Date, a tender may be effected if all the following are complied with:

(a) such tender is made by or through an Eligible Institution;

(b) on or prior to the Expiration Date, the Exchange Agent has received
from such Eligible Institution, at one of the addresses of the Exchange
Agent set forth on the back cover page of this Offer to Exchange, a
properly completed and validly executed Notice of Guaranteed Delivery (by
telegram, telex, facsimile transmission, mail or hand delivery) in
substantially the form accompanying this Offer to Exchange, setting forth
the name and address of the registered holder and the principal amount of
6% Debentures being tendered and stating that the tender is being made
thereby and guaranteeing that, within three Nasdaq SmallCap Market trading
days after the date of the Notice of Guaranteed Delivery, the Letter of
Transmittal validly executed (or a facsimile thereof), together with
certificates evidencing the 6% Debentures (or confirmation of book-entry
transfer of such 6% Debentures into the Exchange Agent's account with a
Book-Entry Transfer Facility), and any other documents required by the
Letter of Transmittal and the instructions thereto, will be deposited by
such Eligible Institution with the Exchange Agent; and

(c) such Letter of Transmittal (or a facsimile thereof), properly
completed and validly executed, together with certificates evidencing all
physically delivered 6% Debentures in proper form for transfer (or
confirmation of book-entry transfer of such 6% Debentures into the Exchange
Agent's account with a Book-Entry Transfer Facility) and any other required
documents are received by the Exchange Agent within three Nasdaq SmallCap
Market trading days after the date of such Notice of Guaranteed Delivery.

Lost or Missing Certificates.

If a holder desires to tender 6% Debentures pursuant to the Exchange Offer
but the certificates evidencing such 6% Debentures have been mutilated, lost,
stolen or destroyed, such holder should write to or telephone the Exchange
Agent, at the address or telephone number listed on the back cover of this
Offer to Exchange about procedures for obtaining replacement certificates for
such 6% Debentures or arranging for indemnification or any other matter that
requires handling by the Exchange Agent.

Other Matters.

Notwithstanding any other provision of the Exchange Offer, delivery of the
Tender Offer Consideration for 6% Debentures tendered and accepted pursuant to
the Exchange Offer will occur only after timely receipt by the Exchange Agent
of such 6% Debentures (or confirmation of book-entry transfer of such 6%
Debentures into the Exchange Agent's account with a Book-Entry Transfer
Facility), together with properly completed and validly executed Letters of
Transmittal (or a facsimile thereof) and any other required documents.

Tenders of 6% Debentures pursuant to any of the procedures described above
and acceptance thereof by the Company will constitute a binding agreement
between the Company and the tendering holder upon the terms and subject to the
conditions of the Exchange Offer.

All questions as to the form of all documents, the validity (including time
of receipt) and acceptance of tenders of the 6% Debentures will be determined
by the Company, in its sole discretion, the determination of which shall be
final and binding. Alternative, conditional or contingent tenders of 6%
Debentures will not be considered valid. The Company reserves the absolute
right to reject any or all tenders of 6% Debentures that are not in proper
form or the acceptance of which, in the Company's opinion, would be unlawful.
The Company also reserves the right to waive any defects, irregularities or
conditions of tender as to particular 6% Debentures.

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If the Company waives its right to reject a defective tender of 6% Debentures,
the holder will be entitled to the Tender Offer Consideration. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding. Any
defect or irregularity in connection with tenders of 6% Debentures must be
cured within such time as the Company determines, unless waived by the Company.
Tenders of 6% Debentures shall not be deemed to have been made until all
defects and irregularities have been waived by the Company or cured. None of
the Company, the Exchange Agent, the Trustee or any other person will be under
any duty to give notice of any defects or irregularities in tenders of 6%
Debentures, or will incur any liability to holders for failure to give any such
notice.

WITHDRAWAL OF TENDERS

Tenders of 6% Debentures may be withdrawn at any time until the Expiration
Date. Thereafter, such tenders are irrevocable, except that they may be
withdrawn after the expiration of 40 business days from the commencement of the
Exchange Offer (December 4, 1996) unless accepted for exchange prior to that
date.

Holders who wish to exercise their right of withdrawal with respect to a
tender of 6% Debentures in the Exchange Offer must give written notice of
withdrawal, delivered by mail or hand delivery or facsimile transmission, to
the Exchange Agent at one of its addresses set forth on the back cover page of
this Offer to Exchange prior to the Expiration Date or at such other time as
otherwise provided for herein. In order to be effective, a notice of withdrawal
must specify the name of the person who deposited the 6% Debentures to be
withdrawn (the "Depositor"), the name in which the 6% Debentures are
registered, if different from that of the Depositor, and the principal amount
of the 6% Debentures to be withdrawn. If tendered 6% Debentures to be withdrawn
have been delivered or identified through confirmation of book-entry transfer
to the Exchange Agent, the notice of withdrawal also must specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
withdrawn 6% Debentures. The notice of withdrawal must be signed by the
registered holder of such 6% Debentures in the same manner as the applicable
Letter of Transmittal (including any required signature guarantees), or be
accompanied by evidence satisfactory to the Company that the person withdrawing
the tender has succeeded to the beneficial ownership of such 6% Debentures.
Withdrawals of tenders of 6% Debentures may not be rescinded, and any 6%
Debentures withdrawn will be deemed not validly tendered thereafter for
purposes of the Exchange Offer. However, properly withdrawn 6% Debentures may
be tendered again at any time prior to the Expiration Date by following the
procedures for tendering not previously tendered 6% Debentures described
elsewhere herein.

All questions as to the form and validity (including time of receipt) of any
withdrawal of tendered 6% Debentures will be determined by the Company, in its
sole discretion, which determination shall be final and binding. None of the
Company, the Exchange Agent, the Trustee or any other person will be under any
duty to give notification of any defect or irregularity in any withdrawal of
tendered 6% Debentures, or will incur any liability for failure to give any
such notification.

If the Company is delayed in its acceptance for exchange and payment for any
6% Debentures or is unable to accept for exchange or exchange any 6% Debentures
pursuant to the Exchange Offer for any reason, then, without prejudice to the
Company's rights hereunder, tendered 6% Debentures may be retained by the
Exchange Agent on behalf of the Company and may not be withdrawn (subject to
Rule 13e-4(f)(5)) under the Exchange Act, which requires that the issuer making
the tender offer pay the consideration offered, or return the tendered
securities, promptly after the termination or withdrawal of a tender offer),
except as otherwise permitted hereby.

FRACTIONAL SHARES

Tendering holders of 6% Debentures will not receive fractional shares of
Common Stock but instead will receive a cash payment in lieu thereof in an
amount equal to the same fraction of the market price per share of Common Stock
(as determined by the Board of Directors or in any manner prescribed by the
Board of Directors, which, so long as the Common Stock is traded on Nasdaq,
shall be the last reported sales price on Nasdaq at the close of business on
the day immediately prior to the day the Company gives its notice of acceptance
of tendered securities in the Exchange Offer).

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ACCEPTANCE OF DEBENTURES; DELIVERY OF TENDER OFFER CONSIDERATION

The acceptance of the 6% Debentures validly tendered and not withdrawn will
be made as promptly as practicable after the Expiration Date. For purposes of
the Exchange Offer, the Company will be deemed to have accepted for exchange
validly tendered 6% Debentures if, as and when the Company gives oral or
written notice thereof to the Exchange Agent. Such notice of acceptance shall
constitute a binding contract between the Company and the tendering holder
pursuant to which the Company will be obligated to pay the Tender Offer
Consideration therefor, and upon such notice of acceptance the tendered 6%
Debentures will be cancelled and will cease to be treated as outstanding
indebtedness of the Company. Subject to the terms and conditions of the
Exchange Offer, delivery of Promissory Notes, Common Stock, Warrants and cash
in respect of 6% Debentures accepted and exchanged pursuant to the Exchange
Offer will be made by the Exchange Agent as soon as practicable after receipt
of such notice. The Exchange Agent will act as agent for the tendering holders
of 6% Debentures for the purposes of receiving Promissory Notes, Common Stock,
Warrants and cash from the Company and transmitting the Promissory Notes,
Common Stock, Warrants and cash to the tendering holders. Tendered 6%
Debentures not accepted for exchange by the Company, if any, will be returned
without expense to the tendering holder of such 6% Debentures (or, in the case
of 6% Debentures tendered by book-entry transfer into the Exchange Agent's
account at a Book-Entry Transfer Facility, such 6% Debentures will be credited
to an account maintained at a Book-Entry Transfer Facility) as promptly as
practicable following the Expiration Date.

FEES AND EXPENSES

The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by facsimile transmission, telephone or in person by officers and
regular employees of the Company and their affiliates. The Company will pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of the Exchange
Offer material to the beneficial owners of the 6% Debentures, and in handling
and forwarding tenders to the Exchange Agent.

The Company estimates that expenses of making the Exchange Offer, including
the fees and expenses of the Exchange Agent (approximately $7,500), Warrant
Agent (approximately $7,500), Loomis Sayles' Financial Advisor Fees
(approximately $300,000), printing costs (approximately $100,000), filing fees
(approximately $10,000), legal fees (approximately $300,000), and accounting
fees (approximately $20,000), will total approximately $750,000. Such expenses
will be paid from the Company's general working capital.

The Company will pay all transfer taxes, if any, applicable to the transfer
and exchange of 6% Debentures pursuant to the Exchange Offer. If, however,
delivery of the Tender Offer Consideration or 6% Debentures for principal
amounts not exchanged is to be made to, or are to be registered in the name of
any person other than the Holder of the 6% Debentures tendered thereby, or if
tendered 6% Debentures are registered in the name of any person other than the
person signing the Letter of Transmittal, or if a transfer tax is imposed for
any other reason other than the transfer and exchange of 6% Debentures to the
Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered Holder or any other person)
will be payable by the tendering Holder prior to the issuance of the Tender
Offer Consideration.

EXCHANGE AGENT

ChaseMellon Shareholder Services, L.L.C. has been appointed Exchange Agent
for the Exchange Offer. All deliveries and correspondence sent to the Exchange
Agent should be directed to one of its addresses set forth on the back cover
page of this Offer to Exchange. Requests for assistance or additional copies
of this Offer to Exchange and the Letter of Transmittal should be directed to
the Company at its address and phone number as set forth on the back cover
page of this Offer to Exchange. The Company has agreed to pay the Exchange
Agent

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customary fees for their services and to reimburse the Exchange Agent for
their reasonable out-of-pocket expenses in connection therewith. The Company
also has agreed to indemnify the Exchange Agent for certain liabilities,
including liabilities under the federal securities laws.

APPRAISAL RIGHTS

No appraisal or similar statutory rights are available to beneficial owners
of 6% Debentures in connection with the Exchange Offer.

MISCELLANEOUS

The Company has not retained any dealer manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting tenders of 6% Debentures. However, directors,
officers and regular employees of the Company (who will not be separately
compensated for such services) may solicit tenders by use of the mails,
personally or by telephone, facsimile or similar means of electronic
transmission. The Company also will pay brokerage houses and other custodians,
nominees and fiduciaries their reasonable out-of-pocket expenses incurred in
forwarding copies of this Offer to Exchange and related documents to the
beneficial owners of the 6% Debentures and in handling or forwarding tenders
of 6% Debentures by their customers.

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DESCRIPTION OF 6% DEBENTURES

The 6% Debentures are issued under an Indenture, dated as of March 15, 1987
(the "Indenture"), between the Company and Harris Trust and Savings Bank, as
Trustee (the "Trustee"). The following is a summary of certain provisions of
the Indenture. Any 6% Debentures that are not tendered in the Offer will
continue outstanding on the terms of the Indenture.

General. The 6% Debentures are unsecured, subordinated obligations of the
Company, aggregating $75,000,000 in principal amount and maturing on March 15,
2012. The 6% Debentures bear interest at the rate of 6% per annum. Interest is
payable semiannually on March 15 and September 15 of each year to the persons
in whose names the 6% Debentures are registered at the close of business on
the preceding March 1 and September 1, as the case may be.

The 6% Debentures were issued in registered form, without coupons, in
denominations of $1,000 and integral multiples thereof.

Conversion Rights. The 6% Debentures (or portions thereof which are $1,000
or integral multiples thereof) are convertible into Common Stock at any time
prior to redemption or maturity, currently at the conversion price of $48 1/2
per share, subject to adjustment as described below. The right to convert 6%
Debentures called for redemption terminates at the close of business on any
redemption date unless the Company defaults in making the payment due upon
redemption, and will be lost if not exercised prior to that time. The
conversion price is subject to adjustment in certain events, including (i)
dividends (and other distributions) on the Company's Common Stock payable in
capital stock of the Company, (ii) the issuance to all holders of Common Stock
of certain rights or warrants entitling them to subscribe for or purchase
Common Stock at less than the then-current market price (as defined), (iii)
subdivisions, combinations and certain reclassifications of the Common Stock,
and (iv) distributions to all holders of Common Stock of debt securities or
assets of the Company or certain rights or warrants to purchase securities of
the Company (excluding those rights and warrants referred to above and
dividends and distributions paid in cash out of the current or retained
earnings of the Company). The Company is not required to make adjustments in
the conversion price of less than 1% of such price, but any adjustment that
would otherwise be required to be made will be taken into account in the
computation of any subsequent adjustment. The Company may at any time reduce
the conversion price by any amount.

In case of certain consolidations or mergers to which the Company is a party
or the transfer or lease of all or substantially all of the assets of the
Company, each 6% Debenture then outstanding would, without the consent of any
holders of 6% Debentures (the "Holders"), become convertible only into the
kind and amount of securities, cash or other property which the Holder would
have owned immediately after the transaction if he had converted such 6%
Debenture immediately prior to such consolidation, merger or transfer
(assuming such Holder of Common Stock failed to exercise any rights of
election and received per share the kind and amount received per share by a
plurality of the non-electing shares and assuming such Holder was not a party
to the transaction or an affiliate of such a party).

Subordination of 6% Debentures. The 6% Debentures are subordinated in right
of payment and subject, to the extent set forth in the Indenture, to the prior
payment in full of all existing and future Indebtedness (as defined below). No
payments on account of principal of (or premium, if any) or interest on the 6%
Debentures may be made if there has occurred and is continuing a default in
the payment of an aggregate of $5,000,000 principal or interest with respect
to any Indebtedness, or a default or an event of default with respect to an
aggregate of $5,000,000 principal or interest of Indebtedness resulting in the
acceleration of the maturity thereof. Upon any acceleration of the payment of
the 6% Debentures or any payment or distribution of assets of the Company to
creditors resulting from any liquidation, dissolution, winding up or
reorganization of the Company (whether in bankruptcy, reorganization,
insolvency or receivership proceedings or, upon an assignment for the benefit
of creditors, or otherwise), the holders of all Indebtedness will be first
entitled to receive payment in full (or such payment must be provided for) of
all amounts due or to become due thereon before the Holders are entitled to
receive any payment upon the principal (or premium, if any) or interest on the
6% Debentures. By

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reason of such subordination, in the event of insolvency general creditors of
the Company may recover more, ratably, than Holders.

"Indebtedness" is defined to mean (i) the principal of (and premium, if any)
and interest on all indebtedness of the Company (other than the 6%
Debentures), whether outstanding on the date of the Indenture or thereafter
created, incurred or assumed, which is for money borrowed or which is
evidenced by a note or similar instrument given in connection with the
acquisition of any businesses, properties or assets, (ii) obligations of the
Company as lessee under leases required to be capitalized under generally
accepted accounting principles, (iii) any indebtedness of others, of the kind
described in the preceding clauses, for the payment of which the Company is
responsible or liable as guarantor, and (iv) any obligations or indebtedness
with respect to amendments, renewals, extensions, modifications and refundings
of any such obligations or indebtedness; unless, with certain exceptions, in
any instrument or instruments evidencing such obligation or indebtedness or
pursuant to which the same is outstanding, or in any such amendment, renewal,
extension or refunding, it is provided that such obligation or indebtedness is
not superior in right of payment to the 6% Debentures.

Redemption. The 6% Debentures are redeemable, otherwise than through the
sinking fund, upon not less than 30 or more than 60 days' notice by mail, at
any time prior to maturity as a whole or in part, at the election of the
Company. Such redemption, if any, shall be at a redemption price equal to
100.6% of the principal amount to the extent 6% Debentures are redeemed in the
12-month period beginning March 15, 1996 and thereafter at 100% of the
principal amount, together in each case with accrued interest to the
redemption date (subject to the right of Holders of record on regular record
dates to receive interest due on an interest payment date that is on or prior
to the redemption date).

Sinking Fund. The 6% Debentures are redeemable through the operation of a
sinking fund on March 15, 1997, and on March 15 in each year thereafter to and
including March 15, 2011, upon no less than 30 nor more than 60 days' notice
by mail, at a sinking fund redemption price equal to 100% of the principal
amount thereof plus accrued interest to the redemption date (subject to the
right of Holders of record on the relevant regular record date to receive
interest due on an interest payment date that is on or prior to the redemption
date). Prior to March 15 of each of the years 1997 to 2011, inclusive, the
Company will pay to the Trustee, for a sinking fund, cash sufficient to redeem
on such date 5% of the aggregate principal amount of the 6% Debentures issued,
provided that 6% Debentures converted pursuant to the Indenture or reacquired
or redeemed by the Company (other than 6% Debentures redeemed through the
sinking fund) may be used, at the principal amount thereof, to reduce the
amount of any sinking fund payment. Sinking fund payments are to be applied to
redeem 6% Debentures.

Consolidation, Merger and Sale of Assets. The Indenture provides that the
Company may, without the consent of the Holders, consolidate with or merge
into any other corporation, or convey, transfer or lease its properties and
assets substantially as an entirety to any person, provided that in any such
case (i) the successor person shall be a corporation and such person shall
assume by a supplemental indenture the Company's obligations under the
Indenture, and (ii) immediately after giving effect to such transaction, no
default shall exist. Upon compliance with these provisions by a successor, the
Company (except in the case of a lease) would be relieved of its obligations
under the Indenture and the 6% Debentures.

Modification and Waiver. Subject to certain exceptions, modifications and
amendments of the Indenture may be made by the Company and the Trustee with
the consent of the Holders of a majority in aggregate principal amount of the
outstanding 6% Debentures; provided, however, that no such modification or
amendment may, without the consent of the Holder of each 6% Debenture affected
thereby, (i) change the stated maturity date of the principal of or the due
date of any installment of interest on any 6% Debenture, or adversely affect
the right to convert any 6% Debenture, (ii) reduce the principal amount of (or
the premium) or interest on any 6% Debenture, (iii) change the currency for
payment of principal of (or premium) or interest on any 6% Debenture, (iv)
impair the right to institute suit for the enforcement of any payment on or
with respect to any 6% Debenture, (v) modify the subordination provisions in a
manner adverse to the Holder of any 6% Debenture, (vi) reduce the above-stated
percentage of outstanding 6% Debentures necessary to modify or amend the

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Indenture, (vii) reduce the percentage of aggregate principal amount of
outstanding 6% Debentures necessary for waiver of compliance with certain
provisions of the Indenture or for waiver of certain defaults, or (viii)
modify (with certain exceptions) any provisions of the Indenture relating to
the modification and amendment of the Indenture or waiver of compliance with
conditions and defaults thereunder.

The Holders of a majority in aggregate principal amount of the outstanding
6% Debentures may waive compliance by the Company with certain restrictive
provisions of the 6% Debentures and any existing default under the Indenture,
except a default in the payment of principal, premium or interest or in
respect of a covenant or provisions which cannot be modified or amended
without the consent of each of the Holders of affected 6% Debentures.

Events of Default. The following are "Events of Default" under the
Indenture: (i) failure to pay principal of (or premium, if any, on) any 6%
Debenture when due, (ii) failure to pay any interest on any 6% Debenture when
due, continued for 30 days, (iii) failure to deposit any sinking fund payment
when due, continued for 10 days or failure to deposit any redemption payment
when due, (iv) failure to perform any other covenant or warranty of the
Company continued for 60 days after written notice as provided in the
Indenture, (v) acceleration of any indebtedness of the Company for borrowed
money in excess of $5,000,000 pursuant to the terms of any agreement or
instrument under which such indebtedness is issued, if acceleration is not
annulled within 30 days after written notice, and (vi) certain events of
bankruptcy, insolvency or reorganization in respect of the Company.

If an Event of Default occurs and is continuing, either the Trustee or the
Holders of a majority in aggregate principal amount of the outstanding 6%
Debentures may declare all of the 6% Debentures to be due and payable
immediately; provided, however, that the Holders of a majority in aggregate
principal amount of outstanding 6% Debentures may rescind and annul such
acceleration under certain circumstances.

No Holder has any right to institute any proceeding with respect to the
Indenture or for any remedy thereunder, unless such Holder has previously
given to the Trustee written notice of a continuing Event of Default and
unless also the Holders of at least 25% in aggregate principal amount of the
outstanding 6% Debentures shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
and the Trustee has not received from the Holders of a majority in aggregate
principal amount of the outstanding 6% Debentures a direction inconsistent
with such request and has failed to institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a Holder for
the enforcement of payment of the principal of (and premium, if any) or
interest on such 6% Debenture on or after the respective due dates expressed
in such 6% Debenture or of the right to convert such 6% Debenture in
accordance with the Indenture.

The Company is required to furnish to the Trustee annually a statement as to
any default under the Indenture and must notify the Trustee upon the
occurrence of any default.

Applicable Law. The 6% Debentures and the Indenture are governed by and
construed in accordance with the laws of the State of California.

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DESCRIPTION OF CAPITAL STOCK

The authorized stock of the Company is divided into two Classes, Common
Stock, $1.00 par value, of which the Company is authorized to issue 50,000,000
shares, and Preferred Stock, $1.00 par value ("Preferred Stock"), of which the
Company is authorized to issue 2,000,000 shares.

COMMON STOCK

The holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of stockholders. Subject to
preferences which may be applicable to any shares of the Company's Preferred
Stock outstanding at that time, holders of Common Stock are entitled to
receive ratably such dividends as may be declared by the Company's Board of
Directors out of funds legally available therefor and, in the event of the
liquidation or dissolution of the Company, are entitled to share ratably in
all assets remaining after payment of liabilities. Holders of Common Stock
have no preemptive rights and have no right to convert their Common Stock into
any other securities. The shares of Common Stock outstanding are, and the
shares to be issued as part of the Tender Offer Consideration will be, when
issued, duly authorized, validly issued, fully paid and nonassessable.

At the close of business on the Record Date, there were 16,930,790 shares of
Common Stock outstanding.

PREFERRED STOCK

The Company's Preferred Stock is issuable in classes or series with such
rights, preferences, privileges and restrictions as the Company's Board of
Directors may determine, including the voting rights, redemption provisions,
dividend rates, liquidation preferences and conversion rights, without any
further stockholder approval. No such classes or series are presently
established and no shares of Preferred Stock are outstanding.

SHARE PURCHASE RIGHTS PLAN

In May 1989, the Company adopted a Rights Agreement (the "Rights Agreement")
pursuant to which Common Stock Purchase Rights ("Rights") were distributed to
stockholders, which Rights Agreement was amended in October 1995, in March
1996, in May 1996 and in September 1996. When exercisable, each Right entitles
the registered holder to purchase from the Company one share of Common Stock
at a price of $40.00 per share, subject to adjustment. Currently, the Rights
attach to all outstanding shares of Common Stock, and no separate Rights
Certificates have been distributed. The Rights will become exercisable and
will detach from the Common Stock following an event in which any person or
group, with certain exceptions, acquires 20% or more of the Company's Common
Stock, or announces a tender or exchange offer which, if consummated, would
result in that person or group owning at least 30% of the Company's Common
Stock. If such a person or group acquires 20% or more of the Company's Common
Stock (except pursuant to certain cash tender offers for all of the Company's
Common Stock), each Right will entitle the holder of a Right, other than
Rights that are or were acquired or beneficially owned by the 20% stockholder
(which rights will thereafter be void), to purchase, at the Right's then
current exercise price, the Company's Common Stock in an amount having a
market value equal to twice the exercise price. Similarly, with certain
exceptions, if the Company merges or consolidates with or sells 50% or more of
its assets or earning power to another person, each Right then will entitle
the holder to purchase, at the Right's then current exercise price, the stock
of the acquiring company in an amount having a market value equal to twice the
exercise price. The Rights do not have voting or dividend rights, and until
they become exercisable, have no dilutive effect on the earnings of the
Company. The Company may redeem the rights at $0.01 per Right, subject to
adjustment, at any time on or prior to the tenth day, unless extended, after
acquisition by a person or group of 20% or more of the Company's outstanding
Common Stock. The Rights will expire on May 18, 1999, unless earlier redeemed.
This plan is designed to deter potentially coercive takeover attempts.

Each share of Common Stock issued, whether immediately or upon exercise of
any Warrants, as part of the Tender Offer Consideration will have attached to
it one Right. The September 1996 amendment of the Rights Agreement provides
that none of the Tender Agreement, this Offer to Exchange or the consummation
of the Exchange Offer cause the Rights to become exercisable or detach from
the Common Stock.

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<PAGE>

DESCRIPTION OF PROMISSORY NOTES

If the Exchange Offer is consummated, the Company will issue the Promissory
Notes as part of the Tender Offer Consideration with respect to the 6%
Debentures tendered pursuant to the Exchange Offer. The Promissory Notes will
be issued pursuant to an indenture, dated as of the date on which the
Promissory Notes are issued (the "Note Indenture"), between the Company and a
trustee (the "Note Trustee") to be selected prior to the consummation of the
Exchange Offer. The Promissory Notes are not expected to be subject to the
provisions of the Trust Indenture Act of 1939, as amended. The following is a
summary of certain provisions of the Note Indenture and the Promissory Notes,
which summary does not purport to be complete, and is qualified in its
entirety by reference to the Note Indenture (which includes the form of the
Promissory Notes), the form of which is attached hereto as Appendix B.

General. The Promissory Notes will be general unsecured obligations of the
Company limited in aggregate principal amount to $8,500,000. The Promissory
Notes will be issued only in fully registered form and without coupons.

Maturity and Interest. The Promissory Notes will mature on the second
anniversary of the date they are issued. During the period commencing on the
date on which the Promissory Notes are issued and ending on the day before the
first anniversary of such issuance, the Promissory Notes shall bear interest
at the rate of 14% per annum. During the period commencing on the first
anniversary of the date of issuance until maturity, the Promissory Notes shall
bear interest at the rate of 16% per annum. Interest is payable quarterly on
March 31, June 30, September 30 and December 31 of each year to the persons in
whose names the Promissory Notes are registered at the close of business on
the preceding March 15, June 15, September 15 and December 15, as the case may
be. Interest on the Promissory Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date
of issuance of the Promissory Notes. Principal and interest on the Promissory
Notes will be payable at the office or agency of the Company maintained for
such purpose within or without the City and State of New York, or, at the
option of the Company, payment of principal and interest may be made by check
mailed to the registered holders of the Promissory Notes at their respective
addresses set forth in the register of holders of Promissory Notes; provided
that payment by wire transfer of immediately available funds will be required
with respect to principal of and interest on all Promissory Notes the holders
of which shall have provided wire transfer instructions to the Company or the
Note Trustee. Until otherwise designated by the Company, the Company's office
or agency in New York will be at the office of the Note Trustee maintained for
such purpose.

Ranking. The Promissory Notes will rank senior in right of payment to all
indebtedness of the Company that by its terms is subordinate to the Promissory
Notes, including, without limitation, 6% Debentures that are not tendered in
the Offer. The Promissory Notes will rank pari passu in right of payment with
all other unsecured borrowings of the Company.

Prepayment. The Company, at its option, may prepay the Promissory Notes, in
whole or in part, at any time upon not less than 15 nor more than 60 days'
notice to the registered holders of the Promissory Notes to be prepaid. Any
such prepayment shall be at a prepayment price equal to 100% of the principal
amount to be prepaid plus the interest accrued but unpaid with respect to such
principal amount as of the prepayment date.

Covenant. While the Promissory Notes are outstanding, the Company will not
incur any indebtedness for borrowed money other than Permitted Indebtedness
(as defined below), unless the proceeds of such indebtedness are applied,
first, to repay all amounts outstanding under the Promissory Notes and,
thereafter, for the other purposes of the financing. "Permitted Indebtedness"
means indebtedness under the Company's existing $4 million revolving credit
facility with Wells Fargo Bank, N.A., or any replacement thereof.

Modification and Waiver. The Company and the Note Trustee may amend the Note
Indenture without the consent of any holder of any Promissory Notes to cure
ambiguities in a manner that does not adversely affect the rights of any
Promissory Note holder or to make other changes that do not adversely affect
the legal rights of the holders of Promissory Notes under the Note Indenture.
Subject to certain exceptions, modifications and

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<PAGE>

amendments of the Note Indenture may be made by the Company and the Note
Trustee with the consent of the Holders of 66 2/3% in aggregate principal
amount of the outstanding Promissory Notes; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Promissory Note affected thereby, (i) change the stated maturity date of the
principal of or the due date of any installment of interest on any Promissory
Notes, (ii) reduce the principal amount of Promissory Notes or interest on any
Promissory Notes, (iii) change the currency for, or manner of, payment of
principal or interest on any Promissory Notes, (iv) reduce the above-stated
percentage of outstanding Promissory Notes necessary to modify or amend the
Indenture, (v) reduce the percentage of aggregate principal amount of
Promissory Notes necessary for waiver of compliance with certain provisions of
the Note Indenture or for waiver of certain defaults, or (vi) modify (with
certain exceptions) any provisions of the Note Indenture relating to the
modification and amendment of the Note Indenture or waiver of compliance with
conditions and defaults thereunder.

The Holders of at least 66 2/3% of the aggregate principal amount of the
outstanding Promissory Notes may waive compliance by the Company with certain
restrictive provisions of the Promissory Notes and any existing default under
the Note Indenture, except a default in the payment of principal, premium or
interest or in respect of a covenant or provisions which cannot be modified or
amended without the consent of each of the Holders of affected Promissory
Notes.

Events of Default. The following are "Events of Default" under the
Indenture: (i) failure to pay interest on principal of (or premium, if any,
on) any Promissory Notes when due, (ii) failure of any representation or
warranty of the Company made in the Note Indenture to be true when made and
(iii) certain events of bankruptcy, insolvency, dissolution or reorganization
in respect of the Company.

If an Event of Default occurs and is continuing, either the Note Trustee or
the Holders of at least 25% in aggregate principal amount of the outstanding
Promissory Notes may declare all of the Promissory Notes to be due and payable
immediately and in certain bankruptcy-related circumstances such Promissory
Notes may become immediately due and Payable ipso facto without any act by the
Note Trustee or any Holders of Promissory Notes; provided, however, that the
Holders of a majority in aggregate principal amount of outstanding Promissory
Notes may rescind and annul such acceleration under certain circumstances.

No Holder has any right to institute any proceeding with respect to the Note
Indenture or for any remedy thereunder, unless such Holder has previously
given to the Note Trustee written notice of a continuing Event of Default and
unless also the Holders of at least 25% in aggregate principal amount of the
outstanding Promissory Notes shall have made written request, and offered
reasonable indemnity, to the Note Trustee to institute such proceeding as
trustee, and the Note Trustee has not received from the Holders of a majority
in aggregate principal amount of the outstanding Promissory Notes a direction
inconsistent with such request and has failed to institute such proceeding
within 60 days.

Applicable Law. The Promissory Notes and the Note Indenture and the
Indenture are governed by and construed in accordance with the laws of the
State of New York. The Note Indenture is not expected to be subject to the
Trust Indenture Act of 1939, as amended.

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<PAGE>

DESCRIPTION OF WARRANTS

If the Offer is consummated, the Warrants will be issued pursuant to a
warrant agreement (the "Warrant Agreement") by and between the Company and
Wells Fargo Bank, N.A., as warrant agent (the "Warrant Agent"). The following
is a summary of the material provisions of the Warrant Agreement and the
warrant certificate attached thereto (the "Warrant Certificate"), which
summary does not purport to be complete, and is qualified in its entirety by
reference to the Warrant Agreement and the Warrant Certificate, the forms of
which are attached hereto as Appendix C.

General. Each Warrant will entitle the holder thereof to purchase 40 shares
of Common Stock (each such share, a "Warrant Share"), subject to the
antidilution provisions described below. Initially, the exercise price of each
Warrant shall be $3.60 per share of Common Stock. The exercise price of each
Warrant, however, is subject to certain adjustments pursuant to the "Reset
Option" and/or the antidilution provisions described below. Warrants will be
exercisable during an "Exercise Period" that will begin upon the Warrants'
issuance pursuant to the Exchange and end at 5:00 p.m. Los Angeles time on the
day preceeding the fifth anniversary of such issuance, subject to the "Warrant
Exercise Option" described below and extensions due to any "No-Exercise
Periods" which may be designated by the Company as described below. Unless
exercised, Warrants will automatically expire at the end of the Exercise
Period.

During the first year after the Exchange, each time the average closing
price of the Company's Common Stock is less than $1.56 per share (after taking
into account any stock splits, consolidations or similar transactions and
excluding the highest and lowest closing price) for a period of five
consecutive trading days (such average price is the "Reset Price"), each
Warrant holder shall have the option (the "Reset Option") to adjust the
exercise price of its Warrants to equal 150% of the Reset Price (the "Reset
Adjusted Price"); provided, however, that each Warrant can be reset only one
time. Any Warrant holder who desires to exercise its Reset Option must do so
by giving the Warrant Agent written notice of such exercise within five
business days after the applicable period during which the average Common
Stock closing price was below $1.56 per share.

If, at any time during the Exercise Period, the closing price of the
Company's Common Stock exceeds $4.50 per share (after taking into account any
stock splits, consolidations or similar transactions and excluding the highest
and lowest closing price) for a period of five consecutive trading days, the
Company shall have the option (the "Warrant Exercise Option") to require the
Warrant holders either to (i) exercise their Warrants at the Exercise Price
(or, to the extent applicable to any particular Warrants, the Reset Adjusted
Price) or (ii) cancel such holders' Warrants. The Company shall exercise the
Warrant Exercise Option by giving the Warrant Agent written notice of such
exercise within five business days of the applicable period during which the
average Common Stock closing price exceeded $4.50 per share.

The Company may designate any period of up to 90 consecutive days as a
period during which Warrants may not be exercised (a "No-Exercise Period").
The Company may designate no more than one No-Exercise Period in any twelve-
month period. A No-Exercise Period will commence on the date designated by the
Company in a written notice delivered to the Warrant Agent no later than the
close of business on the business day immediately preceding the first day of
such No-Exercise Period, and shall terminate on such date as is designated by
the Company in a written notice of the termination delivered to the Warrant
Agent no later than the end of business on the business day immediately
preceding such date of termination; provided, however, that any such No-
Exercise Period will terminate automatically at the close of business on the
90th day thereof, should the Company not designate an earlier termination
date. If the Company has designated one or more No-Exercise Periods, the
Exercise Period shall be extended by a number of days equal to the aggregate
number of days during which such No-Exercise Period or Periods was or were in
effect, subject to the Warrant Exercise Option described above.

The Company has authorized and has agreed to maintain for issuance such
number of Shares of Common Stock as shall be issuable upon the exercise of all
outstanding Warrants. Such Common Stock, when issued, will be duly and validly
issued and fully paid and nonassessable.

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<PAGE>

No fractional shares will be issued upon exercise of Warrants. If any
fraction of a Warrant Share would, but for the foregoing provision, be
issuable upon the exercise of any Warrants, the Company will pay to the
applicable Warrant holder an amount in cash equal to: (i) such fraction, times
(ii) the current market value on the exercise date of any fractional shares
otherwise issuable.

Warrant holders will have no right to vote on matters submitted to the
Company's stockholders and will have no right to receive any cash dividends.
Warrant holders will not be entitled to share in the Company's assets in the
event of the liquidation, dissolution or winding up of the Company's affairs.

The Common Stock is presently authorized for inclusion on the Nasdaq NMS
under the symbol "STLC," and the Company intends to apply for such inclusion
of the Warrant Shares, or if the Company's Common Stock should then be trading
on the Nasdaq SmallCap Market, for inclusion thereon, in either case subject
to notice of issuance. The Company does not intend to apply for listing of the
Warrants on any national securities exchange or for inclusion on Nasdaq.

REGISTRATION OF WARRANT SHARES

The Company is required under the terms of the Tender Agreement to file and
use its best efforts to have declared effective upon the closing of the
Exchange a registration statement covering the Warrant Shares, which
registration statement shall, subject to certain "black-out" periods, remain
effective (i) for a period of five years, plus the duration of any black-out
periods, or (ii) to the extent it is determined that all Warrant Shares and
other shares of Common Stock issued as part of the Tender Offer Consideration
are freely tradable without such registration statement, for such shorter
period of time as may be deemed necessary.

ANTIDILUTION

The number of Warrant Shares issuable upon the exercise of each Warrant and
the Exercise Price or the Reset Adjusted Price, as applicable, are subject to
adjustment in certain events, including (i) a dividend or distribution on the
Company's Common Stock in Common Stock, or a split, combination, subdivision
or reclassification of Common Stock, (ii) the issuance of Common Stock, or
rights, options or warrants to purchase Common Stock or securities convertible
into, or exchangeable for, Common Stock, for consideration that is less than
the then current market price of Common Stock (determined with reference to
the average closing price, excluding the highest and lowest closing price, of
the Company's Common Stock for the 20 trading days immediately preceding such
issuance), (iii) decreases in the exercise price or increases in the
conversion rate of existing options to purchase Common Stock or securities
exchangeable or convertible into Common Stock; (iv) the distribution of cash,
evidence of indebtedness or other property or assets (other than out of
retained earnings) to holders of Common Stock and (v) redemptions or purchases
of Common Stock by the Company at a price in excess of the then current market
price of Common Stock (determined with reference to the average closing price,
excluding the highest and lowest closing price, of the Company's Common Stock
for the 20 trading days immediately preceding such purchase or redemption). No
adjustment in the number of Warrant Shares issuable upon exercise of the
Warrants, or the Exercise Price or the Reset Adjusted Price, as applicable,
will be required unless such adjustment would require an increase or decrease
of at least 1% in the number of Warrant Shares or to the Exercise Price or the
Reset Adjusted Price; provided, however, that any adjustment that is not made
will be carried forward and taken into account in any subsequent adjustment.
In addition, in the event of certain mergers, consolidations or sales of
assets, holders of Warrants will thereafter be entitled to receive such
securities or other consideration as they would have been entitled if they had
exercised their Warrants immediately prior thereto.

AMENDMENT

From time to time, the Company and the Warrant Agent, without the consent of
the holders of the Warrants, may amend or supplement the Warrant Agreement for
certain purposes, including curing defects or inconsistencies or making any
change that does not adversely affect the rights of any holder. Any amendment
or supplement to the Warrant Agreement that has an adverse effect on the
interest of holders requires the written

65
<PAGE>

consent of registered holders of a majority of the then outstanding Warrants,
except that any such amendment or supplement that (i) increases the Exercise
Price, (ii) decreases the number of shares of Common Stock issuable upon
exercise of a Warrant, or (iii) shortens the period during which Warrants may
be exercised, shall require the consent of each Warrant holder affected
thereby.

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<PAGE>

PRICE RANGE OF 6% DEBENTURES AND COMMON STOCK

6% DEBENTURES

The 6% Debentures are traded on the Nasdaq SmallCap Market under the symbol
"STLCG." In general, trading of the 6% Debentures has been limited and
sporadic. Quotations for securities that are not widely traded, such as the 6%
Debentures, may differ from actual trading prices and should be viewed as
approximations. The quotations for bid prices for the 6% Debentures set forth
below were reported by Nasdaq. HOLDERS ARE URGED TO OBTAIN CURRENT INFORMATION
WITH RESPECT TO THE MARKET PRICE OF THE 6% DEBENTURES.

<TABLE>
<CAPTION>
BID PRICE
-------------
CALENDAR QUARTER HIGH LOW
---------------- ------ ------
(PER $100
FACE AMOUNT)
<S> <C> <C>
1996:
First Quarter................................................ 49 45
Second Quarter............................................... 60 45.5
Third Quarter................................................ 64 56
1995:
First Quarter................................................ 64.75 56
Second Quarter............................................... 56 55
Third Quarter................................................ 56 54.75
Fourth Quarter............................................... 56 48
1994:
First Quarter................................................ 69.5 61
Second Quarter............................................... 64.25 57.5
Third Quarter................................................ 61.5 56.5
Fourth Quarter............................................... 62.5 60.75
</TABLE>

On (i) June 6, 1996, the last day prior to the date the Initial Tender
Agreement was publicly announced on which trades in the 6% Debentures were
reported, (ii) September 13, 1996, the last day prior to the date the First
Amendment was publicly announced on which trades in the 6% Debentures were
reported, and (iii) September 26, 1996, the last day prior to the date the
Second Amendment was publicly announced on which trades in the 6% Debentures
were reported, the last sales prices for the 6% Debentures on the Nasdaq
SmallCap Market were $55, 56 and 57 per $100 face value, respectively.

At October 1, 1996, there were 26 direct holders of record of the Company's
6% Debentures.

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<PAGE>

COMMON STOCK

The Company's Common Stock is currently traded on the Nasdaq NMS under the
symbol "STLC." The following table sets forth for the periods indicated the
high and low closing sale prices for the Common Stock.

<TABLE>
<CAPTION>
BID PRICE
---------------
CALENDAR QUARTER HIGH LOW
---------------- ----- ---
(PER $100
FACE AMOUNT)
<S> <C> <C>
1996:
First Quarter........................................ 5 1/8 1 3/8
Second Quarter....................................... 8 5/8 3 1/2
Third Quarter........................................ 3 5/8 2
1995:
First Quarter........................................ 11 4 7/8
Second Quarter....................................... 7 1/4 4 3/4
Third Quarter........................................ 7 3/8 5 3/8
Fourth Quarter....................................... 5 3/8 6 1/8
1994:
First Quarter........................................ 8 3/8 4 7/8
Second Quarter....................................... 7 7/8 5 1/4
Third Quarter........................................ 7 1/4 5 3/8
Fourth Quarter....................................... 9 1/2 6 1/8
</TABLE>

On June 14, 1996, September 13, 1996 and October 3, 1996, the last
respective trading days prior to the date the Initial Tender Agreement, the
First Amendment and the Second Amendment were each publicly announced, the
closing sale price of the Common Stock as reported by Nasdaq NMS was 5 3/8, 3
1/16 and 2 1/8, respectively.

At August 5, 1996, there were 622 record holders of the Company's Common
Stock.

The Company has never declared or paid any dividends on the Common Stock,
and it is not contemplated that the Company will pay dividends on the Common
Stock in the foreseeable future.

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<PAGE>

SUMMARY OF MATERIAL FEDERAL INCOME TAX CONSEQUENCES

The following summary sets forth the material federal income tax
consequences expected to result to holders and the Company from the issuance
by the Company of Common Stock, Warrants, Promissory Notes and cash in
exchange for 6% Debentures pursuant to the Exchange Offer. This summary is
based upon current provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), currently applicable Treasury Regulations promulgated
thereunder, judicial authority and administrative rulings and practice. There
can be no assurance that the Internal Revenue Service (the "IRS") will not
take a contrary view, and no rulings from the IRS has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conclusions set
forth herein. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to holders and the Company.

The following summary is for general information only. The tax treatment of
a holder may vary depending upon the holder's particular situation, and
certain holders (including insurance companies, tax exempt organizations,
financial institutions or broker-dealers, and persons who are not citizens or
residents of the United States or who are foreign corporations, foreign
partnerships or foreign estates or trusts as to the United States) may be
subject to special rules not discussed below. EACH HOLDER IS URGED TO CONSULT
HIS OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO HIM OF THE
TRANSACTIONS DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY
FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS AND OF CHANGES IN APPLICABLE TAX
LAWS.

EXCHANGE OFFER

General. The exchange of the 6% Debentures for the Tender Offer
Consideration is likely to be treated as a recapitalization, in which case
(except as discussed below under "--Accrued Interest") an exchanging holder
will recognize gain (but not loss) equal to the lesser of (i) the excess of
(A) the fair market value of the Common Stock, the fair market value of the
Warrants, the fair market value of the Promissory Notes and the amount of cash
received over (B) the holder's adjusted tax basis in the 6% Debentures
surrendered therefor or (ii) the fair market value of the Warrants, the fair
market value of the Promissory Notes and the amount of cash received. Such
gain will be capital gain if the 6% Debenture was held as a capital asset
(subject to the market discount rules discussed below) and will be long-term
capital gain if the 6% Debenture was held for more than one year. The holder's
initial tax basis in the Common Stock received in the recapitalization will
equal the holder's adjusted tax basis in the 6% Debentures surrendered
therefor, decreased by the fair market value of the Warrants, the fair market
value of the Promissory Notes and the amount of cash received in the
recapitalization, and increased by the amount of gain recognized on the
exchange. The holder's holding period for such Common Stock will include his
holding period for the 6% Debenture surrendered therefor, provided the 6%
Debenture was held as a capital asset. The holder's initial tax basis in the
Warrants and the Promissory Notes will be their fair market value, and his
holding period for the Warrants and the Promissory Notes will commence on the
date of the exchange.

Accrued Interest. An exchanging holder will be treated as receiving interest
income to the extent the Tender Offer Consideration received by the holder is
"attributable to" accrued but unpaid interest on the 6% Debentures, and the
recapitalization treatment described above will not apply to such extent. With
respect to exchanging holders, the Company intends to take the position, based
on the relative amount of the accrued interest to the principal of the 6%
Debentures, that a portion of the fair market value of the Tender Offer
Consideration is attributable to accrued interest on the 6% Debentures.
Consequently, an exchanging holder will recognize interest income equal to the
portion of the Tender Offer Consideration attributed to accrued interest to
the extent such holder has not already included such interest in income. An
accrual basis holder will recognize an ordinary loss to the extent, if any, of
the excess of the amount of interest income previously included in income over
such portion of the Tender Offer Consideration. The holder's initial tax basis
in such portion of the Tender Offer Consideration will be equal to its fair
market value, and the holding period will commence on the date of the
exchange.

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<PAGE>

Market Discount on 6% Debentures. The exchange of 6% Debentures for the
Tender Offer Consideration pursuant to the Proposal may be affected by the
market discount provisions of the Code. These rules generally provide that,
subject to a statutorily defined de minimis exception, if a holder of a debt
instrument acquires it at a market discount (i.e., at a price below its stated
redemption price at maturity) and thereafter recognizes gain upon a
disposition of the debt instrument, the lesser of such gain or the portion of
the market discount that accrued (and was not included in income) while the
debt instrument was held by such holder will be treated as ordinary interest
income at the time of the disposition. Thus, holders will recognize any
accrued market discount on the 6% Debentures only to the extent of the gain
recognized on the recapitalization, and any remaining accrued market discount
on a 6% Debenture will carry over to the Common Stock received therefor. In
such case, on a subsequent disposition (including by gift) of the Common Stock
received in the recapitalization, gain is treated as ordinary income to the
extent of market discount accrued prior to the exchange.

COMMON STOCK

In general, a holder will recognize gain or loss upon the sale, exchange,
redemption or other taxable disposition of Common Stock measured by the
difference between (i) the amount realized and (ii) the holder's tax basis in
the Common Stock. Subject to the market discount rules discussed above, any
such gain or loss will be capital gain or loss if the Common Stock was held as
a capital asset, and will be long-term capital gain or loss if the Common
Stock was held for more than a year.

WARRANTS

Sale or Exchange of the Warrants. Generally, a holder will recognize gain or
loss upon the sale or exchange of a Warrant in an amount equal to the
difference between (i) the amount of cash and the fair market value of other
property received therefor and (ii) the holder's adjusted tax basis in the
Warrant. In general, such gain or loss will be capital gain or loss if the
Common Stock to which the Warrant relates would be a capital asset in the
hands of the holder, and will be long-term capital gain or loss if the Warrant
was held for more than a year. A repurchase of the Warrant by the Company may
not qualify for capital gain or loss treatment, however, and a holder instead
may be required to treat such gain or loss as ordinary income or loss.

Exercise of the Warrants. The exercise of a Warrant with cash will not
result in a taxable event to the holder (except to the extent of cash, if any,
received in lieu of fractional shares of Company Common Stock). Upon such
exercise, the holder's basis in the shares of Common Stock issued thereunder
will be the sum of (i) the holder's basis in the Warrant and (ii) the exercise
price of the Warrant. The holding period for the shares of Common Stock
acquired upon exercise of a Warrant will not include the period during which
the Warrant was held. If any cash is received in lieu of fractional shares,
the holder will recognize gain or loss, and the character and amount of gain
or loss will be determined as if the holder had received such fractional
shares and then such shares were immediately redeemed for cash. Accordingly, a
holder will recognize gain or loss in an amount equal to the difference
between the amount of cash received for the fractional shares and the holder's
tax basis in the fractional shares.

Expiration of the Warrants. Upon the expiration of an unexercised Warrant,
the holder will recognize a loss equal to the holder's adjusted tax basis in
the Warrant. In general, such loss will be a capital loss if the Common Stock
to which the Warrant relates would be a capital asset in the hands of the
holder, and will be long-term if the Warrant was held for more than one year.

Adjustments Under the Warrants. Adjustments to the Exercise Price of a
Warrant, or the failure to make such adjustments, may in certain circumstances
result in the receipt of constructive distributions by the holder which could
be taxable as a dividend, in which event the holder's tax basis in the Warrant
would be increased by an amount equal to such constructive dividend. The rules
with respect to adjustments are complex and Warrantholders should consult
their own tax advisors in the event of an adjustment.

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PROMISSORY NOTES

Original Issue Discount. Because the Promissory Notes will be issued with an
interest rate which is 14% for the first year and 16% thereafter, the
Promissory Notes will be issued with original issue discount ("OID") for
federal income tax purposes. Holders thereof will be required to include such
OID in gross income as it accrues (under the rules described below) and in
advance of the receipt of cash to which such OID is attributable.

The amount of OID on each Promissory Note will be equal to the excess of the
"stated redemption price at maturity" of the Promissory Note over its "issue
price." In general, the holder of a debt instrument issued with OID must
include in gross income for federal income tax purposes the sum of the daily
portions of OID with respect to such debt instrument for each day during the
taxable year or portion of the taxable year on which such holder holds the
debt instrument. The daily portion is determined by allocating to each day of
any accrual period (generally, a six month period or a shorter or longer
period from the date of issuance) a pro rata portion of an amount equal to the
"adjusted issue price" of the debt instrument at the beginning of the accrual
period multiplied by the yield to maturity of the debt instrument. The
"adjusted issue price" is the issue price of the debt instrument increased by
the accrued OID for all prior accrual periods (and decreased by the amount of
cash payments made in all prior accrual periods, other than "qualified stated
interest" payments.) The tax basis of the debt instrument in the hands of the
holder will be increased by the amount of OID, if any, on the debt instrument
that is included in the holder's gross income and will be decreased by the
amount of cash payments (other than "qualified stated interest" payments)
received with respect to the debt instrument.

Because the holders who acquire the Promissory Notes will also acquire the
remainder of the Tender Offer Consideration, each Promissory Note should be
treated as having been issued as part of an "investment unit" consisting of
the Tender Offer Consideration. The "issue price" of this investment unit will
be equal to the fair market value of the 6% Debentures, determined as of the
exchange date, and this "issue price" must be allocated between the Promissory
Notes and the remaining components of the Tender Offer Consideration based on
their relative fair market values. Accordingly, the Company will determine the
"issue price" of the Promissory Notes by allocating the "issue price" of the
investment unit between the Promissory Notes and the remaining components of
the Tender Offer Consideration in accordance with their relative fair market
values on the exchange date. A holder must use the Company's allocation unless
the holder discloses on its federal income tax return that it plans to use an
allocation that is inconsistent with the Company's allocation. However, such
allocation is not binding on the IRS.

The "stated redemption price at maturity" of a debt instrument is the sum of
all payments provided by the debt instrument other than payments of "qualified
stated interest." "Qualified stated interest" includes stated interest that is
unconditionally payable in cash at least annually at a single fixed rate. To
the extent that stated interest payable under a debt instrument exceeds
qualified stated interest, the excess is included in the debt instrument's
stated redemption price at maturity. Thus, because the Promissory Notes will
pay interest annually at a rate of 14% for the first year and 16% thereafter,
the entire amount of interest paid for the first year, and the portion of the
amount of interest paid for the second year equal to interest calculated at a
rate of 14%, will constitute qualified stated interest. Accordingly, the
"stated redemption price at maturity" of a Promissory Note will equal the sum
of (i) the portion of interest paid for the second year in excess of interest
calculated at a rate of 14% and (ii) the principal amount thereof.

To the extent that interest payments on the Promissory Notes constitute
qualified stated interest, such payments will be taxable as ordinary income
when received or accrued by holders in accordance with their method of
accounting.

Market Discount. Holders should be aware that the disposition of a
Promissory Note may be affected by the market discount provisions of the Code.
As described above under "Exchange Offer--Market Discount on 6% Debentures",
these rules generally provide that, subject to a statutorily defined de
minimis exception, if a holder of a debt instrument acquires it at a market
discount (i.e., at a price below its revised issue price) and thereafter
recognizes gain upon a disposition of the debt instrument (or disposes of it
in certain nonrecognition

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<PAGE>

transactions, including by gift), the lesser of such gain (or appreciation, in
the case of an applicable nonrecognition transaction) or the portion of the
market discount that accrued (and was not included in income) while the debt
instrument was held by such holder will be treated as ordinary interest income
at the time of disposition.

Sales, Retirement or Other Taxable Disposition. In general, a holder of a
Promissory Note will recognize gain or loss upon the sale, retirement or other
taxable disposition of a Promissory Note measured by the difference between
(i) the amount of cash and the fair market value of other property received
(other than the amount attributable to, and taxable as, accrued interest) and
(ii) the holder's tax basis in the Promissory Note (as increased by any OID or
market discount previously included in income by the holder and decreased by
any payments other than qualified stated interest with respect to such
Promissory Note). In general, any such gain or loss will be capital gain or
loss, provided that the Promissory Note was held as a capital asset, and will
be long-term capital gain or loss if the Promissory Note was held for more
than one year.

EFFECTS OF THE EXCHANGE OFFERS ON THE COMPANY

Cancellation of Indebtedness Income. In general, the acquisition of a debt
instrument by the issuer for less than its adjusted issue price gives rise to
cancellation of indebtedness income ("COD") to the issuer which must be
included in the issuer's gross income for federal income tax purposes.
Accordingly, to the extent that the sum of (i) the fair market value of the
Common Stock, (ii) the fair market value of the Warrants, (iii) the issue
price of the Promissory Notes and (iv) the amount of cash issued with respect
to the 6% Debentures is less than the adjusted issue price of such 6%
Debentures, the Company would generally recognize COD.

Limitation on Net Operating Loss Carryforwards. Under Code Section 382, a
corporation's use of net operating loss carryforwards ("NOL's") may be limited
if the corporation has been subject to an "ownership change." In general,
however, Code Section 382 would not limit the use of NOL's to offset taxable
income allocable to the portion of the taxable year ending on or prior to the
date of the ownership change (the "change date"). The Company believes that no
"ownership change" has occurred or will have occurred prior to the Exchange
Offer. The Company does, however, anticipate that an ownership change will
occur as a result of the Exchange Offer and that its ability to utilize its
NOL's in subsequent periods will be substantially limited. Based on certain
assumptions, including assumptions regarding the value of the Tender Offer
Consideration, and its election to allocate its taxable income for this
purpose by closing its books as of the close of the change date, the Company
believes that sufficient NOL's will be available to offset the COD resulting
from the Exchange Offer. However, the Code also imposes an alternative minimum
tax ("AMT") at a rate of 20% of a corporation's alternative minimum taxable
income ("AMTI"), and NOL's, as recomputed for purposes of the AMT, may be used
to offset only 90% of AMTI. Thus, to the extent that the Company utilizes its
NOL's to offset the COD, it may be exposed to liability for the AMT at an
effective rate of 2% (i.e., 10% of the 20% AMT rate).

BACKUP WITHHOLDING AND REPORTING REQUIREMENTS

Backup withholding at the rate of 31% may apply with respect to the Tender
Offer Consideration received by holders pursuant to the Proposal, unless the
holder (i) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A holder who does not provide the Company with his correct
taxpayer identification number may be subject to penalties imposed by the IRS.
Any amount withheld under these rules will be creditable against the holder's
federal income tax liability.

The Company will report to holders and to the IRS the amount of "reportable
payments" and any amount withheld in connection with the Exchange Offers.

THE FOREGOING SUMMARY IS FOR INFORMATION PURPOSES ONLY AND DOES NOT DISCUSS
ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A

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<PAGE>

PARTICULAR HOLDER OF 6% DEBENTURES IN LIGHT OF HIS PARTICULAR CIRCUMSTANCES
AND INCOME TAX SITUATION. ACCORDINGLY, EACH HOLDER OF 6% DEBENTURES SHOULD
CONSULT HIS TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF
THE EXCHANGE OF 6% DEBENTURES FOR THE TENDER OFFER CONSIDERATION PURSUANT TO
THE PROPOSAL, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL
OR FOREIGN TAX LAWS AND OF CHANGES IN APPLICABLE TAX LAWS.

INTERESTS IN 6% DEBENTURES

Based upon the Company's records and upon information provided to the
Company by its directors, executive officers and affiliates, neither the
Company nor any of its subsidiaries or affiliates nor any of the directors or
executive officers of the Company, nor any associates of any of the foregoing,
including the directors or executive officers of its subsidiaries,
beneficially owns any 6% Debentures nor has effected any transactions in the
6% Debentures during the sixty day period prior to the date hereof, except
that Barbara V. Scherer, the Company's Senior Vice President--Operations owns
$23,000 face amount of 6% Debentures (0.03% of the total amount of 6%
Debentures outstanding) which she purchased in October 1989.

CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO 6% DEBENTURES

Other than the Tender Agreement, neither the Company nor any of its
affiliates, directors or executive officers, or any of the executive officers
or directors of its subsidiaries, is a party to any contract, arrangement,
understanding or relationship with any other person relating, directly or
indirectly, to the Exchange Offer with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
such securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies, consents or authorizations).

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APPENDIX A-1

June 14, 1996

CONFIDENTIAL

StreamLogic Corporation
21211 Nordhoff Street
Chatsworth, California 91311
Attention: Mr. Larry Smart

Agreement re: Tender Offer for All Outstanding 6%
Convertible Subordinated Debentures Due 2012

Dear Mr. Smart:

This letter sets forth our mutual understanding and agreement with respect
to (i) a tender offer (the "Tender Offer") by StreamLogic Corporation
("StreamLogic") for all of the outstanding 6% Convertible Subordinated
Debentures due 2012 previously issued by StreamLogic (the "Debentures") and
(ii) the terms upon which the institutional clients advised by Loomis Sayles &
Co., L.P. would be willing to tender the Debentures they hold into the Tender
Offer. The institutional clients advised by Loomis Sayles and Co., L.P.,
collectively, hold 79% of all of the Debentures. Hereinafter, (i) Loomis
Sayles & Co., L.P. shall be referred to as "Loomis Sayles" and (ii) "per
Debenture" means per $1000 face amount of Debentures.

1. The Tender Offer. Subject to paragraph 6 of this letter, StreamLogic
shall take every reasonable effort to initiate and complete the Tender Offer.
The Tender Offer shall be an offer for all of the outstanding Debentures and
shall exchange all tendered Debentures for cash, common stock and warrants, on
the terms and conditions described below. Loomis Sayles shall use its best
efforts to assist StreamLogic in obtaining all approvals necessary for
completion of the Tender Offer and the transactions contemplated thereby.

2. Timing. StreamLogic shall make the Tender Offer to all holders of the
Debentures, for all of the Debentures, no later than July 1, 1996 assuming no
shareholder approval is required. If shareholder approval is required, the
Tender Offer shall be made no later than ten days after the mailing of a proxy
statement to StreamLogic's shareholders. StreamLogic should use its best
efforts to expedite preparation of a proxy statement to its shareholders if
required. The Tender Offer shall close no later than August 24, 1996 assuming
no shareholder approval is required and on the day following shareholder
approval if such approval is required or as soon thereafter as permitted by
the Securities and Exchange Commission ("SEC") and applicable law. The date on
which the Tender Offer is required to close shall hereinafter be referred to
as the "Closing Date". The exchange of the tendered Debentures for cash,
common stock and warrants on the terms and conditions described below (the
"Exchange") shall occur no later than 10 days after the Closing Date. The date
of the Exchange shall hereinafter be referred to as the "Exchange Date."

3. Exchange of Debentures for Cash. Common Stock and Warrants. In the Tender
Offer the Company shall offer to each holder of Debentures the right to
exchange for each Debenture (including interest on the Debentures which is
accrued and unpaid on the Exchange Date):

(i) cash in the amount of $233.33 per Debenture;

(ii) that number of shares of StreamLogic's common stock ("Exchange
Shares") equal to $520.00 per Debenture calculated by using the average of
the closing price of StreamLogic's common stock for the 5 trading days
prior to the Closing Date or such earlier 5 day trading average as required
by the SEC (the "Exchange Price"); provided that the maximum number of
Exchange Shares per Debenture will be 130.0 shares and the minimum number
of Exchange Shares per Debenture will be 69.33333 shares; and

(iii) warrants to purchase 40 shares of StreamLogic's common stock (the
"Warrants") per Debenture. The Warrants shall be exercisable at any time
before the fifth anniversary of the date of the Exchange and

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<PAGE>

shall have an initial exercise price equal to 150% of the Exchange Price
(the "Exercise Price"). Each time prior to the first anniversary of the
Exchange that the average (excluding the highest price and the lowest
price) closing price of StreamLogic's common stock for a period of 5
consecutive trading days (the "Reset Period") is less than 65% of the
Exchange Price (the "Reset Price"), each holder of Warrants shall have the
option (the "Reset Election") to adjust the exercise price of the Warrants
held by such holder to 150% of the Reset Price, provided that a holder of
Warrants may exercise this option no more than one time. An agent shall be
appointed to handle the mechanics of the transmission and exchange of the
warrants (the "Warrant Agent"). The holder of the Warrants must give notice
to the Warrant Agent of its intent to exercise the Reset Election within 5
business days following the last day of the Reset Period. Notice of
exercise of the Reset Election shall be given by facsimile and perfected by
delivery of the Warrant to the Warrant Agent. Each Warrant shall be
legended to reflect the terms of the Reset Election and shall be exchanged
by the Warrant Agent for a Warrant deleting references to the Reset
Election upon exercise of the Reset Election with respect to such Warrant.
If at any time for a period of 5 consecutive trading days the average
(excluding the highest price and the lowest price) closing price of
StreamLogic's common stock exceeds 125% of the Exercise Price (after taking
into account any stock splits, consolidations or similar transactions) (the
"Option Period"), Streamlogic shall have the option (the "Warrant Exercise
Option") to require the holders of the Warrants either to exercise the
Warrants held by such holder at the Exercise Price, or the Reset Price if a
Reset Price has been set, or to cancel the Warrants. StreamLogic shall
exercise such option within five (5) business days following the last day
of the Option Period.

All shares of StreamLogics's common stock issued pursuant to exercise of
the Warrants shall be referred to as the "Warrant Shares." The Warrants
will be issued pursuant to a Warrant Agreement which shall be satisfactory
in form and substance to Loomis Sayles and shall have provisions
customarily included in warrants of this type including, without
limitation, the following:

(A) StreamLogic shall adjust the number of Warrant Shares to be
issued upon exercise of a Warrant to avoid dilution of the interests of
the holders of the Warrants which might result from stock splits,
consolidations, reclassifications and similar transactions of
StreamLogic's common stock.

(B) StreamLogic shall adjust, on a weighted average basis, the number
of Warrant Shares to be issued upon exercise of a Warrant to avoid
dilution which might result from any of the following:

(1) issuance of securities, options or convertible securities for
less than fair value determined with reference to the average
(excluding the highest price and the lowest price) closing price of
StreamLogic's common stock for the 20 trading days immediately prior
to the issuance thereof;

(2) redemption of any stock for more than fair value determined
with reference to the average (excluding the highest price and the
lowest price) closing price of StreamLogic's common stock for 20
trading days immediately prior to the issuance thereof;

(3) changes in the exercise price or conversion rate of options to
purchase StreamLogic's common stock or securities exchangeable or
convertible into StreamLogic's common stock; and

(4) dividends and distributions to holders of StreamLogic's common
stock.

Notwithstanding the foregoing, no adjustments shall be made pursuant
to this section 3 (iii) (A) and (B) on account of the transactions
set forth on Exhibit A.

4. Registration. On the Exchange Date, StreamLogic shall deliver to holders
of Debentures tendered pursuant to the Tender Offer Exchange Shares and upon
exercise of the Warrants StreamLogic shall deliver Warrant Shares which are
and at all times in the future will be freely tradeable to any person and
without having to comply with any holding periods, volume limits or
restrictions as to the transfer of such Exchange Shares and Warrant Shares
imposed under the securities laws. StreamLogic shall take each such measure as
may be necessary or reasonably appropriate to cause the Exchange Shares and
the Warrant Shares to be freely tradeable at all times including, without
limitation, preparation of a shelf registration statement. A shelf
registration statement shall be effective for a period of five years from the
Exchange Date or such shorter period of time if it is determined that

A1-2
<PAGE>

all Warrant Shares and Exchange Shares are freely tradeable without the
necessity of having a registration statement and prospectus available. Once
during each twelve month period that a shelf registration covering the Warrant
Shares and Exchange Shares is in effect, StreamLogic may provide notice to the
holders of the Warrants and Exchange Shares that the shelf registration will
not be available for a period of up to 90 consecutive days (a "Withdrawal
Election"). In the event that StreamLogic makes a Withdrawal Election, the
number of days that the Withdrawal Election is in effect shall be added to the
five year term of the self registration statement. Warrants will not be
exercisable during the period of any Withdrawal Election. StreamLogic shall
pay all costs and expenses in connection with the registration of the Exchange
Shares and the Warrant Shares, if registration is necessary, and each other
measure taken by StreamLogic.

5. Agreement to Tender. The institutional clients advised by Loomis Sayles
and that hold Debentures will tender all of the Debentures held by them to
StreamLogic pursuant to the Tender Offer and not withdraw prior to August 12,
1996 the tender of any Debentures held by them, if (i) the Tender Offer
includes each of the terms described in paragraphs 1 through 4 above and (ii)
each of the following terms and conditions are met to the satisfaction of
Loomis Sayles:

(a) The Exchange Price shall not be (i) greater than $7.50 nor (ii) less
than $4.00.

(b) The Tender Offer shall be for all of the then outstanding Debentures
and on the date of the Closing Date not less than 95% of the then
outstanding Debentures shall have been irrevocably tendered to the Company
pursuant to the Tender Offer unless Loomis Sayles subsequently agrees to a
lower percentage.

(c) StreamLogic shall have reserved a sufficient number of shares of
common stock to accommodate the issuance of the Exchange Shares and the
Warrants to all holders of the Debentures. The Tender Offer, the Exchange
and the issuance of the Exchange Shares and the Warrants shall have been
approved and authorized by all necessary and appropriate corporate and
regulatory action, including, without limitation, (i) authorization and
approval by the shareholders, if necessary, and board of directors of
StreamLogic of the Tender Offer, the Exchange and the issuance of the
Exchange Shares and the Warrants and (ii) making such amendments and
modifications of StreamLogic's charter documents as may be necessary or
appropriate to consummate the transactions contemplated herein.

(d) StreamLogic's board of directors shall have been expanded to seven
members, of which one member shall be the person designated in writing by
Loomis Sayles. StreamLogic and its management shall also have agreed that
StreamLogic management will include in its slate of persons nominated to be
directors for election at the next meeting of shareholders one person
designated in writing by Loomis Sayles. In the event that the institutional
clients of Loomis Sayles transfer more than 80% of the Exchange Shares and
Warrants to persons who are not advised by Loomis Sayles, then Loomis
Sayles' right to nominate a director shall terminate.

(e) StreamLogic shall have complied with all applicable requirements of
state and federal securities laws and the NASDAQ National Market System in
connection with the Tender Offer, the Exchange and the issuance of the
Exchange Shares and the Warrants.

(f) On the Exchange Date and assuming that the Exchange has not occurred,
the Company's authorized capital stock shall consist solely of 2,000,000
shares of preferred stock and 50,000,000 shares of common stock (together,
the "Capital Stock"), of which only 15,774,967 shares of common stock will
be outstanding, exclusive of the number of shares that become outstanding
as a result of the transaction and the exercise of options and warrants
specified on Exhibit A. After giving effect to transaction and the exercise
of all outstanding options and warrants including those set forth on
Exhibit A, there shall be outstanding no more than 21,798,108 shares of
common stock and no other equity securities of StreamLogic outstanding. No
preferred stock shall be outstanding on the Exchange Date.

(g) All governmental and third party approvals to the Tender Offer, the
Exchange and the issuance of the Exchange Shares and the Warrants
contemplated herein shall have been obtained and be in full force and
effect and all applicable waiting periods shall have expired without any
action being taken or threatened by any competent authority which would
restrain, prevent or otherwise impose adverse conditions on the Tender
Offer, the Exchange or the issuance of the Exchange Shares and the Warrants
as contemplated

A1-3
<PAGE>

herein. Loomis Sayles will take all actions reasonably necessary to assist
StreamLogic in obtaining such approvals.

(h) The definitive documentation evidencing the Tender Offer, the
Exchange, the issuance of the Exchange Shares and the Warrants and related
transactions shall be reasonably satisfactory in form, substance and all
other respects to Loomis Sayles and its counsel.

(i) Until the Exchange Date, the Company (i) will conduct its business
only in the ordinary course and consistent with past practices and will
maintain its books and records in accordance with past practices; and (ii)
will not, without the prior written consent of Chanin & Company (after it
has consulted with Loomis Sayles), (A) issue any equity securities or debt
securities other than in connection with the transactions set forth in
Exhibit A; (B) amend its charter documents except as provided herein; (C)
grant or issue any options, rights, warrants or convertible securities
other than in connection with the transactions set forth in Exhibit A; (D)
declare or pay any dividends or make any other distribution to
shareholders, reclassify outstanding shares, or reacquire any equity
securities; (E) reorganize, sell or dispose of any significant amount of
assets; (F) materially increase the level of compensation to any officer,
director or employee; or (G) engage in any transaction, other than the
transactions set forth in Exhibit A, the Tender Offer, the Exchange and the
issuance of the Exchange Shares and the Warrants and the other transactions
described herein, with the intention of affecting or influencing the
trading price of Stream Logic's traded common stock or with the knowledge
that the transaction could reasonable be expected to affect or influence
the trading price of StreamLogic's traded common stock; and (iii) will not
agree to do anything or take any action which could reasonably be expected
to impede, prevent, restrict or otherwise make more difficult the Tender
Offer, the Exchange, the issuance of the Exchange Shares or Warrants or any
of the other transactions contemplated herein.

(j) Until the Exchange Date, Chanin & Company and its agents and
independent contractors shall have unlimited access to the properties,
books and records of StreamLogic for the purposes of conducting such
investigations, appraisals or audits as Chanin & Company deems necessary or
advisable in the circumstances. The Company shall not terminate or breach
its letter agreement with Chanin & Company dated April 24, 1996 prior to
the Exchange Date.

(k) On the Exchange Date, StreamLogic shall have paid (i) all amounts
then due and owing to Chanin & Company pursuant to the letter agreement
dated April 24, 1996 and (ii) all amounts then due and owing to Heller
Ehrman White & McAuliffe pursuant to its agreement dated April 22, 1996 and
(iii) all reasonable out of pocket fees and expenses of Loomis Sayles
incurred in connection with the preparation and negotiation of this
Agreement or in connection with the Tender Offer, the Exchange, the
issuance of the Exchange Shares and the Warrants or transactions related
thereto. StreamLogic shall pay all of its own expenses (including, without
limitation, fees and expenses of counsel) incurred by StreamLogic in
connection with this Agreement, the Tender Offer, the Exchange, the
issuance of the Exchange Shares and Warrants or transactions related
thereto.

(l) There shall not have occurred any material and adverse change in (i)
the business, operations, properties, assets, or condition (financial or
otherwise) after the date of this letter agreement of StreamLogic or (ii)
the ability of StreamLogic to perform its obligations under this Agreement
or to accomplish the Tender Offer, the Exchange, the issuance of the
Exchange Shares and Warrants or other transactions contemplated herein or
related thereto.

(m) StreamLogic shall negotiate and implement amendments to the March,
1987 Indenture between Micropolis Corporation and First Interstate Bank of
California and, if necessary, StreamLogic's charter documents which are
satisfactory to Loomis Sayles and to StreamLogic.

(n) This Agreement shall not be effective unless executed by Loomis
Sayles and Streamlogic, and a fully executed copy of this Agreement is
delivered to Loomis Sayles, or its counsel, prior to midnight on June 14,
1996.

(o) Any press release by Loomis Sayles or StreamLogic concerning the
terms set forth in this letter shall be subject to the prior reasonable
approval of the other party.

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<PAGE>

(p) All matters referred to herein are subject to and conditioned upon
(i) compliance with all applicable laws and (ii) the consistency of the
terms hereof with any material rights of any third parties or the
unconditional consent to the Tender Offer, the Exchange, the issuance of
the Exchange Shares and Warrants and each other transaction contemplated
herein or related thereto of third parties whose material rights are not
consistent with the transactions contemplated herein.

(q) Loomis Sayles shall be satisfied that the common stock of StreamLogic
will continue to be listed and quoted by the NASDAQ-National Market System.

(r) There shall not be pending, instituted or threatened any legal action
or administrative proceedings before any court or governmental agency, by
any governmental agency challenging the Tender Offer.

(s) StreamLogic shall have obtained all required approvals by its
shareholders.

(t) The Trustee shall not have objected in any respect to, or taken any
action that could, adversely affect the consummation of the Tender Offer or
shall have taken any action that challenges the validity or effectiveness
of the procedures used by the Company in the making of the Tender Offer or
the acceptance of, or payment for, any of the Debentures.

6. StreamLogic's obligations to complete the Tender Offer shall be subject
to each of the following terms and conditions:

(a) The Exchange Price shall not be (i) greater than $7.50 nor (ii) less
than $4.00.

(b) The conditions set forth in Sections 5(g), 5(l), 5(r), 5(s) and 5(t)
of this letter.

(c) The definitive documentation evidencing the issuance of the Warrants
shall be reasonably satisfactory in form, substance and in all other
respects to StreamLogic.

(d) Compliance with all applicable laws.

(e) The continued listing and quotation of StreamLogic's common stock on
the NASDAQ-National Market System.

Nothing expressed or referred to in this letter agreement will be construed
to give any person other than the parties signing this letter any legal or
equitable right, remedy or claim under or with respect to this letter
agreement or any provision of this letter agreement. This letter and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this letter agreement and their successors and assigns.

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

If this letter is satisfactory to you as a basis for proceeding with the
Tender Offer, on the terms and conditions described above, please so signify
on the enclosed copy of this letter and return it to us at the above address.
We reserve the right to withdraw this letter at any time before it is
accepted.

Loomis Sayles

Loomis, Sayles & Co., L.P.

By: Loomis, Sayles & Co., Inc.

By Frederick D. Vyn
Its Vice President

AGREED:

STREAMLOGIC:

STREAMLOGIC CORPORATION

By J. Larry Smart
Title: President, CEO

A1-5
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EXHIBIT A

<TABLE>
<CAPTION>
NO. OF SHARES,
TRANSACTION OPTIONS, WARRANTS
----------- -----------------
<S> <C>
Shares to be Issued to FWB at Closing in early July
1996 (subject to adjustment
120 days after FWB Closing).......................... 1,256,123
Warrants outstanding to Salomon as of June 13, 1996... 80,081 at an exercise
price of $5.00 per share
Warrants outstanding to Linder as of June 13, 1996.... 1,500,000 at an exercise
price of $4.00 per share
STOCK OPTIONS:
StreamLogic Option.................................... 787,200
Micropolis Options (exercise lapse by 6/29/96)........ 838,860
Options granted on April 1, 1996...................... 657,000
Options granted on May 22, 1996....................... 70,000
Options expected to be granted by September 1, 1996... 150,000
TOTAL OPTIONS..................................... 2,503,060
</TABLE>

A1-6
<PAGE>

APPENDIX A-2

September 13, 1996

StreamLogic Corporation
21211 Nordhoff Street
Chatsworth, California 91311
Attention: Mr. Larry Smart

Amendment to June 14, 1996 Agreement re:
Tender Offer for All Outstanding 6% Convertible Subordinated Debentures Due
2012

Dear Mr. Smart:

This letter sets forth out mutual understanding and agreement with respect
to amendments to the June 14, 1996 Agreement re: Tender Offer for All
Outstanding 6% Convertible Subordinated Debentures Due 2012 between Loomis,
Sayles & Co., L.P. and StreamLogic Corporation (the "Agreement"). Loomis
Sayles & Co., L.P. and StreamLogic Corporation hereby agree that the Agreement
shall be amended as follows:

1. Section 2 is amended by deleting it in its entirety and substituting the
following therefor:

"2. Timing. The Tender Offer shall close no later than October 21, 1996;
provided that, if based on SEC comments or otherwise, an extension of the
closing of the Tender Offer is required by applicable regulatory
requirements or law, the date by which the Tender Offer shall close shall
be the earlier of the date of the satisfaction of such requirements and
October 31, 1996. The date on which the Tender Offer closes shall
hereinafter be referred to as the "Closing Date." The exchange of the
tendered Debentures for cash, common stock and warrants on the terms and
conditions described below (the "Exchange") shall occur no later than 10
days after the Closing Date. The date of the Exchange shall hereinafter be
referred to as the "Exchange Date."

2. clause (i) of Section 3 is amended by deleting it in its entirety and
substituting the following therefor:

"cash in the amount of $233.33 per Debenture to be paid as follows: (a)
cash paid on the Exchange Date in the amount of $120.00 per Debenture and
(b) an unsecured promissory note (the "Promissory Note") in the principal
amount of $133.33 per Debenture with a maturity on the second anniversary
of the Exchange Date and bearing interest at the per annum rate of 14% from
the Exchange Date until the day before the first anniversary of the
Exchange Date and 16% from the day of the first anniversary of the Exchange
Date until the day of the second anniversary of the Exchange Date.
StreamLogic may prepay the Promissory Note without penalty at any time. The
proceeds of any debt financing of StreamLogic (other than proceeds not in
excess of $4,000,000 at any time outstanding under StreamLogic's revolving
credit facility currently in place with Wells Fargo Bank, or any amendment
thereto or replacement thereof so long as the amount outstanding thereunder
does not at any time exceed $4,000,000) shall be applied, first, to
repayment of all amounts outstanding under the Promissory Note and,
thereafter, after all amounts outstanding under the Promissory Note have
been paid in full to other purposes of the financing determined by
StreamLogic and the financing entity;"

3. clause (ii) of Section 3 is amended by deleting it in its entirety and
substituting the following therefor:

"(ii) StreamLogic's common stock in the amount of 148.57143 shares of
common stock per Debenture (the "Exchange Shares");"

4. Clause (iii) of Section 3 is amended by deleting the first paragraph of
this clause in its entirety and substituting the following therefor:

A2-1
<PAGE>

have an initial exercise price of $5.25 per share of common stock (the
"Exercise Price"). Each time prior to the first anniversary of the Exchange
that the average (excluding the highest price and the lowest price) closing
price of StreamLogic's common stock for a period of 5 consecutive trading
days (the "Reset Period") is less than $2.28 (after taking into account any
stock splits, consolidations or similar transactions) (the "Reset Price"),
each holder of Warrants shall have the option (the "Reset Election") to
adjust the exercise price of the Warrants held by such holder to 150% of
the Reset Price, provided that a holder of Warrants may exercise this
option no more than one time. An agent shall be appointed to handle the
mechanics of the transmission and exchange of the warrants (the "Warrant
Agent"). The holder of the Warrants must give notice to the Warrant Agent
of its intent to exercise the Reset Election within 5 business days
following the last day of the Reset Period. Notice of exercise of the Reset
Election shall be given by facsimile and perfected by delivery of the
Warrant to the Warrant Agent. Each Warrant shall be legended to reflect the
terms of the Reset Election and shall be exchanged by the Warrant Agent for
a Warrant deleting references to the Reset Election upon exercise of the
Reset Election with respect to such Warrant. If at any time for a period of
consecutive trading days the average (excluding the highest price and
lowest price) closing price of StreamLogic's common exceeds $6.56 (after
taking into account any stock splits, consolidations or similar
transactions) (the "Option Period"), StreamLogic shall have the option (the
"Warrant Exercise Option") to require the holders of the Warrants either to
exercise the Warrants held by such holder at the Exercise Price, or the
Reset Price if a Reset Price has been set, or to cancel the Warrants.
StreamLogic shall exercise such option within 5 business days following the
last day of the Option Period.

5. Section 4 shall be amended by adding the following sentence after the
fifth sentence of Section 4:

"StreamLogic shall take all reasonable measures and efforts to limit the
length of the time after a Withdrawal Election during which the shelf
registration is not available to as short a period of time as is possible,
consistent with the reason for the Withdrawal Election, and shall terminate
each Withdrawal Election and the period during which the shelf registration
is not available as quickly as reasonably possible, consistent with the
reason for the Withdrawal Election."

the introductory paragraph of Section 5 shall be amended by deleting it in its
entirety and substituting the following therefor:

"5. Agreement to Tender. Loomis Sayles agrees that it will

(i) advise the institutional clients it advises as of the Closing
Date, and

(ii) use its reasonable best efforts consistent with its various
relationships with its institutional clients to cause its institutional
clients as of the Closing Date which hold Debentures as of the Closing
Date,

to tender all of the Debentures held by such institutional clients as of
the Closing Date to StreamLogic pursuant to the Tender Offer and not
withdraw prior to the closing Date the tender of any Debentures held by
them, if

(a) the Tender Offer includes each of the terms described in paragraphs 1
through 4 above, and

(b) each of the following terms and conditions are met to the
satisfaction of Loomis Sayles:"

6. clause (a) of Section 5 shall be amended by deleting it in entirety and
substituting the following therefor:

"(a) The Tender Offer shall have closed no later than October 21, 1996;
provided that, if based on SEC comments or otherwise, an extension of the
closing of the Tender Offer is required by applicable regulatory
requirements or law, the date by which the Tender Offer shall close shall
be the earlier of the date of the satisfaction of such requirements and
October 31, 1996;"

7. clause (d) of Section 5 shall be amended by deleting it in its entirety
and substituting the following therefor:

"(d) StreamLogic's board of directors shall have been expanded to seven
members, of which three (3) shall be persons designated in writing by
Loomis Sayles. StreamLogic and its management shall also have

A2-2
<PAGE>

agreed that StreamLogic's management will include in its slate of persons
nominated to be directors for election at the next meeting of shareholders
three persons designated in writing by Loomis Sayles. In the event that the
institutional clients of Loomis Sayles transfer more than eighty percent
(80%), in the aggregate, of the total aggregate number of Exchange Shares
and shares of common stock issued or issuable pursuant to the Warrants to
persons who are not advised by Loomis Sayles, the Loomis Sayles' right to
nominate directors shall terminate."

8. clause (a) of Section 6 shall be deleted in its entirety.

9. Exhibit A is amended by deleting it in its entirety and substituting
Exhibit A attached hereto therefor.

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

Each of Loomis, Sayles & Co., L.P. and StreamLogic Corporation hereby
reaffirm (i) the terms and conditions contained in the Agreement, as amended
hereby and (ii) that the Agreement, as amended hereby, is a legal, valid and
binding obligation of each of them on the terms set forth in the Agreement, as
amended hereby.

If this letter is satisfactory to you as a basis for proceeding with Tender
Offer, on the terms and conditions described in the Agreement, as amended
hereby, please so signify on the enclosed copy of this letter and return it to
us at the above address. We reserve the right to withdraw this letter at any
time before it is accepted.

Loomis, Sayles & Co., L.P.

By: Loomis, Sayles & Co., Inc.

By Frederick D. Vyn
Title: Vice President

Agreed:

STREAMLOGIC CORPORATION

By Lee Hilbert
Title: Chief Financial Officer

A2-3
<PAGE>

EXHIBIT A

NO. OF SHARES,
TRANSACTION OPTIONS, WARRANTS
- ----------- -----------------
<S> <C>
Shares issued to FWB at Closing as of July 1, 1996
(subject to adjustment 120 days after closing)....... 1,256,123
Warrants outstanding to Salomon as of September 18,
1996................................................. 80,081 at an exercise
price of $5.00 per share
Warrants outstanding to Lindner as of September 18,
1996................................................. 1,500,000 at an exercise
price of $4.00 per share
STOCK OPTIONS:
Options outstanding September 18, 1996................ 1,657,300
Options expected to be granted by October 31, 1996.... 150,000
Total stock options................................. 1,807,300
</TABLE>

A2-4
<PAGE>

APPENDIX A-3

October 3, 1996

StreamLogic Corporation
21211 Nordhoff Street
Chatsworth, California 91311
Attention: Mr. Larry Smart

Second Amendment to June 14, 1996 Agreement re:
Tender Offer for All Outstanding 6% Convertible Subordinated Debentures Due
2012

Dear Mr. Smart:

This letter sets forth out mutual understanding and agreement with respect
to amendments to the June 14, 1996 Agreement re: Tender Offer for All
Outstanding 6% Convertible Subordinated Debentures Due 2012 between Loomis
Sayles & Company, L.P. and StreamLogic Corporation, as amended by the
September 13, 1996 amendment to June 14, 1996 Agreement re: Tender Offer for
All Outstanding 6% Convertible Subordinated Debentures Due 2012 (the
"Agreement"). Loomis Sayles & Company, L.P. and StreamLogic Corporation hereby
agree that the Agreement shall be amended as follows:

1. Section 2 is amended by deleting it in its entirety and substituting the
following therefor:

"2. Timing. The Tender Offer shall close no later than November 4, 1996;
provided that, if based on SEC comments or otherwise, an extension of the
closing of the Tender Offer is required by applicable regulatory
requirements or law, the date by which the Tender Offer shall close shall
be the earlier of the date of the satisfaction of such requirements and
November 14, 1996. The date on which the Tender Offer closes shall
hereinafter be referred to as the "Closing Date." The exchange of the
tendered Debentures for cash, common stock and warrants on the terms and
conditions described below (the "Exchange") shall occur no later than 10
days after the Closing Date. The date of the Exchange shall hereinafter be
referred to as the "Exchange Date."

2. clause (ii) of Section 3 is amended by deleting it in its entirety and
substituting the following therefor:

"(ii) StreamLogic's common stock in the amount of 216.6667 shares of common
stock per Debenture (the "Exchange Shares");"

3. Clause (iii) of Section 3 is amended by deleting the first paragraph of
this clause in its entirety and substituting the following therefor:

"Warrants to purchase 40 shares of StreamLogic's common stock (the
"Warrants") per Debenture. The Warrants shall be exercisable at any time
before the fifth anniversary of the date of the Exchange and shall have an
initial exercise price of $3.60 per share of common stock (the "Exercise
Price"). Each time prior to the first anniversary of the Exchange that the
average (excluding the highest price and the lowest price) closing price of
StreamLogic's common stock for a period of 5 consecutive trading days (the
"Reset Period") is less than $1.56 (after taking into account any stock
splits, consolidations or similar transactions) (the "Reset Price"), each
holder of Warrants shall have the option (the "Reset Election") to adjust
the exercise price of the Warrants held by such holder to 150% of the Reset
Price, provided that a holder of Warrants may exercise this option no more
than one time. An agent shall be appointed to handle the mechanics of the
transmission and exchange of the warrants (the "Warrant Agent"). The holder
of the Warrants must give notice to the Warrant Agent of its intent to
exercise the Reset Election within 5 business days following the last day
of the Reset Period. Notice of exercise of the Reset Election shall be
given by facsimile and perfected by delivery of the Warrant to the Warrant
Agent. Each Warrant shall be legended to reflect the terms of the Reset
Election and shall be exchanged by the Warrant Agent for a Warrant deleting

A3-1
<PAGE>

references to the Reset Election upon exercise of the Reset Election with
respect to such Warrant. If at any time for a period of consecutive trading
days the average (excluding the highest price and lowest price) closing
price of StreamLogic's common exceeds $4.50 (after taking into account any
stock splits, consolidations or similar transactions) (the "Option
Period"), StreamLogic shall have the option (the "Warrant Exercise Option")
to require the holders of the Warrants either to exercise the Warrants held
by such holder at the Exercise Price, or the Reset Price if a Reset Price
has been set, or to cancel the Warrants. StreamLogic shall exercise such
option within 5 business days following the last day of the Option Period.

4. clause (a) of Section 5 shall be amended by deleting it in entirety and
substituting the following therefor:

"(a) The Tender Offer shall have closed no later than November 4, 1996;
provided that, if based on SEC comments or otherwise, an extension of the
closing of the Tender Offer is required by applicable regulatory
requirements or law, the date by which the Tender Offer shall close shall
be the earlier of the date of the satisfaction of such requirements and
November 14, 1996;"

5. clause (d) of Section 5 shall be amended by deleting it in its entirety
and substituting the following therefor:

"(d) StreamLogic's board of directors shall have been expanded to seven
members, of which two (2) shall be persons designated in writing by Loomis
Sayles. StreamLogic hereby agrees that it will take all actions reasonably
necessary, and will cause its management to take all actions reasonably
necessary, to include in management's slate of persons nominated to be
directors for election at the next meeting of shareholders two (2) persons
designated in writing by investors advised by Loomis Sayles. In the event
that the investors advised by Loomis Sayles hold less than twenty-eight
(28%), in the aggregate, of the total aggregate number of shares of common
stock of StreamLogic outstanding, the right of such investors to nominate
directors shall terminate. Loomis Sayles may in its discretion require each
person designated by investors advised by Loomis Sayles to be a member of
StreamLogic's board of directors to agree to take measures designated by
Loomis Sayles which are intended to prevent nonpublic information from
being communicated to Loomis Sayles or investors advised by Loomis Sayles
unless Loomis Sayles determines that receiving nonpublic information is in
the best interests of the investors advised by Loomis Sayles."

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

Each of Loomis Sayles & Company, L.P. and StreamLogic Corporation hereby
reaffirm (i) the terms and conditions contained in the Agreement, as amended
hereby and (ii) that the Agreement, as amended hereby, is a legal, valid and
binding obligation of each of them on the terms set forth in the Agreement, as
amended hereby.

Loomis Sayles & Company, L.P.

By: Loomis Sayles & Company, Inc.

By Frederick D. Vyn
Title: Vice President

Agreed:

STREAMLOGIC CORPORATION

By Lee Hilbert
Title: Chief Financial Officer

A3-2
<PAGE>

APPENDIX B

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

STREAMLOGIC CORPORATION

$8,500,000

Increasing Rate Unsecured Promissory Notes
due , 1998

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

INDENTURE

Dated as of , 1996

[TRUSTEE]

Trustee

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE...................... B-1
Section 1.01. Definitions............................................. B-1
Section 1.02. Other Definitions....................................... B-2
Section 1.03. Incorporation by Reference of Trust Indenture Act ...... B-2
Section 1.04. Rules of Construction................................... B-2
ARTICLE 2 THE SECURITIES.................................................. B-3
Section 2.01. Form and Dating......................................... B-3
Section 2.02. Execution and Authentication............................ B-3
Section 2.03. Registrar and Paying Agent.............................. B-3
Section 2.04. Paying Agent to Hold Money in Trust..................... B-3
Section 2.05. Securityholder Lists.................................... B-4
Section 2.06. Transfer and Exchange................................... B-4
Section 2.07. Replacement Securities.................................. B-4
Section 2.08. Outstanding Securities.................................. B-4
Section 2.09. Cancellation............................................ B-4
Section 2.10. Defaulted Interest...................................... B-5
ARTICLE 3 COVENANTS....................................................... B-5
Section 3.01. Payment of Securities................................... B-5
Section 3.02. SEC Reports............................................. B-5
Section 3.03. Mandatory Redemption Upon Debt Financing................ B-5
ARTICLE 4 SUCCESSORS...................................................... B-6
ARTICLE 5 DEFAULTS AND REMEDIES........................................... B-6
Section 5.01. Events of Default....................................... B-6
Section 5.02. Acceleration............................................ B-6
Section 5.03. Other Remedies.......................................... B-7
Section 5.04. Waiver of Past Defaults................................. B-7
Section 5.05. Control by Majority..................................... B-7
Section 5.06. Limitation on Suits..................................... B-7
Section 5.07. Rights of Holders to Receive Payment.................... B-7
Section 5.08. Collection Suit by Trustee.............................. B-8
Section 5.09. Trustee May File Proofs of Claim........................ B-8
Section 5.10. Priorities.............................................. B-8
ARTICLE 6 TRUSTEE......................................................... B-8
Section 6.01. Duties of Trustee....................................... B-8
Section 6.02. Rights of Trustee....................................... B-9
Section 6.03. Individual Rights of Trustee ........................... B-9
Section 6.04. Trustee's Disclaimer.................................... B-9
Section 6.05. Notice of Defaults...................................... B-9
Section 6.06. Reports by Trustee to Holders........................... B-9
Section 6.07. Compensation and Indemnity.............................. B-10
Section 6.08. Replacement of Trustee.................................. B-10
Section 6.09. Successor Trustee by Merger, etc........................ B-11
Section 6.10. Eligibility; Disqualification........................... B-11
Section 6.11. Preferential Collection of Claims Against Company....... B-11
ARTICLE 7 REDEMPTION AND PREPAYMENT....................................... B-11
Section 7.01. Notices to Trustee...................................... B-11
Section 7.02. Selection of Securities to Be Redeemed.................. B-11
Section 7.03. Notice of Redemption.................................... B-12
Section 7.04. Effect of Notice of Redemption.......................... B-12
</TABLE>

i
<PAGE>

TABLE OF CONTENTS--(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 7.05. Deposit of Redemption Price............................ B-12
Section 7.06. Securities Redeemed in Part............................ B-13
Section 7.07. Optional Redemption.................................... B-13
Section 7.08. Mandatory Redemption................................... B-13
Section 7.09. Redemption by Application of Debt Financing Proceeds... B-13
ARTICLE 8 AMENDMENTS...................................................... B-13
Section 8.01. Without Consent of Holders............................. B-13
Section 8.02. With Consent of Holders................................ B-14
Section 8.03. Compliance with Trust Indenture Act.................... B-14
Section 8.04. Revocation and Effect of Consents...................... B-14
Section 8.05. Notation on or Exchange of Securities ................. B-15
Section 8.06. Trustee Protected...................................... B-15
ARTICLE 9 REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... B-15
Section 9.01. Due Incorporation; Good Standing....................... B-15
Section 9.02. Due Authorization...................................... B-15
Section 9.03. Enforceability......................................... B-15
ARTICLE 10 MISCELLANEOUS.................................................. B-16
Section 10.01. Trust Indenture Act Controls........................... B-16
Section 10.02. Notices................................................ B-16
Section 10.03. Communication by Holders with Other Holders............ B-16
Section 10.04. Certificate as to Conditions Precedent ................ B-16
Section 10.05. Statements Required in Certificate..................... B-16
Section 10.06. Rules by Trustee and Agents............................ B-17
Section 10.07. Legal Holidays......................................... B-17
Section 10.08. No Recourse Against Others ............................ B-17
Section 10.09. Counterparts .......................................... B-17
Section 10.10. Variable Provisions ................................... B-17
Section 10.11. Governing Law ......................................... B-17
Section 10.12. No Adverse Interpretation of Other Agreements.......... B-18
Section 10.13. Successors ............................................ B-18
Section 10.14. Severability .......................................... B-18
Section 10.15. Photocopies............................................ B-18
Section 10.16. Table of Contents, Headings, Etc. ..................... B-18
</TABLE>

ii
<PAGE>

INDENTURE dated as of , 1996 between StreamLogic Corporation,
a Delaware corporation ("Company"), and [TRUSTEE] ("Trustee").

Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Company's Increasing Rate
Unsecured Promissory Notes due , 1998 ("Securities"):

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01. Definitions.

"Agent" means any Registrar, Paying Agent, or co-registrar.

"Board of Directors" means the Board of Directors of the Company or any
authorized committee of the Board.

"Company" means the party named as such above until a successor replaces it
in accordance with Article 4 and thereafter means the successor.

"Company Order" means a written order signed in the name of the Company by
two Officers, one of whom must be the Company's principal executive officer,
principal financial officer or principal accounting officer.

"Credit Agreement" means the revolving credit facility, dated as of July 1,
1996, between the Company and Wells Fargo Bank, N.A., or any amendment thereto
or replacement thereof so long as the amount outstanding thereunder does not
at any time exceed $4,000,000.

"Custodian" means any receiver, trustee, assignee, liquidator or similar
official under any bankruptcy Law.

"Default" means any event which is, or after notice or passage of time would
be, an Event of Default.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Holder" or "Securityholder" means a person in whose name a Security is
registered.

"Indenture" means this Indenture as amended from time to time.

"Officers' Certificate" means a certificate signed by two Officers, one of
whom must be the Company's principal executive officer, principal financial
officer or principal accounting officer.

"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.

"person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.

"SEC" means the Securities and Exchange Commission.

"Securities" means the Securities described above issued under this
Indenture.

"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-
77bbbb), as amended, as in effect on the date of execution of this Indenture.

B-1
<PAGE>

"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions of this Indenture and thereafter
means the successor.

"Trust Officer" means any officer in the principal corporate trust office of
the Trustee or any other officer or assistant officer of the Trustee assigned
by the Trustee to administer its corporate trust matters.

"Warrant Agreement" means the Warrant Agreement, dated as of ,
1996 between the Company and Wells Fargo Bank, N.A., as Warrant Agent.

Section 1.02. Other Definitions.

<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
---- ----------
<S> <C>
"Bankruptcy Law"................................................. 5.01
"Event of Default"............................................... 5.01
"Financing Redemption"........................................... 7.09
"Legal Holiday".................................................. 10.07
"Officer"........................................................ 10.10
"Paying Agent"................................................... 2.03
"Registrar"...................................................... 2.03
</TABLE>

Section 1.03. Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.

The following TIA terms used in this Indenture have the following meanings:

"indenture securities" means the Securities;

"indenture security holder" means a Securityholder;

"indenture to be qualified" means this Indenture;

"indenture trustee" or "institutional trustee" means the Trustee;

"obligor" on the Securities means the Company.

All other terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by SEC rule under the TIA have
the meanings so assigned to them.

Section 1.04. Rules of Construction.

Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) "or" is not exclusive;

(3) words in the singular include the plural, and in the plural include
the singular; and

(4) provisions apply to successive events and transactions.

B-2
<PAGE>

ARTICLE 2

THE SECURITIES

Section 2.01. Form and Dating.

The Securities shall be substantially in the form of Exhibit A, which is
part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Security
shall be dated the date of its authentication.

The terms and provisions contained in the Securities shall constitute, and
are hereby expressly made, a part of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions and to be bound
thereby.

Section 2.02. Execution and Authentication.

Two Officers shall sign the Securities for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Securities.

If an Officer whose signature is on a Security no longer holds that office
at the time the Security is authenticated, the Security shall nevertheless be
valid.

A Security shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Security has
been authenticated under this Indenture.

The Trustee shall authenticate Securities for original issue up to the
aggregate principal amount stated in paragraph 4 of the Securities upon a
written order of the Company signed by two Officers. The aggregate principal
amount of Securities outstanding at any time may not exceed that amount except
as provided in Section 2.07.

The Trustee may appoint an authenticating agent acceptable to the Company to
authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company
or an Affiliate.

Section 2.03. Registrar and Paying Agent.

The Company shall maintain within or without the Borough of Manhattan, City
of New York, State of New York, and in such additional locations as it shall
determine (i) an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar") and (ii) an office or
agency where Securities may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" includes any additional
paying agent. The Company may change any Paying Agent, Registrar or co-
registrar without prior notice to any Securityholder. The Company shall notify
the Trustee of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent, Registrar or co-registrar.

Section 2.04. Paying Agent to Hold Money in Trust.

The Company shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust for the benefit of
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal or interest on the Securities, and will notify the
Trustee of any default by the Company in making any such payment. While any
such default continues, the Trustee may require a Paying Agent to pay

B-3
<PAGE>

all money held by it to the Trustee. The Company at any time may require a
Paying Agent to pay all money held by it to the Trustee. Upon payment over to
the Trustee, the Paying Agent (if other than the Company or a Subsidiary)
shall have no further liability for the money. If the Company or a Subsidiary
acts as Paying Agent, it shall segregate and hold in a separate trust fund for
the benefit of the Securityholders all money held by it as Paying Agent.

Section 2.05. Securityholder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable
the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or before each interest payment date and at such
other times as the Trustee may request in writing a list in such form and as
of such date as the Trustee may reasonably require of the names and addresses
of Securityholders.

Section 2.06. Transfer and Exchange.

Where Securities are presented to the Registrar or a co-registrar with a
request to register a transfer or to exchange them for an equal principal
amount of Securities of other denominations, the Registrar shall register the
transfer or make the exchange if its requirements for such transactions are
met. To permit registrations of transfers and exchanges, the Company shall
issue and the Trustee shall authenticate Securities at the Registrar's
request. No service charge shall be made for any registration of transfer or
exchange (except as otherwise expressly permitted herein), but the Company may
require payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any such
transfer tax or similar governmental charge payable upon exchanges pursuant to
Section 8.05).

Section 2.07. Replacement Securities.

If the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Company, an indemnity bond must be sufficient
in the judgment of both to protect the Company, the Trustee, any Agent or any
authenticating agent from any loss which any of them may suffer if a Security
is replaced. The Company may charge for its expenses in replacing a Security.

Every replacement Security is an additional obligation of the Company.

Section 2.08. Outstanding Securities.

The Securities outstanding at any time are all the Securities authenticated
by the Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section as not outstanding.

If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.

If Securities are considered paid under Section 3.01, they cease to be
outstanding and interest on them ceases to accrue.

A Security does not cease to be outstanding because the Company or an
affiliate of the Company holds the Security.

Section 2.09. Cancellation.

The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Securities surrendered to them for registration of transfer, exchange or

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payment. The Trustee shall cancel all Securities surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall dispose
of cancelled Securities as the Company directs. Except as otherwise provided
in Sections 2.06, 2.07 and 8.05, the Company may not issue new Securities to
replace Securities that it has paid or that have been delivered to the Trustee
for cancellation.

Section 2.10. Defaulted Interest.

If the Company defaults in a payment of interest on the Securities, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on
a subsequent special record date, in each case at the rate provided in the
Securities and in Section 3.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each
Security and the date of the proposed payment. The Company shall fix or cause
to be fixed each such special record date and payment date, provided that no
such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company shall mail or cause to be mailed to Holders a notice
that states the special record date, the related payment date and the amount
of such interest to be paid.

ARTICLE 3

COVENANTS

Section 3.01. Payment of Securities.

The Company shall pay the principal of and interest on the Securities on the
dates and in the manner provided in the Securities. Principal and interest
shall be considered paid on the date due if the Paying Agent (other than the
Company or a subsidiary) holds on that date money designated for and
sufficient to pay all principal and interest then due.

The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
2% per annum in excess of the then applicable interest rate on the Securities,
compounded quarterly, or at the maximum rate permitted by law, whichever is
less; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate, compounded
quarterly, or at the maximum rate permitted by law, whichever is less.

Section 3.02. SEC Reports.

The Company shall deliver to the Trustee within 15 days after it files them
with the SEC copies of the annual reports and of the information, documents,
and other reports (or copies of such portions of any of the foregoing as the
SEC may by rules and regulations prescribe) which the Company is required to
file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The
Company also shall comply with the other provisions of TIA (S) 314(a). This
Section 3.02 shall only be applicable at such times, if any, as this Indenture
is subject to the TIA.

Section 3.03. Mandatory Redemption Upon Debt Financing.

The Company shall apply the net proceeds of any debt financing of the
Company (other than proceeds not in excess of $4 million at any time
outstanding under the Credit Agreement) to the repayment of all amounts
outstanding under the Securities until all amounts due under the Securities
are paid and satisfied in full.

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ARTICLE 4

SUCCESSORS

Upon any consolidation or merger of the Company, the successor corporation
formed by such consolidation or into or with which the Company is merged shall
assume all the obligations of the Company under the Securities and hereunder,
and shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor person has been named as the Company herein.

ARTICLE 5

DEFAULTS AND REMEDIES

Section 5.01. Events of Default.

An "Event of Default" occurs if:

(1) any payment of principal, interest, premium (if any) or any other sum
required to be paid under any Security is not made when due,

(2) any of the representations and warranties of the Company contained
herein are not true, complete and correct in every respect when made,

(3) the Company shall suffer or consent to or apply for the appointment
of a receiver, trustee, custodian or liquidator of itself or any of its
material properties, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of
creditors,

(4) the Company shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with
creditors or any other relief under any Bankruptcy Law; or any involuntary
petition or proceeding pursuant to any Bankruptcy Law is filed or commenced
against the Company, which petition or proceeding (a) results in the entry
of an order for relief or any such adjudication of relief, or (b) remains
unreleased, undischarged, or unbonded for a period of sixty (60) days, or
(c) the Company files an answer admitting jurisdiction of the court and the
material allegations of the petition,

(5) the Company shall be adjudicated a bankrupt, or an order for relief
shall be entered by any court of competent jurisdiction under any
Bankruptcy Law, or

(6) the dissolution or liquidation of the Company, or the Company or a
majority of the directors or majority of the shareholders of the Company
shall take action seeking to effect the dissolution or liquidation of the
Company.

The term "Bankruptcy Law" means title 11, U.S. Code or any similar Federal
or State law for the relief of debtors.

Section 5.02. Acceleration.

If an Event of Default (other than an Event of Default specified in clauses
(3), (4) and (5) of Section 5.01) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of
the then outstanding Securities by notice to the Company and the Trustee, may
declare the unpaid principal of and any accrued interest on all the Securities
to be due and payable. Upon such declaration the principal and interest shall
be due and payable immediately. If an Event of Default specified in clause
(3), (4) or (5) of Section 5.01 occurs, such an amount shall ipso facto become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder. The Holders of a majority in principal
amount of the then outstanding Securities by notice to the Trustee may rescind
an acceleration and its consequences if the rescission would not conflict with
any judgment or decree and if all existing Events of Default have been cured
or waived.

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Section 5.03. Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal or interest on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the
Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.

Section 5.04. Waiver of Past Defaults.

The Holders of a majority in principal amount of the then outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences except a Default or Event of Default in the
payment of the principal of or interest on any Security.

Section 5.05. Control by Majority.

The Holders of a majority in principal amount of the then outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, is unduly prejudicial to the rights of
other Securityholders, or would involve the Trustee in personal liability.

Section 5.06. Limitation on Suits.

A Securityholder may pursue a remedy with respect to this Indenture or the
Securities only if:

(1) the Holder gives to the Trustee notice of a continuing Event of
Default;

(2) the Holders of at least 25% in principal amount of the then
outstanding Securities make a request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;

(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and

(5) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Securities do not give the Trustee a
direction inconsistent with the request.

A Securityholder may not use this Indenture to prejudice the rights of another
Securityholder or to obtain a preference or priority over another
Securityholder.

Section 5.07. Rights of Holders to Receive Payment.

Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal and interest on the
Security, on or after the respective due dates expressed in the Security, or
to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of the
Holder.

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Section 5.08. Collection Suit by Trustee.

If an Event of Default specified in Section 5.01(1) occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company for the whole amount of principal and
interest remaining unpaid on the Securities and interest on overdue principal
and interest and such further amount as shall be sufficient to cover the costs
and, to the extent lawful, expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.

Section 5.09. Trustee May File Proofs of Claim.

The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee and
the Securityholders allowed in any judicial proceedings relative to the
Company, its creditors or its property. Nothing contained herein shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Securityholder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Securityholder in any such proceeding.

Section 5.10. Priorities.

If the Trustee collects any money pursuant to this Article, it shall pay out
the money in the following order:

First: to the Trustee for amounts due under Section 6.07;

Second: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts
due and payable on the Securities for principal and interest,
respectively; and

Third: to the Company.

The Trustee may fix a record date and payment date for any payment to
Securityholders.

ARTICLE 6

TRUSTEE

Section 6.01. Duties of Trustee.

(1) If an Event of Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.

(2) Except during the continuance of an Event of Default:

(A) The Trustee need perform only those duties that are specifically set
forth in this Indenture and no others.

(B) In the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee
and conforming to the requirements of this Indenture. However, the Trustee
shall examine the certificates and opinions to determine whether or not
they conform to the requirements of this Indenture.

(3) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own wilful misconduct, except
that:

(A) This paragraph does not limit the effect of paragraph (2) of this
Section.

(B) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.

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(C) The Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by
it pursuant to Section 5.05.

(4) Every provision of this Indenture that in any way relates to the Trustee
is subject to paragraphs (1), (2) and (3) of this Section.

(5) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.

(6) The Trustee shall not be liable for interest on any money received by it
except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.

Section 6.02. Rights of Trustee.

(1) The Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.

(2) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel.

(3) The Trustee may act through agents and shall not be responsible for the
misconduct or negligence of any agent appointed with due care.

(4) The Trustee shall not be liable for any action it takes or omits to take
in good faith which it believes to be authorized or within its rights or
powers.

Section 6.03. Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with the Company or an Affiliate
with the same rights it would have if it were not Trustee. Any Agent may do
the same with like rights. However, the Trustee is subject to Sections 6.10
and 6.11.

Section 6.04. Trustee's Disclaimer.

The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's use
of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in the Indenture or any statement in the Securities
other than its authentication.

Section 6.05. Notice of Defaults.

If a Default or Event of Default occurs and is continuing and if it is known
to the Trustee, the Trustee shall mail to Securityholders a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment on any Security, the Trustee may
withhold the notice if and so long as a committee of its Trust Officers in
good faith determines that withholding the notice is in the interests of
Securityholders.

Section 6.06. Reports by Trustee to Holders.

Within 60 days after May 15 of each year in which any Securities are
outstanding beginning with the May 15 following the date of this Indenture,
the Trustee shall mail to Securityholders a brief report dated as of such May
15 that complies with TIA (S) 313(a) but only if such report is required by
TIA (S) 313(a). The Trustee

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also shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by
mail all reports to the persons described in TIA (S) 313(c).

A copy of each report at the time of its mailing to Securityholders shall be
filed with the SEC and each stock exchange on which the Securities are listed.
The Company shall notify the Trustee when the Securities are listed on any
stock exchange.

The provisions of this Section 6.06 shall only be applicable at such times,
if any, as this Indenture is subject to the TIA.

Section 6.07. Compensation and Indemnity.

The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable out-of-
pocket expenses incurred by it. Such expenses may include the reasonable
compensation and out-of-pocket expenses of the Trustee's agents and counsel.

The Company shall indemnify the Trustee against any loss or liability
incurred by it except as set forth in the next paragraph. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity. The
Company shall defend the claim and the Trustee shall cooperate in the defense.
The Trustee may have separate counsel and the Company shall pay the reasonable
fees and expenses of such counsel. The Company need not pay for any settlement
made without its consent, which consent shall not be unreasonably withheld.

The Company need not reimburse any expense or indemnify against any loss or
liability incurred by the Trustee through negligence or bad faith.

To secure the Company's payment obligations in this Section, the Trustee
shall have a lien prior to the Securities on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.

When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 5.01(3), (4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

Section 6.08. Replacement of Trustee.

A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.

The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the then outstanding Securities may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove
the Trustee if:

(1) the Trustee fails to comply with Section 6.10;

(2) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;

(3) a Custodian or public officer takes charge of the Trustee or its
property; or

(4) the Trustee becomes incapable of acting.

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If the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Securities may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.

If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the then outstanding
Securities may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

If the Trustee fails to comply with Section 6.10, any Securityholder may
petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to
the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee
shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Securityholders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided
for in Section 6.07. Notwithstanding replacement of the Trustee pursuant to
this Section 6.08, the Company's obligations under Section 6.07 hereof shall
continue for the benefit of the retiring trustee with respect to expenses and
liabilities incurred by it prior to such replacement.

Section 6.09. Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.

Section 6.10. Eligibility; Disqualification.

This Indenture shall always have a Trustee who satisfies the requirements of
TIA (S) 310(a)(1). The Trustee shall always have a combined capital and
surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA (S) 310(b).

Section 6.11. Preferential Collection of Claims Against Company.

The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.

ARTICLE 7

REDEMPTION AND PREPAYMENT

Section 7.01. Notices to Trustee.

If the Company elects to redeem Securities pursuant to the optional
redemption provisions of Section 7.07 hereof, it shall furnish to the Trustee,
at least 15 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the redemption date, and (ii) the
principal amount of Securities to be redeemed.

Section 7.02. Selection of Securities to Be Redeemed.

If less than all of the Securities are to be redeemed at any time, the
Trustee shall select the Securities to be redeemed among the Holders of the
Securities on a pro rata basis, by lot or in accordance with any other method
the Trustee considers fair and appropriate. In the event of partial redemption
by lot, the particular Securities to

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be redeemed shall be selected, unless otherwise provided herein, not less than
15 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Securities not previously called for redemption.

The Trustee shall promptly notify the Company in writing of the Securities
selected for redemption and, in the case of any Security selected for partial
redemption, the principal amount thereof to be redeemed. Securities and
portions of Securities selected shall be in amounts of $1,000 or whole
multiples of $1,000; except that if all of the Securities of a Holder are to
be redeemed, the entire outstanding amount of Securities held by such Holder,
even if not a multiple of $1,000, shall be redeemed. Except as provided in the
preceding sentence, provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption.

Section 7.03. Notice of Redemption.

At least 15 days but not more than 60 days before a redemption date, the
Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Securities are to be redeemed at its
registered address.

The notice shall identify the Securities to be redeemed and shall state:

(1) the redemption date;

(2) the redemption price;

(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
redemption date upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion shall be
issued upon cancellation of the original Security;

(4) the name and address of the Paying Agent;

(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price; and

(6) that, unless the Company defaults in making such redemption payment,
interest on Securities called for redemption ceases to accrue on and after
the redemption date.

At the Company's request, the Trustee shall give the notice of redemption in
the Company's name and at its expense; provided, however, that the Company
shall have delivered to the Trustee, at least 30 days prior to the redemption
date, an Officers' Certificate requesting that the Trustee give such notice
and setting forth the information to be stated in such notice as provided in
the preceding paragraph.

Section 7.04. Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 7.03 hereof,
Securities called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.

Section 7.05. Deposit of Redemption Price.

One business day prior to the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Securities to be redeemed on
that date. The Trustee or the Paying Agent shall promptly return to the
Company any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of, and
accrued interest on, all Securities to be redeemed.

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If the Company complies with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the
Securities or the portions of Securities called for redemption. If a Security
is redeemed on or after an interest record date but on or prior to the related
interest payment date, then any accrued and unpaid interest shall be paid to
the Person in whose name such Security was registered at the close of business
on such record date. If any Security called for redemption shall not be so
paid upon surrender for redemption because of the failure of the Company to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case
at the rate provided in the Securities.

Section 7.06. Securities Redeemed in Part.

Upon surrender of a Security that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Security equal in principal
amount to the unredeemed portion of the Security surrendered.

Section 7.07. Optional Redemption.

(1) At any time and from time to time prior to the maturity of the
Securities, the Company shall have the option to redeem the Securities, in
whole or in part, at 100% of the principal amount thereof plus accrued and
unpaid interest to the applicable redemption date; provided, however, that
(i) prepayments shall first be applied to payment of accrued and unpaid
interest and fees due to the Holders hereunder, if any, and (ii) each
prepayment of principal hereunder shall be in an amount not less than
$500,000.00, after payment of accrued an unpaid interest and fees due to
the Holders hereunder, if any.

(2) Any redemption pursuant to this Section 7.07 shall be made pursuant
to the provisions of Section 7.01 through 7.06 hereof.

Section 7.08. Mandatory Redemption.

Except as set forth under Section 3.03 hereof, the Company shall not be
required to make mandatory redemption payments with respect to the Securities.

Section 7.09. Redemption by Application of Debt Financing Proceeds.

(1) In the event that, pursuant to Section 3.03 hereof, the Company shall
be required to apply the proceeds of a debt financing to the purchase of
Securities (a "Financing Redemption"), it shall, within 5 days of the
consummation of such financing, furnish to the Trustee an Officers'
Certificate setting forth (i) the date of the consummation of such
financing, (ii) the gross and net proceeds of such financing, (iii) the
redemption date for the Financing Redemption, which date shall be at least
15 but not more than 30 days after consummation of such financing, and (iv)
the principal amount of Securities to be redeemed.

(2) Any redemption pursuant to this Section 7.09 shall be made pursuant
to the provisions of the immediately preceding paragraph and Section 7.02
through 7.06 hereof.

ARTICLE 8

AMENDMENTS

Section 8.01. Without Consent of Holders.

The Company and the Trustee may amend or supplement this Indenture or the
Securities without the consent of any Securityholder:

(1) to cure any ambiguity, defect or inconsistency; provided that such
amendment or supplement does not adversely affect the rights of any
Securityholder; or

(2) to make any change that does not adversely affect the legal rights
hereunder of any Securityholder.

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Section 8.02. With Consent of Holders.

Subject to Section 5.07, the Company and the Trustee may amend this
Indenture or the Securities with the written consent of the Holders of at
least 66 2/3% in principal amount of the then outstanding Securities. Subject
to Sections 5.04 and 5.07, the Holders of 66 2/3% in principal amount of the
Securities then outstanding may also permit non-compliance in a particular
instance by the Company with any provision of this Indenture or the
Securities. However, without the consent of each Securityholder affected, an
amendment or permitted non-compliance under this Section may not:

(1) change the amount of Securities whose Holders must consent to an
amendment, supplement or waiver of any provision of this Indenture or the
Notes;

(2) reduce the rate of or extend the time for payment of interest on any
Security;

(3) reduce the principal of or change the fixed maturity of any Security;

(4) make the principal of, or interest on, any Security payable with
anything or in any manner other than as provided for in this Indenture and
the Securities as in effect on the date hereof;

(5) make any change in Section 5.04, 5.07 or 8.02 (this sentence); or

(6) waive a default in the payment of the principal of, or interest on,
any Security.

To secure a consent of the Holders under this Section, it shall not be
necessary for the Holders to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.

After an amendment or waiver under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing the
amendment or waiver.

Section 8.03. Compliance with Trust Indenture Act.

At such times, if any, as this Indenture is subject to the TIA, every
amendment to this Indenture or the Securities shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.

Section 8.04. Revocation and Effect of Consents.

Until an amendment or waiver becomes effective, a consent to it by a Holder
of a Security is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made
on any Security. However, any such Holder or subsequent Holder may revoke the
consent as to his Security or portion of a Security if the Trustee receives
the notice of revocation before the date on which the Trustee receives an
Officer's Certificate certifying that the Holders of the requisite principal
amount of Securities have consented to the amendment or waiver.

The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment or
waiver. If a record date is fixed, then notwithstanding the provisions of the
immediately preceding paragraph, those persons who were Holders at such record
date (or their duly designated proxies), and only those persons, shall be
entitled to consent to such amendment or waiver or to revoke any consent
previously given, whether or not such persons continue to be Holders after
such record date. No consent shall be valid or effective for more than 90 days
after such record date unless consents from Holders of the principal amount of
Securities required hereunder for such amendment or waiver to be effective
shall have also been given and not revoked within such 90-day period.

After an amendment or waiver becomes effective it shall bind every
Securityholder, unless it is of the type described in any of clauses (1)
through (6) of Section 8.02. In such case, the amendment or waiver shall bind

B-14
<PAGE>

each Holder of a Security who has consented to it and every subsequent Holder
of a Security that evidences the same debt as the consenting Holder's
Security.

Section 8.05 Notation on or Exchange of Securities.

The Trustee may place an appropriate notation about an amendment or waiver
on any Security thereafter authenticated. The Company in exchange for all
Securities may issue and the Trustee shall authenticate new Securities that
reflect the amendment or waiver.

Section 8.06. Trustee Protected.

The Trustee shall sign all supplemental indentures, except that the Trustee
need not sign any supplemental indenture that adversely affects its rights.

ARTICLE 9

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants the following:

Section 9.01 Due Incorporation; Good Standing.

The Company is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated. The
Company is duly qualified or licensed to do business and is in good standing
as a foreign corporation in all jurisdictions in which the failure to obtain
such qualification or licensing could reasonably be expected to have a
material adverse effect on the business or financial condition of the Company.
The Company has all requisite corporate power and authority to conduct its
business, to own, lease, sell or otherwise dispose of property, and to enter
into and perform this Agreement.

Section 9.02 Due Authorization.

The Securities have been duly authorized by all necessary corporate action
on the part of the Company. Neither the execution and delivery nor the
performance of the Securities (i) conflicts with the certificate of
incorporation or by-laws of the Company, (ii) violates any law, regulation or
ordinance, or any order or ruling of any court or governmental entity,
applicable to the Company or (iii) results in a breach or violation of, or
constitutes a default under, any agreement or instrument to which the Company
is a party or by which it or any of its properties or assets are bound other
than any breach or violation which could not reasonably be expected to have a
material and adverse effect on (a) the business, operations, properties,
assets or financial condition of the Company, or (b) the ability of the
Company to perform its obligations under any material agreement in accordance
with its terms.

Section 9.03 Enforceability.

The Securities, when issued and authenticated in accordance with the terms
of this Indenture and delivered against receipt of tendered 6% Convertible
Subordinated Debentures due 2012 of the Company in accordance with the terms
of the Company's Offer to Exchange dated October 7, 1996, will be the legally
valid and binding obligations of the Company, enforceable against the Company
in accordance with their terms, subject (i) to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other laws of general
applicability relating to or affecting creditors' rights and (ii) to general
principles of equity, whether such enforcement is considered in a proceeding
at law or in equity.

B-15
<PAGE>

ARTICLE 10

MISCELLANEOUS

Section 10.01. Trust Indenture Act Controls.

At such times, if any, as this Indenture is subject to the TIA, if any
provision of this Indenture limits, qualifies, or conflicts with the duties
imposed by the TIA, the TIA shall control.

Section 10.02. Notices.

Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in person or mailed by first-class mail
to the other's address stated in Section 10.10. The Company or the Trustee by
notice to the other may designate additional or different addresses for
subsequent notices or communications.

Any notice or communication to a Securityholder shall be mailed by first-
class mail to his address shown on the register kept by the Registrar. Failure
to mail a notice or communication to a Securityholder or any defect in it
shall not affect its sufficiency with respect to other Securityholders.

If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives
it.

If the Company mails a notice or communication to Securityholders, it shall
mail a copy to the Trustee and each Agent at the same time.

All other notices or communications shall be in writing.

Section 10.03. Communication by Holders with Other Holders.

Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).

Section 10.04. Certificate as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with.

Section 10.05. Statements Required in Certificate.

Each certificate with respect to compliance with a condition or covenant
provided for in this Indenture (other than a certificate pursuant to TIA (S)
314(a)(4)) shall include:

(1) a statement that the person making such certificate or opinion has
read such covenant or condition;

(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;

(3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

B-16
<PAGE>

(4) a statement as to whether or not, in the opinion of such person, such
condition or covenant has been complied with.

Section 10.06. Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or a meeting of
Securityholders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.

Section 10.07. Legal Holidays.

A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open. If a payment date is a Legal Holiday
at a place of payment, payment may be made at that place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for
the intervening period.

Section 10.08. No Recourse Against Others.

A director, officer, employee or stockholder, as such, of the Company shall
not have any liability for any obligations of the Company under the Securities
or the Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.

Section 10.09. Counterparts.

This Indenture may be executed in any number of counterparts and by the
parties hereto in separate counterparts, each of which when so executed shall
be deemed to be an original and all of which taken together shall constitute
one and the same agreement.

Section 10.10. Variable Provisions.

"Officer" means the Chairman of the Board, the President, any Vice-
President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Company.

The Company initially appoints the Trustee as Paying Agent, Registrar and
authenticating agent.

The Company's address is:

StreamLogic Corporation
21329 Nordhoff Street
Chatsworth, California 91311
Attn: Treasurer

The Trustee's address is:

[TRUSTEE]

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

-------------------------
Attention:

Section 10.11. Governing Law.

The internal laws of the State of New York shall govern this Indenture and
the Securities, without regard to the conflict of laws provisions thereof.

B-17
<PAGE>

Section 10.12. No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.

Section 10.13. Successors.

All agreements of the Company in this Indenture and the Securities shall
bind its successor. All agreements of the Trustee in this Indenture shall bind
its successor.

Section 10.14. Severability.

In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

Section 10.15. Photocopies.

In any action on a Security, the Holder or its assignee need not produce or
file the original of such Security, but need only file a photocopy of such
Security certified by the Holder or such buyer, transferee or assignee to be a
true and correct copy of the Security in all material respects.

Section 10.16. Table of Contents, Headings, Etc.

The Table of Contents, Cross-Reference Table, and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.

B-18
<PAGE>

SIGNATURES

Dated: as of , 1996 STREAMLOGIC CORPORATION

By __________________________________

Attest:

_____________________________________

(SEAL)

Dated: as of , 1996 [TRUSTEE]

By __________________________________

(SEAL)

<PAGE>

EXHIBIT A

(FACE OF SECURITY)

R- $

STREAMLOGIC CORPORATION
INCREASING RATE NOTE
DUE , 1998

StreamLogic Corporation, a Delaware corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred
to), for value received promises to pay to or registered assigns,
the principal sum of of Dollars on , 1998.

<TABLE>
<S> <C>
Interest Payment Dates: March 31, June 30, September 30 and December 31
Record Dates: March 15, June 15, September 15 and December 15
</TABLE>

Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which will for all purposes have the same effect
as if set forth at this place.

IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officers and a facsimile of
its corporate seal to be reproduced on this Security.

CERTIFICATE OF AUTHENTICATION: This is one of the Securities described
within the within-mentioned Indenture.

Dated:

[TRUSTEE] STREAMLOGIC CORPORATION
as Trustee

By __________________________________ By __________________________________
Authorized Signature

By __________________________________

(SEAL)

B-A-1
<PAGE>

(BACK OF SECURITY)

STREAMLOGIC CORPORATION

INCREASING RATE NOTE DUE , 1998

1. Interest. The Company promises to pay interest on the principal amount of
this Security (i) from and after , 1996 through ,
1997, at a rate of fourteen percent (14%) per annum, and (ii) thereafter, at a
rate of sixteen percent (16%) per annum. Interest on the amount outstanding
hereunder from time to time shall be computed on the basis of a 360-day year,
actual days elapsed, from and including the date of the Securities until, but
not including, the date of payment of all amounts due hereunder. The first
payment of interest on the Securities shall be due and payable in arrears on
December 31, 1996 for the period from date of the Securities through December
31, 1996 and thereafter interest shall be due and payable quarterly in arrears
on each March 31, June 30, September 30 and December 31.

2. Method of Payment. The Company will pay interest on the Securities to the
persons who are registered holders of Securities at the close of business on
the record date for the next interest payment date. Holders must surrender
Securities to a Paying Agent to collect principal payments. Principal and
interest on the Securities will be payable at the office or agency of the
Company maintained for such purpose within or without the City and State of
New York, or, at the option of the Company, payment of interest may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders; provided that payment by wire transfer of immediately available funds
will be required with respect to principal of and interest on all Securities
the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.

At any time and from time to time the Holder of this Security may elect not
to accept cash as payment of principal and/or interest due hereunder, but,
instead, may offset on a dollar for dollar basis any amounts payable by the
Holder of this Security to the Company under the Warrant Agreement from time
to time against principal and/or interest due at that time hereunder. If the
Holder hereof desires to exercise this election, it shall give written notice
of such election to the Company and the Paying Agent not less than five days
prior to the day that the principal and/or interest becomes due and payable.
Such written notice shall include a statement of the amount owing by the
Holder of this Security under the Warrant Agreement and the amount to be
offset against principal and/or interest owing under this Security.

3. Paying Agent and Registrar. The Trustee will act as Paying Agent and
Registrar. The Company may change any Paying Agent, Registrar or co-registrar
without prior notice. The Company or any of its Subsidiaries may act in any
such capacity.

4. Indenture. The Company issued the Securities under an Indenture dated as
of , 1996 (the "Indenture") between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and are subject
to, and qualified by, all such terms, certain of which are summarized hereon,
and Securityholders are referred to the Indenture for a statement of such
terms. The Securities are unsecured general obligations of the Company limited
to $8,500,000 in aggregate principal amount.

5. Transfer, Exchange. The Securities are in registered form without
coupons. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Registrar may require a holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the Indenture.

6. Persons Deemed Owners. The registered holder of a Security may be treated
as its owner for all purposes.

B-A-2
<PAGE>

7. Amendments and Waivers. Subject to certain exceptions, the Indenture or
the Securities may be amended with the consent of the holders of at least 66
2/3% in principal amount of the then outstanding Securities, and any existing
default may be waived with the consent of the holders of at least a majority
in principal amount of the then outstanding Securities, except a waiver of any
default in the payment of principal of or interest on any Security. Without
the consent of any Securityholder, the Indenture or the Securities may be
amended to cure any ambiguity, defect or inconsistency, to provide for
assumption of the Company's obligations to Securityholders or to make any
change that does not adversely affect the rights of any Securityholder.

8. Defaults and Remedies. An Event of Default is: default in payment of
interest on the Securities; default in payment of principal on them; any of
the Company's representations and warranties shall be not true, complete or
correct when made; certain events of bankruptcy or insolvency; and dissolution
or liquidation of the Company. If an Event of Default occurs and is
continuing, the Trustee or the holders of at least 25% in principal amount of
the then outstanding Securities may declare all the Securities to be due and
payable immediately, except that in the case of an Event of Default arising
from certain events of bankruptcy or insolvency, all outstanding Securities
become due and payable immediately without further action or notice.
Securityholders may not enforce the Indenture or the Securities except as
provided in the Indenture. The Trustee may require indemnity satisfactory to
it before it enforces the Indenture or the Securities. Subject to certain
limitations, holders of a majority in principal amount of the then outstanding
Securities may direct the Trustee in its exercise of any trust or power.

9. Trustee Dealings with Company. [TRUSTEE], the Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or its affiliates, and may
otherwise deal with the Company or its affiliates, as if it were not Trustee.

10. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issue of the Securities.

11. Authentication. This Security shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.

12. Successors. When a successor assumes all the obligations of its
predecessor under the Securities and the Indenture, the predecessor will be
released from those obligations.

13. Abbreviations. Customary abbreviations may be used in the name of a
Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).

The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture, which has in it the text of this
Security in larger type. Request may be made to: Treasurer, StreamLogic
Corporation 21329 Nordhoff Street, Chatsworth, California 91311.

All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture unless otherwise defined
herein.

B-A-3
<PAGE>

ASSIGNMENT FORM

To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Please insert social security or other identification number of assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
________________________________________________ agent to transfer this Security
on the books of the Company. The agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: ______________ Your Signature: _______________________________
_______________________________

(Sign exactly as your name appears
on the other side of this Security)

Signature Guaranteed:

- -------------------------------
Signature must be guaranteed
by a member of an approved Signature
Guarantee Medallion Program

B-A-4
<PAGE>

APPENDIX C

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

WARRANT AGREEMENT
BETWEEN
STREAMLOGIC CORPORATION
AND
WELLS FARGO BANK, N.A.
AS WARRANT AGENT

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

DATED AS OF , 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 1. Definitions............................................... 1
Section 2. Issuance; Form of Warrant; Execution; Registration........ 3
2.1 Issuance.................................................. 3
2.2 Form of Warrant; Execution of Warrants.................... 3
2.3 Registration.............................................. 3
2.4 Countersignature of Warrants.............................. 4
Section 3. Transfer and Exchange of Warrants......................... 4
Section 4. Term of Warrants; Exercise of Warrants; Adjustments of
Exercise Price; Compliance with Government Regulations;
Redemption................................................ 4
4.1 Term of Warrants.......................................... 4
4.2 Exercise of Warrants...................................... 5
4.3 Reset of Exercise Price and Early Termination of Exercise
Period.................................................... 5
4.4 Compliance with Government Regulations: Registration Under
the Securities Act........................................ 6
Section 5. Payment of Taxes and Fees................................. 7
Section 6. Mutilated or Lost Warrant Certificates.................... 7
Section 7. Reservation of Warrant Shares............................. 7
Section 8. Adjustment of Exercise Price; Number of Warrant Shares and
Shares of Capital Stock Warrants Are Exercisable Into..... 7
8.1 Pricing and Share Adjustments............................. 7
8.2 Notice of Adjustment...................................... 12
8.3 Preservation of Purchase Rights upon Merger or
Consolidation............................................. 12
Section 9. Fractional Interests...................................... 12
Section 10. No Rights as Stockholders; Notices to Holders............. 13
Section 11. By the Company............................................ 13
11.1 Legal Status; Qualification............................... 13
11.2 No Conflicts.............................................. 14
11.3 Binding and Enforceable................................... 14
Section 12. Payments in U.S. Currency................................. 14
Section 13. Merger or Consolidation or Change of Name of Warrant
Agent..................................................... 14
Section 14. Appointment of Warrant Agent.............................. 14
14.1 Obligations of the Warrant Agent.......................... 15
Section 15. Change of Warrant Agent................................... 16
Section 16. Notices................................................... 17
Section 17. Cancellation of Warrants.................................. 17
Section 18. Supplements and Amendments................................ 17
Section 19. Successors................................................ 17
Section 20. Applicable Law............................................ 17
Section 21. Benefits of this Agreement................................ 18
Section 22. Records................................................... 18
Section 23. Counterparts.............................................. 18
Section 24. Captions.................................................. 18
</TABLE>

i
<PAGE>

WARRANT AGREEMENT, dated as of , 1996, between STREAMLOGIC
CORPORATION, a Delaware corporation (the "Company"), and WELLS FARGO BANK,
N.A., a national banking association, as Warrant Agent (together with any
successors and assigns, the "Warrant Agent").

WITNESSETH:

WHEREAS, StreamLogic Corporation is the issuer of 6% Convertible
Subordinated Debentures Due 2012 in the original face amount of $75,000,000
(collectively, the "Debentures");

WHEREAS, the Company has made a tender offer (the "Tender Offer") to all
holders of the Debentures pursuant to which the Company offered to exchange
all of the Debentures for cash, increasing rate unsecured promissory notes,
common stock of the Company and warrants to purchase common stock of the
Company (the "Warrants"), as more fully described below;

WHEREAS, the Company desires to issue the Warrants, each of which entitles
the holder thereof to purchase one share of the Company's common stock (each
of said shares of common stock deliverable upon exercise of the Warrants, a
"Warrant Share"); and

WHEREAS, the Company wishes the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, division, transfer, exchange and exercise of Warrants;

NOW, THEREFORE, in consideration of the foregoing, to implement the terms of
the Tender Offer, and for the purpose of defining the terms and provisions of
the Warrants and the respective rights and obligations thereunder of the
Company and the registered owners of the Warrants and any security into which
they may be exchanged (the "Holders"), the Company and the Warrant Agent
hereby agree as follows:

SECTION 1. DEFINITIONS.

The following terms, as used herein, have the following meanings (all terms
used herein in the singular to have the correlative meanings when used in the
plural and vice versa):

1.1 "Agreement" means this Warrant Agreement, as the same may be amended,
modified or supplemented from time to time.

1.2 "Business Day" means a day other than (a) a Saturday or Sunday, (b) any
day on which banking institutions located in the City of Los Angeles,
California, are required or authorized by law or by local proclamation to
close or (c) any day on which shares are not traded on the NASDAQ National
Market System.

1.3 "Common Stock" shall have the meaning ascribed to such term in Section
8.1(i).

1.4 "Common Stock Price" on any date of determination shall mean the last
reported sale price regular way of the shares of Common Stock on the principal
national securities exchange on which the shares of Common Stock are listed or
admitted to trading, or if such shares are not listed or admitted to trading
on any national securities exchange, on the Nasdaq National Market System (or,
if no reported sale takes place on such day, the average of the closing bid
and asked prices on such day on such exchange or the Nasdaq National Market
System). If the shares of Common Stock are not listed or admitted to trading
on any national securities exchange or authorized for quotation on the Nasdaq
National Market System, "Common Stock Price" shall mean the average of the
closing bid and asked quotations as reported by The Nasdaq Small Cap Market
for such day, or if the shares of Common Stock are not authorized for
quotation on The Nasdaq Stock Market, the average of the closing bid and asked
quotations as furnished by two member firms of the National Association of
Securities Dealers, Inc. selected from time to time by the Company for that
purpose, or if no such quotations are available, as determined in good faith
by the disinterested non-employee members of the Board of Directors of the
Company. In determining the Common Stock Price, the Warrant Agent shall be
entitled to rely on such prices

C-1
<PAGE>

as may be published in The Wall Street Journal, The New York Times or any
other financial publication of like stature or as may be provided to the
Warrant Agent for such purpose by an authorized employee or agent of the
Company.

1.5 "Convertible Securities" has the meaning ascribed to such term in
Section 8.1(d) hereof.

1.6 "Early Expiration Date" has the meaning ascribed to such term in Section
4.3(b).

1.7 "Early Expiration Election" has the meaning ascribed to such term in
Section 4.3(b).

1.8 "Early Expiration Trigger Date" has the meaning ascribed to such term in
Section 4.3(b).

1.9 "Exchange Date" means [insert the date on which the Company exchanges
Debentures tendered to the Company pursuant to the Tender Offer for cash,
Common Stock, promissory notes and Warrants].

1.10 "Exercise Period" has the meaning ascribed to such term in Section 4.1
hereof.

1.11 "Exercise Price" means $3.60 as adjusted from time to time pursuant to
Section 4.3 and Section 8 hereof.

1.12 "Five-Day Average Price" as of any date of determination shall mean the
average of the Common Stock Prices on each of the immediately preceding five
consecutive Trading Days, after exclusion of the highest and lowest such
prices; provided, however, that if such highest or lowest prices occur on more
than one such Trading Day, such price shall be excluded only once in
calculating such average, so that such average always is based on the Common
Stock Prices on three Trading Days.

1.13 "Holder" has the meaning ascribed to such term in the preamble hereto.

1.14 "NASD" has the meaning ascribed to such term in Section 4.2 hereof.

1.15 "No-Exercise Period" shall mean any period of up to 90 consecutive days
designated by the Company as a period during which Warrants may not be
exercised. The Company shall designate the commencement of no more than one
No-Exercise Period in any twelve-month period. A No-Exercise Period shall
commence on such date as is designated by the Company in a written notice
(which may be by facsimile transmission) of the commencement of such No-
Exercise Period delivered to the Warrant Agent no later than the close of
business of the Warrant Agent on the Business Day immediately preceding the
first day of such No-Exercise Period. Such No-Exercise Period shall terminate
on such date as is designated by the Company in a written notice (which may be
by facsimile transmission) of the termination of such No-Exercise Period
delivered to the Warrant Agent no later than the end of Business on the
Business Day immediately preceding such date of termination; provided,
however, that such No-Exercise Period shall terminate automatically and
without any action on the part of the Company at the close of business on the
90th day thereof, should the Company not designate an earlier termination
date. The Company shall take all reasonable measures and efforts to limit the
length of each No-Exercise Period, consistent with the reason for the No-
Exercise Period and shall terminate each No-Exercise Period as quickly as
reasonably possible, consistent with the reason for the No-Exercise Period.

1.16 "Person" means a natural person, a corporation, a partnership, a trust,
a joint venture, authority or any other entity or organization.

1.17 "Price Per Share" has the meaning ascribed to such term in Section
8.1(e)(ii) hereof.

1.18 "Reset Date" has the meaning ascribed to such term in Section 4.3(a).

1.19 "Reset Election" has the meaning ascribed to such term in Section
4.3(a).

1.20 "Reset Price" has the meaning ascribed to such term in Section 4.3(a).

C-2
<PAGE>

1.21 "Rights" has the meaning ascribed to such term in Section 8.1(b)
hereof.

1.22 "Securities Act" has the meaning ascribed to such term in Section 4.4.

1.23 "SEC" means the United States Securities and Exchange Commission, or
any successor agency or authority thereto.

1.24 "Subsidiary" has the meaning ascribed to such term in Section 8.1(c)
hereof.

1.25 "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading is open for trading, or if such shares are not so listed or
admitted to trading on any national securities exchange, a day on which The
Nasdaq Stock Market is open for trading.

1.26 "Transfer Agent" has the meaning ascribed to such term in Section 7
hereof.

1.27 "Twenty-Day Average Price" as of any date of determination shall mean
the average of the Common Stock Prices on each of the immediately preceding
twenty consecutive Trading Days, after the exclusion of the highest and lowest
such prices; provided, however, that if such highest or lowest prices occur on
more than one such Trading Day, such price shall be excluded only once in
calculating such average, so that such average always is based on the Common
Stock Prices on 18 Trading Days.

1.28 "Warrant" has the meaning ascribed to such term in the preamble hereto.

1.29 "Warrant Certificate" has the meaning ascribed to such term in Section
2.2 hereof.

1.30 "Warrant Register" has the meaning ascribed to such term in Section 2.3
hereof.

1.31 "Warrant Share" has the meaning ascribed to such term in the preamble
hereto.

SECTION 2. ISSUANCE; FORM OF WARRANT; EXECUTION; REGISTRATION.

2.1 Issuance. On the Exchange Date the Company shall issue to each holder of
Debentures that tenders any Debentures to the Company pursuant to the Tender
Offer Warrants to purchase 40 shares of Common Stock per $1,000 face amount of
the Debentures, subject to adjustment pursuant to Section 8 hereof. The
Company shall cause the Warrant Agent to issue to each such holder of
Debentures one or more Warrant Certificates (defined below) representing the
Warrants issued by the Company.

2.2 Form of Warrant; Execution of Warrants. The certificates evidencing the
Warrants (the "Warrant Certificates") shall be in registered form only and
shall be in the form set forth as Exhibit A hereto. The Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board,
President or one of its Vice Presidents. The signature of any such officer on
the Warrant Certificates may be manual or by facsimile. Any Warrant
Certificate may be signed on behalf of the Company by any person who, at the
actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate. Each Warrant
Certificate shall be dated the date it is countersigned by the Warrant Agent
pursuant to Section 2.4 hereof.

2.3 Registration. The Warrant Certificates shall be numbered and shall be
registered on the books of the Company maintained at the principal office of
the Warrant Agent initially in Los Angeles (or such other place in the
continental United States as the Warrant Agent shall from time to time notify
the Company and the Holders in writing) (the "Warrant Register"). The Company
and the Warrant Agent shall be entitled to treat the registered owner of any
Warrant as the owner in fact thereof for all purposes and shall not be bound
to recognize any equitable or other claim to or interest in such Warrant on
the part of any other person; provided that the Company and the Warrant Agent
shall follow the directions and instructions of a financial advisor of any
holder

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of Warrants which has been designated as such by such holder of Warrants in a
writing delivered to the Warrant Agent in a form reasonably satisfactory to
the Warrant Agent.

2.4 Countersignature of Warrants. The Warrant Certificates shall be
countersigned by the Warrant Agent and shall not be valid for any purpose
unless so countersigned. Warrant Certificates may be countersigned, however,
by the Warrant Agent and may be delivered by the Warrant Agent notwithstanding
that the persons whose manual or facsimile signatures appear thereon as proper
officers of the Company shall have ceased to be such officers at the time of
such countersignature, issuance or delivery. The Warrant Agent shall, upon
written instructions of the Chairman of the Board, the President, any Vice
President, the Treasurer or the Secretary of the Company, countersign, issue
and deliver Warrant Certificates entitling the Holders thereof to purchase not
more than an aggregate of 3,000,000 Warrant Shares (subject to adjustment
pursuant to Section 8 hereof) and shall countersign, issue and deliver Warrant
Certificates as otherwise provided in this Agreement.

SECTION 3. TRANSFER AND EXCHANGE OF WARRANTS.

Subject to the terms hereof, the Warrant Agent shall countersign, register
in the Warrant Register and deliver Warrants hereunder in accordance with the
written instructions of the Company. The Warrant Agent shall thereafter from
time to time register the transfer of any outstanding Warrants upon the
records to be maintained by it for that purpose, upon surrender of the Warrant
Certificate or Certificates evidencing such Warrants duly endorsed or
accompanied (if so required by it) by a written instrument or instruments of
transfer in form reasonably satisfactory to the Warrant Agent, duly executed
by the registered Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Subject to the terms
of this Agreement, each Warrant Certificate may be exchanged for another
Warrant Certificate or Certificates entitling the Holder thereof to purchase a
like aggregate number of Warrant Shares as the Warrant Certificate or
Certificates surrendered then entitles such Holder to purchase. Any Holder
desiring to exchange a Warrant Certificate or Certificates shall make such
request in writing delivered to the Warrant Agent, and shall surrender the
Warrant Certificate or Certificates to be so exchanged, duly endorsed or
accompanied (if so required by the Warrant Agent) by a written instrument or
instruments of transfer in form reasonably satisfactory to the Warrant Agent.
Upon registration of transfer, the Company shall issue and the Warrant Agent
shall countersign and deliver by certified mail a new Warrant Certificate or
Certificates to the persons entitled thereto.

No service charge to any Holder shall be made for any exchange or
registration of transfer of a Warrant certificate or of Warrant Certificates,
but the Company may require payment of a sum sufficient to cover any stamp tax
or other tax or other governmental charge that is imposed in connection with
any such exchange or registration of transfer pursuant to Section 5 hereof.

By accepting the initial delivery, transfer or exchange of Warrants, each
Holder shall be deemed to agree to the terms of this Agreement as it may be in
effect from time to time, including any amendments or supplements duly adopted
in accordance with Section 18 hereof.

SECTION 4. TERM OF WARRANTS; EXERCISE OF WARRANTS; ADJUSTMENTS OF EXERCISE
PRICE; COMPLIANCE WITH GOVERNMENT REGULATIONS; REDEMPTION.

4.1 Term of Warrants. Subject to the terms of this Agreement, each Holder
shall have the right, which may be exercised at any time from 9:00 a.m., Los
Angeles time, on the day following the Exchange Date to 5:00 p.m., Los Angeles
time, on the day preceding the fifth anniversary of the Exchange Date (the
"Exercise Period"), to receive from the Company the number of Warrant Shares
which the Holder may at the time be entitled to receive upon exercise of such
Warrants and payment of the Exercise Price then in effect for such Warrant
Shares. If the Company has designated one or more No-Exercise Periods, the
Exercise Period shall be extended by a number of days equal to the aggregate
number of days during which such No-Exercise Period or Periods was or were in
effect. The foregoing notwithstanding, the Exercise Period may terminated at
an earlier date, as provided in Section 4.3(b) hereof. The Warrant Shares
issued to a Holder upon exercise of its Warrants shall be duly authorized,
validly issued, fully paid, nonassessable and shall not have been issued in
violation of or subject to

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any preemptive rights. Each Warrant not exercised prior to the expiration of
the Exercise Period shall become void, and all rights thereunder and all
rights in respect thereof under this Agreement shall cease as of the
expiration of the Exercise Period for such Warrant. No adjustments as to
dividends will be made upon exercise of the Warrants for dividends paid prior
to exercise of the Warrants.

4.2 Exercise of Warrants. During the Exercise Period, each Holder may,
subject to this Agreement, exercise from time to time some or all of the
Warrants evidenced by its Warrant Certificate(s) by (i) surrendering to the
Company at the principal office of the Warrant Agent such Warrant
Certificate(s) with the form of election to purchase on the reverse thereof
duly filled in and signed, which signature shall be guaranteed by a bank or
trust company having an office or correspondent in the United States or a
broker or dealer which is a member of a registered securities exchange or the
National Association of Securities Dealers, Inc. (the "NASD"), and (ii) paying
to the Warrant Agent for the account of the Company the Exercise Price, for
the number of Warrant Shares in respect of which such Warrants are exercised.
Warrants shall be deemed exercised on the date such Warrant Certificate(s) are
surrendered to the Warrant Agent, tender of payment of the Exercise Price is
made, and any applicable No-Exercise Period has terminated. Payment of the
aggregate Exercise Price shall be made in cash by wire transfer of immediately
available funds to the Warrant Agent for the account of the Company or by
certified or official bank check or checks payable to the order of the Company
or by any combination thereof.

Upon the exercise of any Warrants in accordance with this Agreement, the
Company shall issue and cause to be delivered by the Warrant Agent with all
reasonable dispatch, to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate or certificates for
the number of full Warrant Shares issuable upon the exercise of such Warrants
and shall take such other actions at its sole expense as are necessary to
complete the exercise of the Warrants (including, without limitation, payment
of any cash with respect to fractional interests required under Section 9
hereof). The Warrant Agent shall have no responsibility or liability for such
issuance or the determination of the number of Warrant Shares issuable upon
such exercise. The certificate or certificates representing such Warrant
Shares shall be deemed to have been issued and any person so designated to be
named therein shall be deemed to have become a holder of record of such
Warrant Shares as of the date the Warrants are exercised hereunder.

In the event that less than all of the Warrants evidenced by a Warrant
Certificate are exercised, the Holder thereof shall be entitled to receive a
new Warrant Certificate or Certificates as specified by such Holder evidencing
the remaining Warrant or Warrants, and the Warrant Agent is hereby irrevocably
authorized by the Company to countersign, issue and deliver the required new
Warrant Certificate or Certificates evidencing such remaining Warrant or
Warrants pursuant to the provisions of this Section 4.2 and of Section 3
hereof. The Company, whenever required by the Warrant Agent, will supply the
Warrant Agent with Warrant Certificates duly executed on behalf of the Company
for such purpose.

Upon delivery of the Warrant Shares issuable upon exercise in accordance
herewith and of any required new Warrant Certificates, the Warrant Agent shall
cancel the Warrant Certificates surrendered upon exercise. Such canceled
Warrant Certificates shall then be disposed of by the Warrant Agent in a
manner permitted by applicable laws and satisfactory to the Company in
accordance with its written instructions to the Warrant Agent. The Warrant
Agent shall account promptly to the Company with respect to Warrants exercised
and concurrently pay to the Company all amounts received by the Warrant Agent
upon exercise of such Warrants.

Each Holder shall be entitled to enforce all rights relating to Warrants
owned by such Holder under the terms of this Agreement.

4.3 Reset of Exercise Price and Early Termination of Exercise Period.

(a) On any date (a "Reset Date") prior to the first anniversary of the
Exchange Date that the Five-Day Average Price is less than $1.56 (after
giving effect to any adjustments pursuant to Section 8 hereof), each Holder
of Warrants shall have the right to elect (a "Reset Election") to adjust
the Exercise Price of such Holder's Warrants to an amount equal to 150% of
such Five-Day Average Price (the "Reset Price");

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provided, however, that the Exercise Price of any Warrant may be adjusted
only once pursuant to this Section 4.3(a). To elect a Reset Election with
respect to a Warrant, a Holder shall surrender to the Company at the
principal office of the Warrant Agent the Warrant Certificate representing
such Warrant, together with the form of Reset Election on the reverse
thereof duly filled in and signed, which signature shall be guaranteed by a
bank or trust company having an office or correspondent in the United
States or a broker or dealer which is a member of the NASD. No Reset
Election shall be effective with respect to any Reset Date unless such
Warrant Certificate and form of Reset Election are received by the Warrant
Agent no later than the fifth Business Day following such Reset Date. Upon
timely receipt of a Reset Election in proper form, the Warrant Agent shall
determine the Reset Price and shall imprint the following legend in a
prominent location and typeface on the front of the Warrant Certificate:

"The Exercise Price of the Warrant represented by this Warrant
Certificate has been the subject of a Reset Election pursuant to
Section 4.3(a) of the Warrant Agreement referred to herein. As a result
of such Reset Election, the Reset Price as defined in such Section
4.3(a) is $[insert price]. No further Reset Election is permitted under
the Warrant Agreement."

The Warrant Agent shall then deliver such Warrant Certificate as so
legended to the Holder thereof. The Warrant Agent shall promptly notify the
Company of each Reset Election and the date, Reset Price and other
particulars thereof and shall maintain records of each Reset Election in
the register of Warrants referred to in Section 2.3 hereof. In the event of
any transfer, exchange or other issue or reissue of Warrants that have been
the subject of a Reset Election, the Warrant Agent shall cause any and all
Warrant Certificates so issued or reissued to bear the legend referred to
above.

(b) If on any date (an "Early Expiration Trigger Date") the Five-Day
Average Price is more than $4.50 (after giving effect to any adjustments
thereto pursuant to Section 8 hereof), the Company shall have the right to
elect (an "Early Expiration Election") to designate a date (the "Early
Expiration Date") after which no Warrant shall be exercisable, the
provisions of Section 4.1 hereof to the contrary notwithstanding. Each
Warrant not exercised prior to 5:00 p.m. Los Angeles time on any such Early
Expiration Date shall become void, and all rights thereunder and all rights
in respect thereof under this Agreement shall cease as of such time. The
Company shall make an Early Expiration Election by designating an Early
Expiration Date in a written notice (which may be by facsimile
transmission) to the Warrant Agent specifying the Early Expiration Trigger
Date and the Five-Day Average Price no later than the fifth Business Day
following such Early Expiration Trigger Date. Upon receipt of such notice,
the Warrant Agent shall within two Business Days of such receipt give
notice pursuant to Section 16 hereof to each Holder of the Early Expiration
Election of the Company and specifying the Early Expiration Date. The
Company shall not specify an Early Expiration Date that is less than 12
Business Days after the delivery to the Warrant Agent of the Company's
notice of its Early Expiration Election.

4.4 Compliance with Government Regulations: Registration Under the
Securities Act. To the extent required by the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (collectively,
the "Securities Act"), the Company will register under the Securities Act the
issuance and sale of Warrant Shares by the Company in connection with the due
exercise of Warrants by the Holder thereof (subject to the prohibition on any
such exercise during any No-Exercise Period). In addition, if the transfer of
the Warrant Shares obtained upon such exercises by Holders would not otherwise
be exempt from the registration and prospectus delivery requirements of the
Securities Act, the Company will register under the Securities Act the offer
and sale of such Warrant Shares in connection with such transfers by such
Holders (subject to prohibition of any such transfers during any No-Exercise
Period); provided, however, that participation by any Holder in any such
registration shall be conditioned upon such Holder's provision to the Company
of all information, undertakings, consents, agreements or other documents and
the taking of any and all actions as may be necessary to enable such
registration and such participation therein by such Holder as a selling
security holder to comply with all applicable requirements of the Securities
Act. The Company's registration obligations hereunder shall terminate on the
seventh anniversary of the Exchange Date.

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SECTION 5. PAYMENT OF TAXES AND FEES.

The Company will pay all documentary stamp and other like taxes, if any,
attributable to the initial issuance and delivery of the Warrants and the
initial issuance and delivery of the Warrant Shares upon the exercise of
Warrants, provided that the Company shall not be required to pay any tax or
taxes which may be payable in respect of any transfer of the Warrants or
involved in the issuance or delivery of any Warrant Shares in a name other
than that of the Holder of the Warrants being exercised, and the Warrant Agent
shall not register any such transfer or issue or deliver any Warrant
Certificate(s) or Warrant Shares unless or until the persons requesting the
registration or issuance shall have paid to the Warrant Agent for the account
of the Company the amount of such tax, if any, or shall have established to
the reasonable satisfaction of the Company that such tax, if any, has been
paid.

SECTION 6. MUTILATED OR LOST WARRANT CERTIFICATES.

In the event that any Warrant Certificate shall be mutilated, lost, stolen
or destroyed, the Company shall issue, and at the direction of the Company by
written order the Warrant Agent shall countersign and deliver in exchange and
substitution for, and upon cancellation of the mutilated Warrant Certificate,
or in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and an indemnity or bond, if requested
by the Company or the Warrant Agent, also reasonably satisfactory to them. An
applicant for such a substitute Warrant Certificate shall also comply with
such other reasonable procedures and pay such reasonable fees and expenses as
the Company or the Warrant Agent may reasonably require.

SECTION 7. RESERVATION OF WARRANT SHARES.

There have been reserved, and the Company shall at all times keep reserved,
out of its authorized Common Stock, free of all preemptive rights, a number of
shares of Common Stock sufficient to provide for the exercise of the rights of
purchase represented by the outstanding Warrant Certificates. The Company will
keep a copy of this Agreement on file with the Warrant Agent. The Warrant
Agent is hereby irrevocably authorized to requisition from time to time from
the Company certificates for Warrant Shares required to honor outstanding
Warrants upon exercise thereof in accordance with the terms of this Agreement.
The Company will supply its Warrant Agent with duly executed stock
certificates for such purposes and will itself provide or otherwise make
available any cash which may be payable as provided in Section 9 hereof. The
Company will furnish to its agent for transfer of shares of its Common Stock
(the "Transfer Agent"), a copy of all notices of adjustments and certificates
related thereto, transmitted to each Holder pursuant to Section 8.2 hereof.
The Company will give the Warrant Agent prompt notice of any change in any
Transfer Agent or any change of address of any Transfer Agent.

Before taking any action which would cause an adjustment pursuant to Section
8 reducing the Exercise Price, the Company will take any and all corporate
action which may be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.

SECTION 8. ADJUSTMENT OF EXERCISE PRICE; NUMBER OF WARRANT SHARES AND SHARES
OF CAPITAL STOCK WARRANTS ARE EXERCISABLE INTO.

The number of securities purchasable upon the exercise of each Warrant, and
the Exercise Price, shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter described.

8.1 Pricing and Share Adjustments. During the Exercise Period and until a
Holder's Warrants are exercised, the number of Warrant Shares purchasable by
such Holder upon the exercise of each Warrant and the Exercise Price shall be
subject to adjustment as follows:

(a) Adjustment for Change in Capital Stock. Subject to paragraphs (f) and
(h) below, in case the Company shall (i) pay a dividend or other
distribution on its outstanding shares of Common Stock in shares

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of Common Stock, (ii) make a distribution on its outstanding shares of
Common Stock in shares of its capital stock other than Common Stock, (iii)
subdivide its outstanding shares of Common Stock into a greater number of
shares of Common Stock, (iv) combine its outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or (v) issue, by
reclassification of its shares of Common Stock, other securities of the
Company, then the number of Warrant Shares purchasable upon exercise of
each Warrant immediately prior thereto shall be adjusted so that the Holder
of each Warrant shall be entitled to receive the number of Warrant Shares
of the Company which such Holder would have owned or have been entitled to
receive upon the happening of any of the events described above had such
Warrant been exercised in full immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant
to this paragraph (a) shall become effective immediately after the record
date for such event (provided, however, that no additional Warrant Shares
shall be issued or the Exercise Price modified as a result of such
adjustment unless and until the consummation of such event) or, if none,
immediately after the effective date of such event. Such adjustment shall
be made successively whenever such an event occurs.

(b) Adjustment for Rights Issue. Subject to paragraphs (f) and (h) below,
in case the Company shall issue rights, options, warrants or convertible
securities (collectively, "Rights") to all holders of its outstanding
Common Stock entitling them to subscribe for or purchase shares of Common
Stock at a Price Per Share (as defined in paragraph (e) below) which is
lower at the record date mentioned below than the then Current Market Price
(as defined in paragraph (e) below) per share of Common Stock, the number
of Warrant Shares thereafter purchasable upon the exercise of each Warrant
shall be determined by multiplying the number of Warrant Shares theretofore
purchasable upon exercise of each Warrant by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding on the date
of issuance of such Rights plus the additional Number of Shares (as defined
in paragraph (e) below) of Common Stock offered for subscription or
purchase in connection with such Rights and the denominator of which shall
be the number of shares of Common Stock outstanding on the date of issuance
of such Rights plus the number of shares which the aggregate Proceeds (as
defined in paragraph (e) below) received or receivable by the Company upon
exercise of such Rights would purchase at the Current Market Price per
share of Common Stock at such record date. Such adjustment shall be made
whenever Rights are issued, and shall become effective immediately after
the record date for the determination of stockholders entitled to receive
Rights (provided, however, that no additional Warrant Shares shall be
issued or the Exercise Price modified as a result of such adjustment unless
and until such Rights are issued).

(i) Subject to paragraphs (f) and (h) below, in case the Company
shall redeem shares of its Common Stock at a Price Per Share above the
then Current Market Price Per Share of Common Stock on the date of such
redemption then the number of Warrant Shares thereafter purchasable
upon the exercise of each Warrant shall be determined by multiplying
the number of Warrant Shares theretofore purchasable upon the exercise
of each Warrant by a fraction, the numerator of which shall be the
Current Market Price Per Share of Common Stock on the date of
redemption multiplied by the aggregate number of shares of Common Stock
outstanding immediately following the redemption and the denominator of
which shall be the Initial Market Capitalization less the Redemption
Amount. The "Initial Market Capitalization" shall equal the product of
the number of shares of Common Stock outstanding immediately prior to
such redemption and the Current Market Price Per Share of the Common
Stock on the date of such redemption. The "Redemption Amount" shall
equal the number of shares redeemed multiplied by the Price Per Share
at which such redemption occurs. Such adjustment shall be made whenever
any such redemption is made, and shall become effective on the date of
such redemption.

(ii) Subject to paragraphs (f) and (h) below, in case the Company
shall distribute to the holders of its Common Stock a dividend or
distribution (whether in cash, cash equivalents, evidence of
indebtedness or assets of the Company or any corporation or other legal
entity a majority of the voting equity or equity interest of which is
owned, directly or indirectly, by the Company (a "Subsidiary")

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or shares of capital stock of a Subsidiary) other than a dividend or
distribution subject to paragraphs (a) or (b) above, then in each case
the number of Warrant Shares thereafter purchasable upon the exercise
of each Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon the exercise of each
Warrant by a fraction, the numerator of which shall be the Current
Market Price Per Share of Common Stock on the date of such dividend or
distribution and the denominator of which shall be such Current Market
Price Per Share of Common Stock less the amount of dividend or
distribution per share as of the date of such dividend or distribution
(which amount in the case of a distribution of assets for which there
is not a readily ascertainable fair market value shall be the fair
value of such assets as determined by an independent professional
evaluator selected by the disinterested non-employee members of the
Board of Directors of the Company as the portion of the assets
applicable to one share of Common Stock). Such adjustments shall be
made whenever any such distribution is made and shall become effective
on the record date for the determination of stockholders entitled to
receive such distribution, if any, or the effective date of such
redemption if there is no such record date (provided, however, that no
additional Warrant Shares shall be issued or the Exercise Price
modified as a result of such adjustment unless and until the date of
such redemption).

(d) Adjustment for Common Stock and Convertible Securities Issue. Subject
to paragraphs (f) and (h) below, in case (A) the Company shall issue shares
of its Common Stock, or securities convertible into, or exchangeable or
exercisable for Common Stock or Rights to subscribe for or purchase such
securities (collectively, "Convertible Securities") (excluding the issuance
of (i) Common Stock or Convertible Securities issued in any of the
transactions described in paragraphs (a), (b) or (c) above) or (ii) Warrant
Shares issued upon the exercise of the Warrants) at a Price Per Share of
Common Stock, in the case of the issuance of Common Stock, or at a Price
Per Share of Common Stock initially deliverable upon conversion or exercise
of exchange of such Convertible Securities, in each case, together with any
other consideration received or to be received by the Company in connection
with such issuance or upon the conversion, exchange or exercise of such
Convertible Securities, below the then Current Market Price per share of
Common Stock on the date the Company fixed the offering, conversion or
exercise or exchange price of such additional shares, or (B) there shall be
a reduction in the exercise price of any outstanding Convertible Securities
other than pursuant to customary antidilution provisions set forth in the
instruments governing such Convertible Securities as in effect at the date
of the issuance thereof, then the number of Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Warrant Shares theretofore purchasable upon
exercise of each Warrant by a fraction:

(x) in the case of an issuance of Convertible Securities, the
numerator of which shall be the total number of shares of Common Stock
outstanding on the date of such issuance plus the additional number of
shares of Common Stock offered for subscription or purchase and the
denominator of which shall be the number of shares of Common Stock
outstanding on such date plus the number of shares of Common Stock
which the aggregate Proceeds of the total amount of Convertible
Securities so offered would purchase at the Current Market Price Per
Share of Common Stock at such date of issuance; and

(y) in the case of a reduction in the exercise price of any
Convertible Securities, the numerator of which shall be the sum of the
Initial Market Capitalization plus the Initial Proceeds and the
denominator of which shall be the sum of the Initial Market
Capitalization and the Reduced Proceeds. The "Initial Market
Capitalization" shall mean the product of the number of shares of
Common Stock outstanding immediately prior to such price reduction and
the Current Market Price Per Share of the Common Stock on the date of
such price reduction. The "Initial Proceeds" shall mean the Proceeds
received and receivable by the Company prior to such price reduction in
connection with such Convertible Securities. The "Reduced Proceeds"
shall mean the Proceeds received and receivable by the Company after
giving effect to such price reduction in connection with such
Convertible Securities.

In case the Company shall issue and sell Convertible Securities for a
consideration consisting, in whole or in part, of property other than cash
or its equivalent, then in determining the "Price Per Share" of Common
Stock and the "consideration received by the Company" for purposes of this
paragraph (d), an independent professional evaluator selected by the
disinterested non-employee members of the Board of

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Directors of the Company shall reasonably and in good faith determine the
fair value of such property. The determination of whether any adjustment is
required under this paragraph (d), by reason of the sale and issuance of
any Convertible Securities and the amount of such adjustment, if any, shall
be made at such time and not at the subsequent time of issuance of shares
of Common Stock upon the exercise, conversion or exchange of Convertible
Securities.

(e) Current Market Price; Price Per Share.

(i) For the purpose of any computation under this Section 8.1, the
"Current Market Price" per share of Common Stock at any date shall be
the Twenty-Day Average Price.

(ii) For purposes of this Section 8.1, "Price Per Share" shall be
defined and determined according to the following formula:

P = R/N

where

P = Price Per Share;

R = the "Proceeds" received or receivable by the Company which (w)
in the case of shares of Common Stock is the total amount received
or receivable by the Company in consideration for the issuance and
sale of such shares; (x) in the case of Rights or of Convertible
Securities with respect to shares of Common Stock, is the total
amount received or receivable by the Company in consideration for
the issuance and sale of Rights or such Convertible Securities, plus
the minimum aggregate amount of additional consideration, other than
the surrender of such Convertible Securities, payable to the Company
upon exercise, conversion or exchange thereof; (y) in the case of
Rights to subscribe for or purchase such Convertible Securities, is
the total amount received or receivable by the Company in
consideration for the issuance and sale of such Rights plus the
minimum aggregate amount of additional consideration, other than the
surrender of such Convertible Securities, payable upon the exercise
of such Rights and on the conversion or exchange or exercise of such
Convertible Securities; and (z) in the case of a redemption of
shares of Common Stock is the total amount paid or payable by the
Company as consideration for the shares redeemed, provided that in
each case the proceeds received or receivable or paid or payable by
the Company shall be the net cash proceeds after deducting therefrom
any compensation paid or discount allowed in the sale, underwriting
or purchase thereof by underwriters or dealers or others performing
similar services; and

N = the "Number of Shares," which (x) in the case of Common Stock is
the number of shares issued; (y) in the case of Rights or of
Convertible Securities with respect to shares of Common Stock, is
the number of shares of Common Stock issuable upon exercise,
conversion or exchange thereof for the minimum aggregate amount of
additional consideration referred to above in the definition of
Proceeds; and (z) in the case of shares of Common Stock redeemed is
the number of shares redeemed by the Company.

(f) When De Minimis Adjustment May Be Deferred. No adjustment in the
number of Warrant Shares purchasable hereunder shall be required unless
such adjustment would require an increase or decrease of at least one
percent (1%) in the number of Warrant Shares purchasable upon the exercise
of each Warrant, provided that any adjustments which by reason of this
paragraph (f) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations shall be
made to the nearest one-thousandth of a Warrant Share and the nearest cent.

(g) Adjustment in Exercise Price. Whenever the number of Warrant Shares
purchasable upon the exercise of each Warrant is adjusted as herein
provided, the Exercise Price payable upon exercise of each Warrant
immediately prior to such adjustment shall be adjusted by multiplying such
Exercise Price by a fraction, the numerator of which shall be the number of
Warrant Shares purchasable upon the exercise of

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<PAGE>

each Warrant immediately prior to such adjustment and the denominator of
which shall be the number of Warrant Shares purchasable immediately
thereafter.

(h) When No Adjustment Required. No adjustment in the number of Warrant
Shares purchasable upon the exercise of each Warrant or the Exercise Price
shall be made pursuant to this Section 8.1 in connection with the exercise
of any of the following (other than a reduction in the purchase or exercise
price that would be subject to an adjustment under subsection (d)(y) above;
provided, however, there shall be no adjustment pursuant to such subsection
(d)(y) in connection with any antidilution or other adjustment required by
the terms and conditions of instruments governing the following as in
effect on June 14, 1996:

(i) 80,081 Warrants issued as of June 13, 1996 at an exercise price
of $5.00 per share of Common Stock;

(ii) 1,500,000 Warrants outstanding as of June 13, 1996 at an
exercise price of $4.00 per share of Common Stock;

(iii) Up to 1,776,060 options to purchase Common Stock reserved for
issuance to employees of the Company;

(iv) Up to 1,657,300 employee stock options outstanding as of
September 18, 1996; and

(v) Up to 150,000 employee stock options outstanding after September
18, 1996 but on or before October 31, 1996.

Additionally, no adjustment need be made if the Company issues or
distributes to each Holder of Warrants the shares, rights, options,
warrants, evidences of indebtedness, assets or other securities referred to
in the paragraphs above which each Holder of Warrants would have been
entitled to receive had the Warrants been exercised for the number of
Warrant Shares for which Warrants are then exercisable prior to the
happening of such event or the record date with respect thereto.

(i) Common Stock. For all purposes of this Agreement, the term "Common
Stock" shall mean (i) the class of stock designated as the Common Stock of
the Company at the date of this Agreement or (ii) any other class of stock
resulting from successive changes or reclassification of such shares
consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that at any time, as
a result of an adjustment made pursuant to this Section 8.1, the Holders
shall become entitled to purchase any securities of the Company other than
shares of Common Stock, thereafter the number of such other shares so
purchasable upon exercise of each Warrant and the Exercise Price of such
shares shall be subject to adjustment from time to time in a manner and on
terms substantially identical to the provisions with respect to the Warrant
Shares contained in paragraphs (a) through (h) above, and the provisions of
this Agreement with respect to the Warrant Shares shall apply on like terms
to any such other securities.

(j) Expiration of Rights, etc. Upon the expiration of any Rights or
conversion or exchange or exercise rights, if any thereof shall not have
been exercised, the Exercise Price and the number of Warrant Shares
purchasable upon the exercise of each Warrant shall, upon such expiration,
be readjusted and shall thereafter be such as it would have been had it
been originally adjusted (or had the original adjustment not been required,
as the case may be) as if (A) the only shares of Common Stock so issued
were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such Rights or conversion or exchange or exercise rights and
(B) such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale or grant of all of such Rights or conversion or exchange or
exercise rights whether or not exercised, provided that no such
readjustment shall have the effect of increasing the Exercise Price or
decreasing the number of Warrant Shares purchasable upon the exercise of
each Warrant by an amount in excess of the amount of the adjustment
initially made in respect of the issuance, sale or grant of such Rights or
conversion or exchange or exercise rights.

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8.2 Notice of Adjustment. Whenever the number of Warrant Shares purchasable
upon the exercise of each Warrant or the Exercise Price of Warrant Shares is
adjusted, as provided in this Section 8, the Company shall cause the Warrant
Agent promptly to mail to each Holder, at the sole expense of the Company by
first class mail, postage prepaid, notice of such adjustment or adjustments
and shall deliver to the Warrant Agent a certificate of a firm of independent
public accounts (who may be the regular accountants employed by the Company)
setting forth the number of Warrant Shares purchasable upon the exercise of
each Warrant and the Exercise Price of Warrant Shares after such adjustment,
setting forth a brief statement of the facts requiring such adjustment and
setting forth in reasonable detail the computations by which such adjustment
was made. The Warrant Agent shall be entitled to rely on such certificate and
shall be under no duty or responsibility with respect to any such certificate,
except to exhibit the same, from time to time, to any Holder requesting an
inspection thereof during reasonable business hours. The Warrant Agent shall
not at any time be under any duty or responsibility to any Holder to determine
whether any facts exist which may require any adjustment of the Exercise Price
or the number of Warrant Shares or other stock or property purchasable on
exercise of Warrants, or with respect to the nature or extent of any such
adjustment when made, or with respect to the method employed in making such
adjustment. Concurrently with giving a Holder notice of an adjustment, the
Warrant Agent shall issue to such Holder a replacement Warrant Certificate
showing the terms of the Warrant, as adjusted, provided that the Warrant
Agent's failure to provide such new Warrant Certificates shall not adversely
affect the rights of the Holders to receive the benefits of any adjustments.

8.3 Preservation of Purchase Rights upon Merger or Consolidation. In case of
any consolidation of the Company with or merger of the Company into another
entity, the Company or such successor entity shall execute and deliver to the
Warrant Agent an agreement, which shall be binding on the Company and the
Holders, that each Holder shall have the right thereafter upon payment of the
Exercise Price in effect immediately prior to such action to purchase upon
exercise of each Warrant the kind and amount of shares and other securities
and property (including cash) which such Holder would have owned or have been
entitled to receive after the happening of such consolidation or merger had
such Warrant been exercised immediately prior to such action, subject to
obtaining any required governmental approvals or making any required
governmental filings. The Company shall at its sole expense request the
Warrant Agent to mail by first class mail, postage prepaid, to each Holder
notice of the execution of any such agreement. Such agreement shall provide
for adjustments, which shall be substantially identical to the adjustments
provided for in this Section 8. In addition, the Company shall not merge or
consolidate with or into, any other entity unless the successor entity (if not
the Company), shall expressly assume, by supplemental agreement reasonably
satisfactory in form and substance to the Warrant Agent in its sole judgment
and executed and delivered to the Warrant Agent, the due and punctual
performance and observance of each and every covenant and condition of this
Agreement to be performed and observed by the Company. The provisions of this
Section 8.3 shall similarly apply to successive consolidations or mergers. The
Company and the Warrant Agent shall each be under a good faith duty and
responsibility to determine the correctness of any provisions contained in any
such agreement relating to the kind or amount of shares of stock or other
securities or property receivable upon exercise of Warrants or with respect to
the method employed and provided therein for any adjustments and shall be
entitled to rely upon the provisions contained in any such agreement.

If this Section 8.3 applies, paragraphs (a), (b), (c) and (d) of Section 8.1
do not apply.

SECTION 9. FRACTIONAL INTERESTS.

Neither the Company nor the Warrant Agent shall be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be exercised at the same time by the same Holder, the number of
full Warrant Shares which shall be issuable upon such exercise shall be
computed on the basis of the aggregate number of Warrants so exercised. If any
fraction of a Warrant Share would, except for the provisions of this Section
9, be issuable on the exercise of any Warrant, the Company shall pay an amount
in cash equal to the Common Stock Price on the date the Warrant Certificate is
presented for exercise, multiplied by such fraction.

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<PAGE>

SECTION 10. NO RIGHTS AS STOCKHOLDERS; NOTICES TO HOLDERS.

Nothing contained in this Agreement or in any of the Warrants shall be
construed as conferring upon the Holders of Warrant Certificates or their
transferees the right to vote or to receive dividends or to consent or to
receive notice as stockholders in respect of any meeting of stockholders for
the election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company.

In case:

(a) the Company shall authorize the issuance to all holders of shares of
Common Stock of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of any other subscription rights or warrants; or

(b) the Company shall authorize the distribution to all holders of shares
of Common Stock of securities or assets; or

(c) of any consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required, or of
the conveyance or transfer of a substantial portion of the properties and
assets of the Company for which approval of any stockholders of the Company
is required, or of any reclassification or change of Common Stock issuable
upon exercise of the Warrants (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange
offer for shares of Common Stock;

(d) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company; or

(e) the Company shall sell all or substantially all of its assets, or any
asset necessary to conduct the Company's business.

then the Company shall cause to be filed with the Warrant Agent and shall
cause to be given to each Holder at its address appearing on the Warrant
Register, at least ten (10) days prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first class mail, postage prepaid, a written notice stating
(i) the date as of which the holders of record of shares of Common Stock
entitled to receive any such rights, options, warrants or distribution are to
be determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date on which
any such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up or fundamental change is expected to
become effective or consummated, as well as the date as of which it is
expected that holders of record of shares of Common Stock shall be entitled to
exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation, or winding up. The failure to give the notice
required by this Section 10 or any defect therein shall not affect the
legality or validity of any distribution, right, option, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation, winding up or action, or the vote upon any of the foregoing.

SECTION 11. BY THE COMPANY.

The Company represents and warrants to the Warrant Agent and each of the
Holders as follows as of the Exchange Date:

11.1 Legal Status; Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated. The Company is duly qualified or
licensed to do business and is in good standing as a foreign corporation in
all jurisdictions in which the failure to obtain such qualification or
licensing could reasonably be expected to have a material adverse effect on
the business or financial condition of the Company. The Company has all
requisite corporate power and authority to conduct its business, to own,
lease, sell or otherwise dispose of property, and to enter into and perform
this Agreement.

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<PAGE>

11.2 No Conflicts. This Agreement has been duly authorized by all necessary
corporate action on the part of the Company. Neither the execution and
delivery nor the performance of this Agreement (i) conflicts with the
certificate of incorporation or by-laws of the Company, (ii) violates any law,
regulation or ordinance, or any order or ruling of any court or governmental
entity, applicable to the Company or (iii) results in a breach or violation
of, or constitutes a default under, any term of any agreement or instrument to
which the Company is a party or by which it or any of its properties or assets
are bound other than any breach or violation which could not reasonably be
expected to have a material and adverse effect on (i) the business,
operations, properties, assets or financial condition of the Company, or (ii)
the ability of the Company to perform its obligations under any material
agreement in accordance with its terms.

11.3 Binding and Enforceable. This Agreement has been duly executed and
delivered by the Company and is a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject, (i) to bankruptcy, insolvency, reorganization, arrangement,
moratorium and other laws of general applicability relating to or affecting
creditors' rights and (ii) to general principles of equity, whether such
enforcement is considered in a proceeding at law or in equity.

11.4 Valid Issue. All Warrant Shares are duly authorized and, upon issuance
in accordance with the provisions of this Agreement shall be validly issued,
fully paid and nonassessable and free from all taxes, liens, charges and
security interests (other than liens and security interests created by this
Agreement or by the Holder thereof).

SECTION 12. PAYMENTS IN U.S. CURRENCY.

All payments required to be made hereunder shall be made in lawful money of
the United States of America.

SECTION 13. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.

Any corporation into which the Warrant Agent may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporation trust business of the Warrant Agent, shall be
the successor to the Warrant Agent hereunder without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a
successor Warrant Agent under the provisions of Section 14 hereof. In case at
the time such successor to the Warrant Agent shall succeed to the agency
created by this Agreement, any of the Warrant Certificates shall have been
countersigned but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent and deliver such
Warrant Certificates so countersigned; and in case at that time any of the
Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor Warrant Agent;
and in all such cases such Warrant Certificates shall be fully valid and
effective as provided therein and in this Agreement.

In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but
not delivered, the Warrant Agent may adopt the countersignatures under its
prior name and deliver such Warrant Certificates so countersigned; and in case
at that time any of the Warrant Certificates shall not have been
countersigned, the Warrant Agent may countersign such Warrant Certificates
either in its prior name or in its changed name; and in all such cases such
Warrant Certificates shall be fully valid and effective as provided therein
and in this Agreement.

SECTION 14. APPOINTMENT OF WARRANT AGENT.

The Company hereby appoints the Warrant Agent to act as agent for the
Company hereunder and in accordance with the terms and conditions hereof, and
the Warrant Agent hereby accepts such appointment.

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<PAGE>

14.1 Obligations of the Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders, by their acceptance
of Warrant Certificates, shall be bound:

(a) Correctness of Statements. The statements contained herein and in the
Warrant Certificates shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any of the
same except such as described the Warrant Agent or action taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution of
the Warrant Certificates or Warrants except as herein otherwise provided.

(b) Breach of Covenants. The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the covenants contained in
this Agreement or in the Warrant to be complied with by the Company.

(c) Performance of Duties. The Warrant Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents and shall not be
responsible for the misconduct or negligence of any attorney or agent
(which shall not include an employee of the Warrant Agent) appointed with
due care.

(d) Reliance on Counsel. The Warrant Agent may consult at any time with
legal counsel satisfactory to it (who may be counsel for the Company), and
the Warrant Agent shall incur no liability or responsibility to the Company
or to any Holder in respect to any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of
such counsel.

(e) Proof of Actions Taken. Whenever in the performance of its duties
under this Agreement the Warrant Agent shall deem it necessary or desirable
that any fact or matter be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be herein specifically prescribed) may be
deemed conclusively to be proved and established by a certificate signed by
the Chairman of the Board, the President, a Vice President, the Treasurer
or the Secretary of the Company and delivered to the Warrant Agent; and
such certificate shall be full authorization to the Warrant Agent for any
action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.

(f) Compensation. The Company agrees to pay the Warrant Agent such
reasonable compensation for all services rendered by the Warrant Agent in
the performance of its duties under this Agreement as shall be agreed upon
in advance by the Company and the Warrant Agent, to reimburse the Warrant
Agent for all reasonable expenses, taxes and governmental charges and other
charges of any kind and nature incurred by the Warrant Agent in the
performance of its duties under this Agreement (including but not limited
to legal fees and expenses), and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, costs and
counsel fees, for anything done or omitted by the Warrant Agent or any of
its agents in the performance of its duties under this Agreement, except as
a result of the Warrant Agent's gross negligence or willful misconduct as
determined in a final judgment of a court of competent jurisdiction and
authority. The Company's obligations under this Section 14.1(f) and any
claim arising hereunder shall survive the resignation or removal of the
Warrant Agent and the termination or discharge of the Company's obligations
under this Agreement.

(g) Legal Proceedings. The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or any one or more Holders
shall furnish the Warrant Agent with reasonable security and indemnity for
any costs and expenses which may be incurred or any liabilities which may
arise, but this provision shall not affect the power of the Warrant Agent
to take such action as the Warrant Agent may consider proper, whether with
or without any such security or indemnity. All rights of action of any
Holder under this Agreement or under any of the Warrants may be enforced by
the Warrant Agent without the possession of any of the Warrant Certificates
or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant
Agent shall be brought in its name as Warrant Agent, and any

C-15
<PAGE>

recovery of judgment shall be for the ratable benefit of the Holders, as
their respective rights or interests may appear.

(h) Other Transactions in Securities of Company. The Warrant Agent and
any stockholders, director, officer or employee of the Warrant Agent may
buy, sell or deal in any of the Warrants or any other securities of the
Company or become pecuniarily interested in any transaction in which the
Company may be interested or contract with or lend money to the Company or
other wise act as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company of for any other legal entity.

(i) Liability of Warrant Agent. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which
it may do or refrain from doing in connection with this Agreement except
for its own negligence or bad faith.

(j) Reliance on Documents. The Warrant Agent will not incur any liability
or responsibility to the Company or to any Holder for any action taken in
reliance on any notice, resolution, waiver, consent, order, certificate, or
other paper, document or instrument reasonably believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties.

(k) Validity of Agreement. The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the
Warrant Agent) or in respect of the validity or execution of any Warrant
Certificate (except its countersignature thereof) or any Warrant; nor shall
the Warrant Agent by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any Warrant Shares
(or other securities) to be issued pursuant to this Agreement or any
Warrant, or as to whether any Warrant Shares (or other securities) will,
when issued, be validly issued, fully paid and nonassessable, or as to the
Exercise Price or the number or amount of Warrant Shares or other
securities or any Assets or other property issuable upon exercise of any
Warrant.

(l) Instructions from Company. The Warrant Agent is hereby authorized and
directed to accept instructions with respect to the performance of its
duties hereunder from the Chairman of the Board, the President, a Vice
President, the Treasurer or the Secretary of the Company, and to apply to
such officers for advice or instructions in connection with its duties, and
shall not be liable for any action taken or suffered to be taken by it in
accordance with instructions of any such officer or officers.

(m) Reporting Requirements. The Warrant Agent shall send to each Warrant
holder a copy of each publicly available filing with the SEC made by the
Company (including but not limited to Forms 10-K, 10-Q and 8-K) promptly
but in any event within five (5) Business Days following such filing.

SECTION 15. CHANGE OF WARRANT AGENT.

The Warrant Agent may resign and be discharged from its duties under this
Agreement by giving to the Company thirty (30) days' notice in writing. The
Warrant Agent may be removed by like notice to the Warrant Agent and the
Holders from the Company, such notice to specify the date when removal shall
become effective. If the Warrant Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Warrant Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after such removal or notification in writing of
such registration or incapacity by the resigning or incapacitated Warrant
Agent or by any Holder (who shall with such notice submit his Warrant
Certificate or Certificates for inspection by the Company), then any Holder
may apply to any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Any successor Warrant Agent, whether appointed
by the Company or such a court, shall be a bank or trust Company, in good
standing, incorporated under the laws of the United States of America or any
state thereof and having at the time of its appointment as Warrant Agent a
combined capital and surplus of at least $100,000,000. After appointment and
acceptance of such appointment in writing, the successor Warrant Agent shall
be vested with the same powers, rights, duties

C-16
<PAGE>

and responsibilities as if it had been originally named as Warrant Agent with
out further act or deed; but the former Warrant Agent shall deliver and
transfer to the successor Warrant Agent any property at the time held by it
hereunder, and shall execute and deliver any further assurance, conveyance,
act or deed necessary for the purpose. Failure to file any notice provided for
in this Section 15, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Warrant Agent or the
appointment of the successor Warrant Agent, as the case may be. In the event
of such resignation or removal, the successor Warrant Agent shall mail, by
first class mail, postage prepaid, to each Holder, written notice of such
removal or resignation and the name and address of such successor Warrant
Agent.

SECTION 16. NOTICES.

Any notice pursuant to this Agreement by the Company or by any Holder to the
Warrant Agent, or by the Warrant Agent or by any Holder to the Company, shall
be in writing and shall be delivered in person or by facsimile transmission,
or mailed first class, postage pre-paid, (a) to the Company, at its offices at
21329 Nordhoff Street, Chatsworth, California 91311, Attention: Chief
Financial Officer, Telecopier No.: (818) 701-8410, or (b) to the Warrant
Agent, at its offices at , Attention:
, Telecopier No.: . Each party hereto may from time to
time change the address to which notices to its are to be delivered or mailed
hereunder by notice to the other party.

Any notice mailed pursuant to this Agreement by the Company or the Warrant
Agent to the Holders shall be in writing and shall be mailed first class,
postage prepaid, or otherwise delivered, to such Holders at their respective
addresses in the Warrant Register. The initial address of each Holder shall be
as provided by the Company to the Warrant Agent. Any Holder may change its
address by notice to the Company and the Warrant Agent given in accordance
with this Section 16.

SECTION 17. CANCELLATION OF WARRANTS.

In the event the Company shall purchase or otherwise acquire Warrants, the
same shall thereupon be delivered to the Warrant Agent and be cancelled by it
and retired. The Warrant Agent shall cancel any Warrant certificate
surrendered for exchange, substitution, transfer or exercise in whole or in
part.

SECTION 18. SUPPLEMENTS AND AMENDMENTS.

From time to time, the Company and the Warrant Agent, without the consent of
the holders of the Warrants, may amend or supplement this Agreement for
certain purposes, including curing defects or inconsistencies or making any
other change so long as such amendment or supplement does not adversely affect
the rights of any Holder. Any supplement or amendment to this Agreement that
does not adversely affect the rights of a Holder may be made with the approval
of the Holders of a majority of the then outstanding Warrants; provided,
however, that any such amendment or supplement that (i) increases the Exercise
Price; (ii) decreases the number of shares of Common Stock issuable upon
exercise of a Warrant; or (iii) shortens the period during which the Warrants
may be exercised shall require the consent of each Holder of a Warrant
affected thereby.

SECTION 19. SUCCESSORS.

All the covenants and provisions of this Agreement by or for the benefit of
the Company or the Warrant Agent shall bind and inure to the benefit of the
Company or the Warrant Agent and shall bind and inure to the benefit of their
respective successors hereunder.

SECTION 20. APPLICABLE LAW.

This Agreement and each Warrant issued hereunder shall be governed by and
construed in accordance with the laws of the State of California without
giving effect to the principles of conflict of laws thereof.

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SECTION 21. BENEFITS OF THIS AGREEMENT.

Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the Holders and
their successors and assigns any legal or equitable right, remedy or claim
under this Agreement. This Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent, the Holders and the respective
successors and assigns of the Company, Warrant Agent and Holders.

SECTION 22. RECORDS.

The Warrant Agent shall keep copies of this Agreement and any notices given
or received hereunder available for inspection by the Holders during normal
business hours at its office. The Company shall at its sole expense supply the
Warrant Agent from time to time with such numbers of copies of this Agreement
as the Warrant Agent may request.

SECTION 23. COUNTERPARTS.

This Agreement may be executed in any number of counterparts; each of such
counterparts shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute but one and the same instrument.

SECTION 24. CAPTIONS.

The captions of the Sections and subsections of this Agreement have been
inserted for convenience only and shall have no substantive effect.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed, all as of the day and year first above written.

STREAMLOGIC CORPORATION

By: _________________________________
Name:
Title:

WELLS FARGO BANK, N.A.,
as Warrant Agent

By: _________________________________
Name:
Title:

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EXHIBIT A

FORM OF WARRANT CERTIFICATE

No. Warrants

WARRANT CERTIFICATE

STREAMLOGIC CORPORATION

This Warrant Certificate certifies that , or registered
assigns, is the registered holder of Warrants (the "Warrants")
expiring at 5:00 p.m., Los Angeles time, , 2001 (subject to
extension or earlier termination as provided in the Warrant Agreement) (the
"Expiration Date"), to purchase Common Stock, $1.00 par value per share (the
"Common Stock"), of STREAMLOGIC CORPORATION, a Delaware corporation (the
"Company"). The Warrants may be exercised at any time from 9:00 a.m., Los
Angeles time, on , 1996 to 5:00 p.m., Los Angeles time, on the
Expiration Date. Each Warrant entitles the holder upon exercise to receive
from the Company, if exercised before 5:00 p.m., Los Angeles time, on the
Expiration Date, one fully paid and nonassessable share of Common Stock (a
"Warrant Share") at the Exercise Price (as defined in the Warrant Agreement
referred to on the reverse side hereof), payable in lawful money of the United
States of America, upon surrender of this Warrant Certificate and payment of
the Exercise Price at the office or agency of the Warrant Agent, but only
subject to the conditions set forth herein and in the Warrant Agreement. The
Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events as
set forth in the Warrant Agreement.

WARRANTS NOT EXERCISED ON OR BEFORE 5:00 P.M., LOS ANGELES TIME ON THE
EXPIRATION DATE AS DEFINED HEREIN SHALL BECOME VOID.

Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof, and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.

This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agents as such term is used in the Warrant Agreement.

C-19
<PAGE>

IN WITNESS WHEREOF, STREAMLOGIC CORPORATION has caused this Warrant
Certificate to be duly executed.

STREAMLOGIC CORPORATION

By: _________________________________
Title:

Dated: _________________________________

Countersigned:

WELLS FARGO BANK, N.A.
as Warrant Agent

By: ____________________________________
Authorized Signatory

C-20
<PAGE>

[FORM OF WARRANT CERTIFICATE]

[REVERSE]

The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring on the Expiration Date entitling the
holder on exercise to receive shares of Common Stock of the Company and are
issued or to be issued pursuant to a Warrant Agreement dated as of
, 1996 (the "Warrant Agreement"), duly executed and delivered by
the Company to Wells Fargo Bank, N.A., a national banking association, as
Warrant Agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights,
obligations, duties and immunities thereunder of the Warrant Agent, the
Company and the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A copy of the
Warrant Agreement may be obtained by the holder hereof upon written request to
the Company. By accepting initial delivery, transfer or exchange of this
Warrant, the duly registered holder shall be deemed to have agreed to the
terms of the Warrant Agreement as it may be in effect from time to time,
including any amendments or supplements duly adopted in accordance therewith.

The holder of Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form of election to
purchase set forth hereon properly completed and executed, together with
payment of the Exercise Price in the manner described below at the office of
the Warrant Agent. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or its
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.

Payment of the Exercise Price may be made in cash by wire transfer to the
Warrant Agent for the account of the Company or by certified or official bank
check or checks to the order of the Company or by any combination thereof.

The Warrant Agreement provides that upon the occurrence of certain events
the number of shares of Common Stock issuable upon the exercise of each
Warrant, and the Exercise Price of each Warrant, may, subject to certain
conditions, be adjusted. No fractions of a share of Common Stock will be
issued upon the exercise of any Warrant, but the Company shall pay the cash
value thereof determined as provided in the Warrant Agreement.

Warrant Certificates, when surrendered at the office of the Warrant Agent by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of
like tenor evidencing in the aggregate a like number of Warrants.

Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like
number of Warrants shall be issued to the transferee(s) in exchange for this
Warrant Certificate, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.

The Company and the Warrant Agent may deem and treat the registered
holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.

C-21
<PAGE>

PURCHASE FORM

The undersigned hereby irrevocably elects to exercise this Warrant,
according to the terms and conditions hereof, to the extent of purchasing
shares of Common Stock and hereby makes payment of $ in
payment of the exercise price thereof. If the number of shares shall not be
all of the shares purchasable under this Warrant, a new Warrant Certificate
for the balance remaining shall be issued in the name of the undersigned or
its assignee as indicated on the Assignment Form.

Dated:

INSTRUCTIONS FOR REGISTRATION OF STOCK

Name: _________________________________________________________________________
(please typewrite or print in block letters)

Address: ______________________________________________________________________

Signature: ____________________________________________________________________
Note: The signature must conform in all respects to name of holder as
specified on the face of this Warrant Certificate

Signature Guaranteed:

C-22
<PAGE>

ASSIGNMENT FORM

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

Name: __________________________________________________________________________
(please typewrite or print in block letters)

Address: _______________________________________________________________________

its right to purchase shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint Attorney, to
transfer the same on the books of the Company, with full power of substitution
in the premises.

Dated:

Social Security or other identifying number of holder

Signature: _____________________________________________________________________
Note: The signature must conform in all respects to name of holder as
specified on the face of this Warrant Certificate

Signature Guaranteed:

C-23
<PAGE>

RESET ELECTION FORM

The undersigned registered holder of this Warrant hereby irrevocably elects a
Reset Election pursuant to the terms and conditions of this Warrant and Section
4.3(a) of the Warrant Agreement.

The Reset Date applicable to this Reset Election is:

________________________________________________________________________________
(Please typewrite or print in block letters)

Dated:

Social Security or other identifying number of holder

Signature Guaranteed:

C-24
<PAGE>

APPENDIX D

INDEX TO APPENDIX D

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Condensed Consolidated Financial Statements..................... D-2
CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors.......................................... D-7
Consolidated Statements of Operations for the three months ended March
29, 1996 and March 31, 1995 (unaudited) and the years ended December
29, 1995, December 30, 1994 and December 31, 1993...................... D-8
Consolidated Balance Sheets as of March 29, 1996, December 29, 1995 and
December 30, 1994...................................................... D-9
Consolidated Statements of Cash Flows for the three months ended March
29, 1996 and March 31, 1995 (unaudited) and the three years ended
December 29, 1995, December 30, 1994 and December 31, 1993............. D-10
Consolidated Statements of Shareholders' Equity (Deficit) for the three
months ended March 29, 1996 and the three years ended December 29,
1995................................................................... D-11
Notes to Consolidated Financial Statements.............................. D-12
</TABLE>

D-1
<PAGE>

STREAMLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 28, MARCH 29,
1996 1996
----------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term investments..... $ 45,859 $ 40,477
Accounts receivable, net.............................. 8,144 19,139
Receivable from Singapore Technologies................ 1,000 13,966
Inventories........................................... 8,025 10,022
Other current assets.................................. 1,200 1,033
--------- ---------
Total current assets................................ 64,228 84,637
Property, plant and equipment, at cost, less accumulated
depreciation and amortization.......................... 5,639 5,850
Other assets............................................ 1,884 1,896
--------- ---------
$ 71,751 $ 92,383
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
10% Subordinated Notes................................ $ 10,000 $ 20,000
Current maturities of long term debt.................. 3,750 3,750
Accounts payable...................................... 6,302 8,610
Other accrued liabilities............................. 10,862 14,137
--------- ---------
Total current liabilities........................... 30,914 46,497
6% Convertible Subordinated Debentures due 2012......... 71,250 71,250
Deferred income taxes................................... 1,720 1,720
Shareholders' deficit:
Preferred stock, $1.00 par value, 2,000,000 shares
authorized, none issued.............................. -- --
Common stock, $1.00 par value, 50,000,000 shares
authorized; 15,672,967 shares issued and outstanding
(15,580,413 in March 1996)........................... 15,673 15,580
Additional paid-in capital............................ 112,735 112,330
Accumulated deficit................................... (160,541) (154,994)
--------- ---------
Total shareholders' deficit......................... (32,133) (27,084)
--------- ---------
$ 71,751 $ 92,383
========= =========
</TABLE>

See accompanying notes.

D-2
<PAGE>

STREAMLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------
JUNE 28, JUNE 30,
1996 1995
--------- ---------
(UNAUDITED)
<S> <C> <C>
Net sales................................................ $ 11,189 $ 70,076
Cost of sales............................................ 10,467 54,707
--------- ---------
Gross margin............................................. 722 15,369
--------- ---------
Operating expenses:
Research and development............................... 2,465 10,352
Selling, general and administrative.................... 2,771 10,270
--------- ---------
Total operating expenses............................. 5,236 20,622
--------- ---------
Loss from operations..................................... (4,514) (5,253)
Interest expense....................................... (1,402) (1,489)
Interest income........................................ 377 419
--------- ---------
Loss before income taxes................................. (5,539) (6,323)
Income tax provision................................... 8 21
--------- ---------
Net loss................................................. $ (5,547) $ (6,344)
========= =========
Net loss per share....................................... $ (.36) $ (.41)
========= =========
Weighted average common and common equivalent shares
outstanding............................................. 15,608 15,336
========= =========
</TABLE>

See accompanying notes.

D-3
<PAGE>

STREAMLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
------------------
JUNE 28, JUNE 30,
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................. $ (5,547) $ (6,344)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization.......................... 467 5,286
(Gain) loss on disposal of fixed assets................ -- (11)
Deferred income taxes.................................. -- (99)
Increase (decrease) from changes in:
Accounts receivable.................................. 10,995 (14,920)
Inventories.......................................... 1,997 16,616
Other current assets................................. (167) 1,161
Other assets......................................... 6 (57)
Accounts payable and other accrued liabilities....... (5,583) (2,245)
-------- --------
Net cash provided by (used in) operating activities........ 2,168 (613)
Cash flows from investing activities:
Net change in short-term investments..................... (11,865) (2,517)
Proceeds from sale of drive business..................... 12,966 --
Proceeds from sale of equipment.......................... -- (12)
Additions to property, plant and equipment............... (250) (7,043)
-------- --------
Net cash provided by (used in) investing activities........ 851 (9,572)
Cash flows from financing activities:
Decrease in 10% subordinated notes....................... (10,000) --
Increase in Term Loan Facility........................... -- 1,194
Proceeds from sale of common stock, net.................. 498 1,179
-------- --------
Net cash provided by (used in) financing activities........ (9,502) 2,373
Net decrease in cash and equivalents....................... (6,483) (7,812)
Cash and equivalents at beginning of period................ 15,443 35,959
-------- --------
Cash and equivalents at end of period...................... 8,960 28,147
Short-term investments..................................... 36,899 13,854
-------- --------
Total cash, cash equivalents and short-term investments.... $ 45,859 $ 42,001
======== ========
Supplemental cash flow information
Interest payments........................................ $ 1,004 $ 346
Tax payments............................................. $ 337 $ 464
</TABLE>

See accompanying notes.

D-4
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 28, 1996
(UNAUDITED)

NOTE 1. GENERAL

The accompanying condensed consolidated financial statements have not been
audited by independent auditors but, in the opinion of the Company, such
unaudited statements include all adjustments, consisting of normal recurring
accruals, necessary for a fair presentation of the consolidated financial
position as of June 28, 1996, and the consolidated results of operations for
the three month period ended June 30, 1996 and June 30, 1995 and cash flows
for the three month period ended June 28, 1996 and June 30, 1995. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission. Nevertheless, the Company believes that the
disclosures in these financial statements are adequate to make the information
presented not misleading. Interim results are not necessarily indicative of
the results for the full fiscal year.

On May 13, 1996 the Company elected to change its fiscal year from the last
Friday in December to the last Friday in March beginning with March 1996. The
Company has elected to disclose the consolidated results of operations and
cash flows for the three month period ended June 28, 1996 in comparative form
with the three month period ended June 30, 1995 because it believes
comparability is improved.

The three month period ended June 28, 1996 represented the first period for
which the Company's results of operations excluded those of the hard disk
drive business operated under the name "Micropolis Corporation" and sold by
the Company as of March 29, 1996.

These condensed consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto included in the Company's Transition Report on Form 10-K for the three
month period ended March 29, 1996 filed with the Securities and Exchange
Commission.

NOTE 2. INVENTORIES

Inventories are stated at the lower of standard cost, which approximates
first-in, first-out, or market:

<TABLE>
<CAPTION>
JUNE 28, MARCH 29,
1996 1996
-------- ---------
<S> <C> <C>
Raw materials and purchased parts...................... $3,676 $ 4,564
Work in process........................................ 2,204 1,487
Finished goods......................................... 2,145 3,971
------ -------
$8,025 $10,022
====== =======
</TABLE>

NOTE 3. PER SHARE INFORMATION

Loss per share is computed by dividing net loss by the weighted average
number of shares of common stock and applicable common stock equivalents
outstanding during the period. Primary and fully diluted loss per share are
the same.

D-5
<PAGE>

NOTE 4. SUBSEQUENT EVENT

Acquisition of FWB Inc.

Effective July 1, 1996 the Company purchased all of the net assets related
to the hardware business of FWB Software Inc., a developer of performance
computer storage products for pre-press, multi-media and graphics
applications. In addition, the Company made an 11% equity investment in the
software business being retained by FWB Software Inc. In consideration for
such net assets and minority equity investment, at closing the Company paid
cash of approximately $5 million and issued 1,256,123 shares of StreamLogic
Common Stock. FWB Software Inc. will receive additional shares or return
shares of StreamLogic Common Stock such that the market value (based on the
average price as defined in the Operating Agreement of FWB Software, LLC) of
the shares contributed to FWB Software Inc. is equal to $7.5 million, such
adjustment to occur on October 29, 1996.

Tender Agreement

On June 14, 1996 the Company entered into an agreement (the "Initial Tender
Agreement") with Loomis Sayles & Company, L.P. ("Loomis Sayles"), an entity
which advises investors that collectively hold approximately 79% of the
Company's outstanding $75 million issue of 6% Convertible Subordinated
Debentures ("Debentures") to exchange its Debentures for a package of cash and
securities of the Company. On September 13, 1996 the Company announced an
amendment to the Initial Tender Agreement (the "First Amendment"), and on
October 4, 1996 the Company announced a second amendment to the Initial Tender
Agreement (the "Second Amendment"; the Initial Tender Agreement, as amended by
both the First Amendment and the Second Amendment, is referred to as the
"Tender Agreement"). Pursuant to the Tender Agreement, the Company plans to
commence a tender offer for the Debentures on October 7, 1996. In the tender
offer, the Company will offer to exchange its Debentures such that, for each
$1,000 face amount of Debentures tendered, the holders will receive (a) $120
in cash, (b) $113.33 in increasing rate unsecured promissory notes,
(c) 216.66667 shares of StreamLogic Common Stock, and (d) warrants to purchase
40 shares of StreamLogic Common Stock at an initial exercise price of $3.60
per share of Common Stock. The exercise price of the warrants is subject to
downward adjustment in certain circumstances, and contains antidilution
adjustments. The Company expects shareholder approval will be required
pursuant to Nasdaq rules and regulations.

The obligations of the Loomis Sayles to advise the holders to participate in
the tender offer under the Tender remains subject to various conditions
including among others, satisfaction of all necessary regulatory requirements
and 95% participation by bond holders. In addition, such holders are not
obligated to participate. As a result, there can be no assurance that the
tender offer will be consummated. The last reported sales price of the
Debentures prior to the Company's announcement of the Amendment was $57 per
$100 face value on September 26, 1996.

If the holders of 100% of the outstanding Debentures accept the exchange,
the Company will exchange the Debentures for (a) $9 million in cash,
(b) $8.5 million in unsecured promissory notes due 1998, (c) approximately
16.25 million shares of common stock, and (d) warrants to purchase 3.0 million
shares of common stock. As a result, the transaction would increase the
Company's net tangible assets by more than $50 million.

D-6
<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
StreamLogic Corporation

We have audited the accompanying consolidated balance sheets of StreamLogic
Corporation as of March 29, 1996, December 29, 1995 and December 30, 1994, and
the related consolidated statements of operations, shareholders' equity
(deficit), and cash flows for the three months ended March 29, 1996 and each
of the three years in the period ended December 29, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of StreamLogic
Corporation at March 29, 1996, December 29, 1995 and December 30, 1994, and
the consolidated results of its operations and its cash flows for the three
months ended March 29, 1996 and each of the three years in the period ended
December 29, 1995, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Los Angeles, California
June 28, 1996

D-7
<PAGE>

STREAMLOGIC CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See accompanying notes.

D-8
<PAGE>

STREAMLOGIC CORPORATION

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
MARCH 29, DECEMBER 29, DECEMBER 30,
1996 1995 1994
--------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments............................ $ 40,477 $ 27,896 $ 63,216
Accounts receivable, less allowance for
doubtful accounts and customer returns
of $5,667 ($5,427 in 1995 and $4,455
in 1994)............................... 19,139 33,249 61,724
Receivable from Singapore Technologies.. 13,966 -- --
Inventories............................. 10,022 59,777 56,746
Other current assets.................... 1,033 3,433 6,405
--------- --------- --------
Total current assets.................. 84,637 124,355 188,091
Property, plant and equipment, at cost:
Land.................................... 986 1,675 1,675
Buildings and improvements.............. 6,632 22,520 22,246
Machinery and equipment................. 18,029 87,094 85,479
Construction in progress................ 238 24,400 3,524
--------- --------- --------
25,885 135,689 112,924
Less accumulated depreciation and amor-
tization............................... 20,035 81,544 68,672
--------- --------- --------
5,850 54,145 44,252
Other assets.............................. 1,896 1,893 1,572
--------- --------- --------
$ 92,383 $ 180,393 $233,915
========= ========= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
10% Subordinated Notes.................. $ 20,000 $ -- $ --
Current maturities of long term debt.... 3,750 2,687 --
Accounts payable........................ 8,610 34,209 46,388
Other accrued liabilities............... 14,137 21,502 20,681
--------- --------- --------
Total current liabilities................. 46,497 58,398 67,069
Term Loan Facility........................ -- 18,102 --
10% Subordinated Notes.................... -- 20,000 --
6% Convertible Subordinated Debentures due
2012..................................... 71,250 75,000 75,000
Deferred income taxes..................... 1,720 1,720 2,216
Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock, $1.00 par value;
2,000,000 shares authorized, none is-
sued................................... -- -- --
Common stock, $1.00 par value,
50,000,000 shares authorized;
15,580,413 shares issued and outstand-
ing (15,580,413 in 1995 and 15,266,440
in 1994)............................... 15,580 15,580 15,266
Additional paid-in capital.............. 112,330 110,380 108,863
Accumulated deficit..................... (154,994) (118,787) (34,499)
--------- --------- --------
Total shareholders' equity (deficit).. (27,084) 7,173 89,630
--------- --------- --------
$ 92,383 $ 180,393 $233,915
========= ========= ========
</TABLE>

See accompanying notes.

D-9
<PAGE>

STREAMLOGIC CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
---------------------- --------------------------------------
MARCH 29, MARCH 31, DECEMBER 29, DECEMBER 30, DECEMBER 31,
1996 1995 1995 1994 1993
--------- ----------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $(36,207) $(35,087) $(84,288) $(30,675) $(19,916)
Adjustments to
reconcile net loss to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization......... 5,031 5,393 20,679 23,932 25,364
(Gain) loss on
disposition of
property, plant and
equipment............ (1,023) (12) (51) (182) 54
Deferred income taxes. -- (496) (496) (201) (3,000)
Increase (decrease) from
changes in:
Accounts receivable.... 14,110 34,440 28,475 (13,493) 1,760
Inventories............ (3,204) (8,739) (3,031) 2,931 5,934
Other current assets... (339) 2,281 2,972 (2,016) (896)
Accounts payable and
other accrued
liabilities........... 9,283 (9,948) (11,358) 12,644 12,240
Other assets........... (477) (325) (393) 1,226 (432)
-------- -------- -------- -------- --------
Net cash provided by
(used in) operating
activities............. (12,826) (12,493) (47,491) (5,834) 21,108
-------- -------- -------- -------- --------
Cash flows from
investing activities:
Proceeds from sale of
Drive Business........ 39,719 -- -- -- --
Proceeds from sale of
equipment............. -- 35 51 254 57
Additions to property,
plant and equipment... (14,803) (6,132) (30,500) (19,704) (22,766)
Net change in short-
term investments...... (11,792) 14,159 12,254 12,186 1,826
-------- -------- -------- -------- --------
Net cash used in
investing activities... 13,124 8,062 (18,195) (7,264) (20,883)
-------- -------- -------- -------- --------
Cash flows from
financing activities:
Proceeds from Term Loan
Facility.............. 491 2,269 20,789 -- --
Proceeds from 10%
Subordinated Notes.... -- -- 20,000 -- --
Proceeds from sale of
common stock, net..... -- 401 1,831 1,949 2,015
Payment on capital
lease obligation...... -- -- -- (231) (534)
-------- -------- -------- -------- --------
Net cash provided by
financing activities... 491 2,670 42,620 1,718 1,481
-------- -------- -------- -------- --------
Net increase (decrease)
in cash and
equivalents............ 789 (1,761) (23,066) (11,380) 1,706
Cash and equivalents at
beginning of period.... 14,654 37,720 37,720 49,100 47,394
-------- -------- -------- -------- --------
Cash and equivalents at
end of period.......... 15,443 35,959 14,654 37,720 49,100
Short term investments.. 25,034 11,337 13,242 25,496 37,682
-------- -------- -------- -------- --------
Total cash, cash
equivalents and short-
term investments....... $ 40,477 $ 47,296 $ 27,896 $ 63,216 $ 86,782
======== ======== ======== ======== ========
Supplemental cash flow
information:
Interest payments...... $ 2,652 $ 2,439 $ 5,791 $ 5,076 $ 4,821
Tax payments
(recoveries).......... $ 72 $ (963) $ (460) $ 2,964 $ 278
Non-cash investing and
financing activities:
Note receivable from
sale of Drive
Business.............. $ 13,966 $ -- $ -- $ -- $ --
</TABLE>

See accompanying notes.

D-10
<PAGE>

STREAMLOGIC CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

FOR THE THREE YEARS ENDED DECEMBER 29, 1995 AND
THE THREE MONTH PERIOD ENDED MARCH 29, 1996
(IN THOUSANDS)

<TABLE>
<CAPTION>
NUMBER OF ADDITIONAL RETAINED
COMMON COMMON PAID-IN EARNINGS
SHARES STOCK CAPITAL (DEFICIT) TOTAL
--------- ------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
Balances at December 25,
1992........................ 14,532 $14,532 $105,633 $ 16,092 $136,257
Common stock sold for cash. 356 356 1,659 -- 2,015
Net Loss................... -- -- -- (19,916) (19,916)
------ ------- -------- --------- --------
Balances at December 31,
1993........................ 14,888 14,888 107,292 (3,824) 118,356
Common stock sold for cash. 378 378 1,571 -- 1,949
Net Loss................... -- -- -- (30,675) (30,675)
------ ------- -------- --------- --------
Balances at December 30,
1994........................ 15,266 15,266 108,863 (34,499) 89,630
Common stock sold for cash. 314 314 1,517 -- 1,831
Net Loss................... -- -- -- (84,288) (84,288)
------ ------- -------- --------- --------
Balances at December 29,
1995........................ 15,580 $15,580 $110,380 $(118,787) $ 7,173
Warrants granted........... -- -- 1,950 -- 1,950
Net Loss................... -- -- -- (36,207) (36,207)
------ ------- -------- --------- --------
Balances at March 29, 1996... 15,580 $15,580 $112,330 $(154,994) $(27,084)
====== ======= ======== ========= ========
</TABLE>

See accompanying notes.

D-11
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIOD ENDED MARCH 29, 1996
AND THE THREE YEARS ENDED DECEMBER 29, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BUSINESS INFORMATION

RECENT DEVELOPMENTS

As further described in Note 10, on January 24, 1996, the Company entered
into a definitive agreement (the "Purchase Agreement") with ST Chatsworth Pte
Ltd, a Singapore corporation ("MPL"), and a wholly-owned subsidiary of
Singapore Technologies Pte Ltd, a Singapore corporation ("ST"), to sell
substantially all of the Company's assets (other than cash and accounts
receivable) related to the Company's hard disk drive business to MPL (the
"Sale"). On March 29, 1996, the Company consummated the Sale. Accordingly, the
accompanying balance sheet as of March 29, 1996 reflects the Sale and includes
a receivable from ST for the remaining amount of the Sale proceeds. However,
the accompanying statements of operations and cash flows for the three months
ended March 29, 1996 reflect operating results and cash flows of both the hard
disk drive business and the remaining systems business (see Note 10).

BASIS OF PRESENTATION

Although the Company anticipates operating losses in the near term, the
Company is considering and will consider strategic and financial alternatives
to improve its results of operations, cash flows and net worth, including
restructuring of debt, acquisitions and other alternatives. Management
believes its cash, cash equivalents, short term investments and other working
capital will be sufficient to fund operations over the next year.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Intercompany accounts and transactions have
been eliminated. On May 13, 1996 the Company elected to change its fiscal year
from the last Friday in December to the last Friday in March, beginning with
March 1996. The three-month periods ended March 29, 1996 (the "1996 transition
period") and March 31, 1995 each had 13 weeks. Fiscal years 1995 and 1994 were
fifty-two week years versus a fifty-three week 1993.

SALES

StreamLogic is a designer and manufacturer of information storage and video
systems and, through March 29, 1996, high capacity disk drives,. The Company
sells these products and systems directly to original equipment manufacturers
("OEMs") and systems integrators and through independent distributors and
value added resellers ("VARs") for resale to end users. The Company generally
warrants its products against defects for periods from one to five years. The
Company provides for estimated future product warranty costs when products are
shipped. In addition, the Company performs ongoing credit evaluations of its
customers' financial condition, and generally requires no collateral from its
customers. Trade credit is generally granted to its customers, typically on
net 30 day terms. Historically, the Company has not experienced significant
bad debt write-offs. The Company has policies and/or contractual agreements
which allow distributors to receive price protection credit under certain
circumstances when the Company lowers its sales prices. In addition, the
Company permits customers to return products under certain circumstances. The
Company makes a provision for the estimated amount of price protection credits
and for product returns that may occur under these programs and contracts in
the period of sale. Sales, most of which are denominated in U.S. dollars, are
recorded upon shipment. No customer accounted for more than 10% of total sales
during the 1996 transition period, or 1995, 1994 or 1993.

D-12
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

DEPENDENCE ON SUPPLIER

Effective March 29, 1996 the Company and MPL have entered into an OEM supply
agreement. Among other things, the OEM Supply Agreement allows StreamLogic to
buy at prices equal to or slightly lower than the most favored OEM customer of
MPL. StreamLogic must offer all its disk drive business and requirements to
MPL on a right-of-first-refusal basis, subject to the ability of MPL to meet
certain delivery and other standards. The agreement has an initial two-year
term, after which it may be renewed annually by mutual agreement. Also
effective March 29, 1996, the Company entered into a non-exclusive European
Distribution Handling Agreement with MPL, under which MPL provides
distribution services to the Company in Europe and other locations specified
in such agreement.

FOREIGN EXCHANGE CONTRACTS

The functional currency of the Company's Singapore and Thailand subsidiaries
is the U.S. dollar. The Company enters into foreign exchange contracts to
minimize the effects of foreign currency fluctuations related to certain known
local expenditures for operations and for the new facility while under
construction in Singapore. These foreign exchange contracts hedged
approximately $2.3 million, $17.2 million and $19.9 million of transaction
exposures as of March 29, 1996, December 29, 1995 and December 30, 1994,
respectively. There were no significant deferred unrealized gains or losses at
March 29, 1996, December 29, 1995 or December 30, 1994.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents. Short-term investments consist
primarily of commercial paper, certificates of deposit, and U.S. government
agency securities and are considered available for sale under Statement of
Financial Accounting Standards No. 115. These investments generally mature
within six months and are carried at cost which approximates fair values.

INVENTORIES

Inventories are stated at the lower of standard cost, which approximates
first-in, first-out, or market.

<TABLE>
<CAPTION>
MARCH 29, DECEMBER 29, DECEMBER 30,
1996 1995 1994
--------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials and purchased parts.... $ 4,564 $20,207 $18,634
Work-in-process...................... 1,487 23,289 20,771
Finished goods....................... 3,971 16,281 17,341
------- ------- -------
$10,022 $59,777 $56,746
======= ======= =======
</TABLE>

DEPRECIATION AND AMORTIZATION

Depreciation and amortization are provided on the straight-line method over
the estimated useful life of the assets or term of related lease, whichever is
shorter; for buildings and improvements, 10 to 30 years; machinery and
equipment, 3 to 5 years.

D-13
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

OTHER ACCRUED LIABILITIES

Other accrued liabilities are comprised of the following:

<TABLE>
<CAPTION>
MARCH 29, DECEMBER 29, DECEMBER 30,
1996 1995 1994
--------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Accrued salaries and wages............ $ 3,636 $ 5,956 $ 5,622
Accrued warranty...................... 2,000 8,006 8,614
Income taxes payable.................. 394 137 243
Other................................. 8,107 7,403 6,202
------- ------- -------
$14,137 $21,502 $20,681
======= ======= =======
</TABLE>
ADVERTISING EXPENSE

The cost of advertising is expensed as incurred. The Company incurred
$1,515,000, $4,606,000, $4,317,000 and $4,799,000 in advertising costs during
the 1996 transition period and the 1995, 1994 and 1993 fiscal years,
respectively.

RESTRUCTURING CHARGE

In the third quarter of 1993, the Company recorded a restructuring charge of
$5.5 million. This charge related primarily to separation costs recognized in
connection with a reduction in workforce and a write-down of certain assets
which were no longer in use due to changes in the Company's production
requirements and new product specifications. All related expenditures were
completed in fiscal year 1994.

INCOME TAXES

The Company applies an asset and liability approach in accounting for income
taxes. Through December 29, 1995, Federal taxes were not provided currently on
undistributed foreign earnings since it was the Company's intention that these
earnings be reinvested indefinitely in such subsidiaries, or remitted in a
manner which would not result in a Federal tax liability. During the 1996
transition period, the Company provided for Federal taxes on such
undistributed foreign earnings since such earnings would be remitted due to
the Sale.

PER SHARE INFORMATION

Loss per share is computed by dividing net loss by the weighted average
number of shares of common stock. Applicable common stock equivalents
outstanding during the period have not been considered as their effect is
antidilutive. Primary and fully diluted earnings per share are the same.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121

In March 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the

D-14
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. Statement 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. The Company has
adopted Statement 121 in the 1996 transition period and the effect of its
adoption was not material.

2. INCOME TAXES

The provision (credit) for income taxes is composed of the following:

<TABLE>
<CAPTION>
TRANSITION FISCAL YEAR ENDED
---------- --------------------------------------
MARCH 9, DECEMBER 29, DECEMBER 30, DECEMBER 31,
1996 1995 1994 1993
---------- ------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current
Federal............... $242 $ -- $-- $(105)
State................. 2 82 (52) 73
Foreign............... 8 (1,143) 52 36
---- ------- ---- -----
Total................ $252 $(1,061) $-- $ 4
==== ======= ==== =====
</TABLE>

Deferred income taxes result from differences in the timing of the
recognition of expense and income items for tax and financial statement
purposes. During 1993 $3,000,000 was reclassified from deferred income taxes
to current income taxes payable for payments during 1994 for years covering
1986 through 1990. Deferred tax assets and liabilities are comprised of the
following:

<TABLE>
<CAPTION>
MARCH
29, DECEMBER 29, DECEMBER 30,
1996 1995 1994
------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax asset:
Reserves not currently tax deductible... $ 5,747 $ 5,371 $ 4,639
Excess of book over tax depreciation.... 600 2,130 1,798
Net operating loss...................... 50,179 46,641 31,996
Income tax credits...................... 9,545 9,668 7,514
Other................................... 673 768 862
------- -------- --------
Total before valuation allowance....... 66,744 64,578 46,809
Valuation allowance..................... (58,916) (63,756) (45,248)
------- -------- --------
7,828 822 1,561
------- -------- --------
Deferred tax liability:
Reserves not currently tax deductible... -- -- (2,216)
Foreign operations...................... (7,468) -- --
State income taxes...................... (1,962) (2,275) (1,327)
Other................................... (118) (267) (234)
------- -------- --------
(9,548) (2,542) (3,777)
------- -------- --------
Deferred tax liability, net............. $(1,720) $ (1,720) $ (2,216)
======= ======== ========
</TABLE>

The Company has determined a valuation allowance is required for the
deferred tax assets due to the uncertainty of ultimately realizing certain tax
benefits. The change in the valuation allowance was a result of current year
losses and settlement of prior year tax audits.

D-15
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table reconciles the provision for income taxes to the
statutory federal income tax rate of 35%:

<TABLE>
<CAPTION>
TRANSITION
1996 1995 1994 1993
---------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Tax benefit at statutory rate.......... $(12,584) $(29,872) $(10,736) $(6,969)
Increases (decreases) related to:
Federal alternative minimum tax on
foreign earnings..................... 242 -- -- --
Losses without current benefit
(benefit of loss carryforwards)...... (6,312) 15,906 13,267 1,510
State income tax expense (benefit) net
of federal income tax................ 1 53 (34) 48
Foreign operations.................... -- (5,671) (10,234) (5,090)
Repatriation of foreign earnings...... 18,760 18,498 7,700 10,500
Other, net............................ 145 25 37 5
-------- -------- -------- -------
$ 252 $ (1,061) $ 0 $ 4
======== ======== ======== =======
</TABLE>

Income from the Company's Singapore and Thailand subsidiaries was exempt
from income taxes in those countries through August 2004 and December 1993,
respectively. Income (loss) from these operations for the periods under
exemption was $(6,183,000) in the 1996 transition period, $(15,310,000) in
1995, $27,411,000 in 1994 and $17,182,000 in 1993.

A net operating loss of approximately $124,162,000 is available to be
carried forward to the years 2004-2011. General business tax credit
carryforwards of approximately $8,562,000, expiring between 2000 and 2009, are
also available to reduce future federal income taxes. However, under Internal
Revenue Code Sections 382 and 383, the amount of the operating loss and
general business credit carryforwards that can be used annually may be limited
due to certain changes in ownership. The potential issuance of Common Stock in
connection with the Bond Agreement discussed in Note 11, or other trading
activities, may create such a change in ownership.

3. CREDIT FACILITY AGREEMENT

During March 1996, after evaluating the costs of maintaining the Company's
$25 million credit facility and because the Agreement required assets to be
transferred free of all liens, pledges and encumbrances, the Company elected
to terminate its credit facility.

4. LEASE COMMITMENTS

Minimum annual lease commitments at March 29, 1996 under noncancellable
operating leases, principally for operating facilities, are payable as
follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
1997....................................................... $1,122
1998....................................................... 111
1999....................................................... 98
2000....................................................... 98
2001....................................................... 98
Thereafter................................................. 1,014
------
Total future minimum lease payments.................... $2,541
======
</TABLE>

D-16
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Rent expense amounted to $1,101,000 in the 1996 transition period,
$4,923,000 in 1995, $4,182,000 in 1994 and $4,643,000 in 1993.

5. LONG TERM DEBT

Term Loan Facility

In December 1994, Singapore Technologies Construction Pte Ltd. ("ST
Construction"), a subsidiary of ST, was hired by the Company as the general
contractor for construction of its new factory in Singapore. During the third
quarter of 1995, the Company refinanced, with ST Construction together with ST
Capital Ltd (another subsidiary of ST) as lenders, its existing term loan
facility used to finance the new factory with a new $21.5 million loan
facility (the "Loan Facility"). On March 29, 1996 the Loan Facility was
retired in connection with the Sale.

10% Subordinated Notes

During October 1995, the Company completed the private placement to an
institutional investor of $20,000,000 aggregate principal amount of 10%
Convertible Subordinated Notes (the "Notes"), due October 15, 1998. The Notes
are convertible at the option of the holder into shares of Common Stock of the
Company at a conversion price of $6.00 per share, a premium to the market
price of the Company's Common Stock at the time of issuance. The Notes are
senior to the Company's existing 6% Convertible Subordinated Debentures due
2012 and are collateralized by substantially all of the assets of the Company.
During March 1996, the Company obtained the required consent of the holder of
the Notes to allow consummation of the Sale and in consideration for such
consent, agreed to repay the Notes on June 28, 1996 and issued warrants to
purchase 1,500,000 shares of the Company's Common Stock at a price of $4 per
share. Accordingly, the Company has recorded a charge of $1,800,000,
representing the estimated fair market value, for the warrants against the
proceeds of the Sale in the Statement of Operations for the 1996 transition
period. On April 5, 1996 the Company repaid $10,000,000 of the Notes. Interest
on the Notes is payable semiannually on April 15 and October 15. Interest
expense amounted to $500,000 in the 1996 transition period and $444,000 in
1995. Because of the recent agreement to repay the Notes and issue the
Warrants, the fair market value of the Notes approximates carrying value as of
March 29, 1996.

6% Convertible Subordinated Debentures

In March 1987, the Company issued $75,000,000 principal amount of 6%
Convertible Subordinated Debentures due 2012 (the "Debentures"). The
Debentures are convertible into common stock at a price of $48.50 at any time
prior to redemption or maturity (1,546,000 shares of common stock have been
reserved for issuance upon conversion.) Mandatory annual sinking fund payments
of 5% of the aggregate principal amount of the Debentures issued will be made
on each March 15, commencing March 15, 1997. Debentures converted to common
stock or reacquired or otherwise redeemed by the Company may be used to reduce
the amount of any sinking fund payment. The Debentures may be redeemed early,
at the Company's option, upon the payment of a premium. Interest on the
debentures is payable semi-annually on March 15 and September 15. Interest
expense amounted to $1,125,000 in the 1996 transition period and $4,500,000 in
the 1995, 1994 and 1993 fiscal years. The fair market value of the Debentures
using over-the-counter market prices, was approximately $34.1 million at March
29, 1996.

Maturities and sinking fund requirements of long-term debt are $3,750,000 in
each of the five years succeeding March 29, 1996.

During the 1996 transition period and the 1995, 1994 and 1993 fiscal years
interest paid totaled $2,652,000, $5,791,000, $5,076,000 and $4,821,000
respectively, of which $456,000 and $347,000 was capitalized in the 1996
transition period and the 1995 fiscal year, respectively, as part of the cost
of the Company's new factory in Singapore.

D-17
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

6. CAPITAL STOCK

Under the Company's various stock option plans, options may be granted at
prices equal to fair market value at the date of grant. Options for key
employees and officers generally become exercisable in equal annual amounts
over five years commencing one year from the date of grant, and expire five
years from the date of grant. Options for directors are exercisable over three
years. At March 29, 1996, there were options for 970,697 shares available for
future option grants. There are currently 432 employees participating in the
various plans. Expiration dates for all options range from 1996 to 2000.

A summary of certain information with respect to options under the Plans
follows:

<TABLE>
<CAPTION>
PERIODS ENDED
-------------------------------------------------
MARCH 29, DECEMBER 29, DECEMBER 30, DECEMBER 31,
1996 1995 1994 1993
--------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Options outstanding,
beginning of period..... 1,624,160 1,265,470 1,316,970 1,160,444
Options granted.......... -- 1,100,100 476,500 552,000
Options exercised........ -- (91,444) (166,750) (176,326)
Weighted average exercise
price................... -- $ 6.39 $ 4.50 $ 5.72
Options canceled......... (893,893) (649,966) (361,250) (219,148)
--------- --------- --------- ---------
Options outstanding, end
of period............... 730,267 1,624,160 1,265,470 1,316,970
========= ========= ========= =========
Weighted average price... $ 5.86 $ 6.14 $ 7.15 $ 7.15
========= ========= ========= =========
Exercisable.............. 178,567 248,787 381,241 458,638
========= ========= ========= =========
</TABLE>

The Company also has an employee stock purchase plan under Section 423 of
the Internal Revenue Code, with 1,400,000 shares of common stock authorized to
be issued. All full time employees are eligible to participate through payroll
deductions of up to 10% of their compensation. Participants may, at their
option, purchase common stock from the Company at the lower of 85% of the fair
market value of the common stock at either the beginning or end of each one
year option period. During 1995, 222,095 shares were issued pursuant to this
plan at prices ranging from $5.53 to $6.16. During 1994, 207,845 shares were
issued pursuant to this plan at a price of $5.66, and in 1993, 178,898 shares
were issued pursuant to this plan at a price of $5.42. As of March 29, 1996,
303,848 shares were available for issuance under this plan.

On March 29, 1996, in partial consideration for the required consent of the
holder of the Notes to allow consummation of the Sale, the Company issued
warrants to purchase 1,500,000 shares of the Company's common stock at a price
of $4 per share. Such warrants had an estimated fair market value of
$1,800,000 at March 29, 1996 and will expire on March 29, 1998. In addition,
warrants to purchase 80,081 shares of the Company's common stock at a price of
$5 were issued to the Company's investment banker in partial consideration for
work in connection with the Sale. Such warrants had an estimated fair market
value of $150,000 at issuance and will expire on March 28, 1997. Accordingly,
the Company has recorded a charge of $1,950,000 for the warrants in the
Statement of Operations for the 1996 transition period.

The Board of Directors of the Company declared a dividend distribution of
one Right for each share of common stock of the Company outstanding at the
close of business on June 2, 1989. When exercisable, each Right entitles the
registered holder to purchase from the Company one share of common stock at a
price of $40.00 per share, subject to adjustment. Initially, the Rights attach
to all outstanding shares of common stock, and no separate Rights Certificates
will be distributed. The Rights will become exercisable and will detach from
the common stock in the event any individual or group acquires 20% or more of
the Company's common stock, or announces a tender or exchange offer, other
than through conversion of the Notes or any warrants, which, if consummated,
would result in that person or group owning at least 30% of the Company's
common stock. If an

D-18
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

individual or group acquires 20% or more of the Company's common stock (except
pursuant to certain cash tender offers for all of the Company's common stock),
each Right will entitle the holder of a Right, other than Rights that are or
were acquired or beneficially owned by the 20% stockholder (which rights will
thereafter be void) to purchase, at the Right's then current exercise price,
the Company's common stock in an amount having market value equal to twice the
exercise price. Similarly, with certain exceptions, if the Company merges or
consolidates with or sells 20% or more of its assets or earning power to
another person, each Right then will entitle the holder to purchase, at the
Right's then current exercise price, the stock of the acquiring company in an
amount having a market value equal to twice the exercise price. The Rights do
not have voting or dividend rights, and, until they become exercisable, have
no dilutive effect on the earnings of the Company. The Company may redeem the
rights at $0.01 per Right at any time on or prior to the tenth day after
acquisition by a person or group of 20% or more of the Company's outstanding
common stock. The Rights will expire on May 18, 1999, unless earlier redeemed.

No dividends were declared by the Company during the five-year period ended
March 29, 1996.

7. COMMITMENTS AND CONTINGENCIES

In the third quarter of 1992, the Company purchased an equity interest of
approximately 27% in Tulip Memory Systems, Inc. (TMS), a start-up company
formed to develop substrates which are to be used in the manufacture of
computer disk drives. During 1994, the Company increased its ownership to
approximately 60%, pending anticipated outside investment. Operating expenses
attributable to TMS are included in the financial results of the Company. In
connection with its original investment, StreamLogic agreed to guarantee the
obligations of TMS to pay the acquisition cost of equipment. The cost of such
guaranty obligation was recorded in the Company's 1995 Statement of
Operations. In March 1996, in order to consummate the Sale, the Company paid
its $1.3 million guaranty obligation under the agreement.

At March 29, 1996, the Company had letters of credit outstanding totaling
approximately $4.8 million, which guarantee various trade activities. These
letters of credit are secured by pledges of cash.

In addition, the Company is involved in routine legal matters and
contingencies in the ordinary course of business which management believes
will not have a material effect upon the Company's financial position.

D-19
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8. GEOGRAPHIC INFORMATION

The following summarizes the Company's sales, income (loss) before income
taxes, and assets by geographic area. Foreign sales originate primarily from
the Company's Singapore location. The sales described below represent the
geographic origination of such sales. Export sales (sales originating in the
United States to customers in foreign countries), were less than 10% of total
sales in each of the 1996 transition period and the 1995, 1994 and 1993 fiscal
years. Sales to affiliates are at arms-length prices.

<TABLE>
<CAPTION>
TRANSITION FISCAL YEARS ENDED
---------- -------------------------------
1996 1995 1994 1993
---------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Customer sales:
Domestic......................... $ 5,986 $ 25,149 $ 63,892 $ 128,781
Foreign.......................... 18,422 186,115 282,422 254,145
Affiliate sales:
Domestic......................... 11,259 64,309 49,851 55,006
Foreign.......................... 16,600 110,812 178,881 234,477
Eliminations..................... (27,859) (175,121) (228,732) (289,483)
-------- --------- --------- ---------
$ 24,408 $ 211,264 $ 346,314 $ 382,926
======== ========= ========= =========
Income (loss) before income taxes:
Domestic......................... $(26,994) $ (66,406) $ (58,609) $ (34,425)
Foreign.......................... (8,961) (18,943) 27,934 14,513
-------- --------- --------- ---------
$(35,955) $ (85,349) $ (30,675) $ (19,912)
======== ========= ========= =========
Assets:
Domestic......................... $ 70,097 $ 20,732 $ 66,063 $ 74,520
Foreign.......................... 22,286 159,661 167,852 175,909
-------- --------- --------- ---------
$ 92,383 $ 180,393 $ 233,915 $ 250,429
======== ========= ========= =========
</TABLE>

9. COMPARATIVE QUARTERLY FINANCIAL SUMMARY (UNAUDITED)

<TABLE>
<CAPTION>
QUARTERS
----------------------------------------------------
FISCAL 1995 FIRST SECOND THIRD FOURTH YEAR
- ----------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales............... $ 40,899 $ 70,076 $ 58,785 $ 41,504 $211,264
Gross profit (loss)..... (8,869) 15,369 2,491 (3,355) 5,636
Loss before income tax-
es..................... (36,253) (6,323) (17,445) (25,328) (85,349)
Net loss................ (35,087) (6,344) (17,481) (25,376) (84,288)
Loss per share.......... (2.29) (.41) (1.12) (1.63) (5.46)
<CAPTION>
QUARTERS
----------------------------------------------------
FISCAL 1994 FIRST SECOND THIRD FOURTH YEAR
- ----------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Net sales............... $83,658 $ 75,761 $ 79,285 $107,610 $346,314
Gross profit............ 12,296 7,245 11,446 28,471 59,458
Income (loss) before in-
come taxes............. (9,760) (14,793) (10,948) 4,826 (30,675)
Net income (loss)....... (9,760) (14,793) (10,948) 4,826 (30,675)
Earnings (loss) per
share.................. (.65) (.99) (.72) .31 (2.03)
</TABLE>

D-20
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

10. SALE OF THE DISK DRIVE BUSINESS

On January 24, 1996, the Company entered into a definitive agreement (the
"Purchase Agreement") with ST Chatsworth Pte Ltd, a Singapore corporation
("MPL"), and a wholly-owned subsidiary of Singapore Technologies Pte Ltd, a
Singapore corporation ("ST"), to sell substantially all of the assets, other
than cash and accounts receivable, of the Company's hard disk drive business
(the "Drive Business") including the name "Micropolis," certain other
intangibles, the capital stock of the Company's subsidiary Micropolis
Corporation (Thailand) Ltd. and either the capital stock or assets of five of
the Company's European and Asian sales and marketing subsidiaries (such
assets, collectively, the "Subject Assets") to MPL, and MPL assumed certain of
the Company's liabilities relating to the Drive Business (the "Sale"). The
Sale was subject to stockholder approval and such approval was received.

In consideration of the Sale on March 29, 1996, the Company received total
cash consideration of approximately $54 million. $39.7 million of such cash
consideration was received as of the March 29, 1996 closing, $13 million in
cash consideration was received on June 6, 1996, and a final payment of $1
million, which will be held in escrow and is subject to certain conditions, is
expected to be received in early August. The net gain on the Sale was not
significant to the 1996 transition period Statement of Operations.

The following unaudited pro forma condensed consolidated financial
information for the three months ended March 29, 1996 and March 31, 1995 and
the year ended December 31, 1995 has been prepared to illustrate the effect of
the Sale as though the Sale had occurred on December 30, 1995, December 31,
1994 and December 31, 1994, respectively. The unaudited pro forma condensed
consolidated financial information is presented for illustrative purposes only
and is not necessarily indicative of the consolidated results of operations of
StreamLogic Corporation that would have been reported had the Sale occurred on
the dates indicated, nor does it represent a forecast of the consolidated
results of operations of StreamLogic Corporation for any future period.
Furthermore, no effect has been given in the condensed consolidated financial
information for operating benefits that may have been realized by virtue of
the Sale and no effect has been given for any additional expense control or
restructuring activities which the Company may have undertaken with respect to
the remaining business. The unaudited pro forma condensed consolidated
financial information should be read in conjunction with the historical
consolidated financial statements of StreamLogic Corporation, which are
included herein.

<TABLE>
<CAPTION>
THREE MONTH
PERIOD ENDED YEAR ENDED
------------------- ------------
MARCH 29, MARCH 31, DECEMBER 29,
1996 1995 1995
--------- --------- ------------
<S> <C> <C> <C>
Net sales...................................... $ 6,738 $ 9,527 $ 39,343
Gross profit(1)................................ 1,048 2,642 7,679
Net loss(2).................................... (6,533) (5,349) (22,805)
Loss per share................................. (.42) (.35) (1.48)
======= ======= ========
Weighted average shares outstanding............ 15,580 15,311 15,445
======= ======= ========
</TABLE>
- --------
(1) The Company and MPL have entered into an OEM supply agreement. Among other
things, the OEM Supply Agreement allows StreamLogic to buy at prices equal
to or slightly lower than the most favored OEM customer of MPL.
StreamLogic must offer all its disk drive business and requirements to MPL
on a right-of-first-refusal basis, subject to the ability of MPL to meet
certain delivery and other standards. The agreement has an initial two-
year term, after which it may be renewed annually by mutual agreement. The
pro forma adjustment incorporates the provisions contained in the
agreement.

(2) The costs of TMS are included in the StreamLogic Corporation pro forma net
loss. Such costs were $88,000, $3.1 million and $5.1 million in the 1996
transition period, the 1995 quarter, and the 1995 year, respectively. The
Company discontinued funding of TMS in the 1996 transition period.

D-21
<PAGE>

STREAMLOGIC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

11. SUBSEQUENT EVENTS

Acquisition of FWB Inc.

On June 10, 1996 the Company entered into a definitive agreement, subject to
certain conditions, to purchase all of the net assets related to the hardware
business of FWB Inc., a developer of performance computer storage products for
pre-press, multi-media and graphics applications. At closing, the Company
would pay $5 million, consisting of approximately $2 million in cash and
approximately $3 million of assumed debt. In addition, the Company entered
into a definitive agreement, subject to certain conditions, to make an 11%
equity investment in the software business being retained by FWB. In
consideration for such minority equity investment, at closing the Company
would issue shares of StreamLogic Common Stock with an aggregate fair market
value of $8 million, as defined in the agreement. There can be no assurance
that this transaction will be consummated.

Bond Agreement

On June 14, 1996 the Company entered into an agreement (the "Bond
Agreement") with Loomis Sayles & Co., L.P. ("Loomis Sayles"), an entity which
advises investors that collectively hold approximately 79% of the outstanding
Debentures, to exchange the Debentures for a package of cash, common stock and
warrants to purchase common stock. Pursuant to the Bond Agreement, the Company
plans to commence a tender offer for the Debentures during mid-August 1996. In
the tender offer, the Company will offer to exchange its Debentures such that,
for each $1,000 face amount of Debentures tendered, the holders will receive
(a) $233.33 in cash, (b) $520 in Common Stock, and (c) warrants to purchase 40
shares of StreamLogic Common Stock at an initial exercise price of 150% of
market value as defined in the Bond Agreement. The exercise price of the
warrants is subject to downward adjustment in certain circumstances, and
contains antidilution adjustments. The Company expects shareholder approval
will be required pursuant to Nasdaq rules and regulations.

The obligations of the holders advised by Loomis Sayles to participate in
the tender offer under the Bond Agreement is subject to various conditions
including satisfaction of all necessary regulatory requirements, 95%
participation by bond holders, and the average price of StreamLogic's Common
Stock immediately prior to the expiration of the tender offer falling with the
range $4.00 to $7.50. As a result, there can be no assurance that the tender
offer will be consummated.

D-22
<PAGE>

Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and the 6% Debentures and any other required documents should
be sent or delivered by 6% Debenture holders or his broker, dealer, commercial
bank, trust company or other nominee to the Exchange Agent at one of its
addresses set forth below:

The Exchange Agent:

CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

<TABLE>
<S> <C>
By Mail: By Hand Delivery or
Midtown Station Overnight Delivery:
P.O. Box 798 120 Broadway, 13th Fl.
New York, NY 10018 New York, NY 10271
Attention: Reorganization Attention: Reorganization
Dept. Dept.
</TABLE>

By Facsimile Transmission:
(201) 329-8936
For Confirmation of Facsimile Transmission
(201) 296-4983

ADDITIONAL COPIES

You may contact the Company, your broker, dealer, commercial bank or trust
company for assistance concerning the Exchange Offer. Requests for additional
copies of this Offer to Exchange and Letter of Transmittal should be directed
to the Company at the address and phone number as set forth below.

STREAMLOGIC CORPORATION
21329 Nordhoff Street
Chatsworth, California 91311
Attn: Chief Financial Officer
PH: 818-701-8595
FAX: 818-701-8410

<PAGE>

LETTER OF TRANSMITTAL
TO TENDER
6% CONVERTIBLE DEBENTURES DUE 2012
OF
STREAMLOGIC CORPORATION

THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON NOVEMBER 4,
1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF 6% DEBENTURES (AS
DEFINED) DUE 2012 MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE EXPIRATION
DATE.

To:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C., EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Mail By Facsimile Transmission By Hand Delivery or Overnight Delivery

Midtown Station (201) 329-8936 120 Broadway--13th Floor
P.O. Box 798 New York, NY 10271
New York, NY 10018 For Confirmation of Attention: Reorganization Dept.
Attention: Reorganization Dept. Facsimile Transmission

(201) 296-4983
</TABLE>

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA FACSIMILE OR TELEX, OTHER THAN AS SET FORTH ABOVE WILL NOT
CONSTITUTE A VALID DELIVERY.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
DESCRIPTION OF 6% DEBENTURES
- -----------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
AGGREGATE PRINCIPAL AMOUNT OF
CERTIFICATE PRINCIPAL AMOUNT 6% DEBENTURES
NUMBER(S) OF 6% DEBENTURES TENDERED**
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (ATTACH SIGNED REPRESENTED BY (MUST BE AN INTEGRAL
(PLEASE FILL IN, IF BLANK) LIST IF NECESSARY) CERTIFICATE(S)* MULTIPLE OF $1,000)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
TOTAL PRINCIPAL
AMOUNT OF 6%
DEBENTURES
- -----------------------------------------------------------------------------------------------------------
</TABLE>

* Need not be completed by Holders who tender Debentures by book entry
transfer (see below).
** Unless otherwise indicated, it will be assumed that all Debentures
evidenced by any certificate(s) delivered to the Exchange Agent are
being tendered. See Instruction 5.
<PAGE>

The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed. Except as otherwise
provided herein, all signatures on this Letter of Transmittal must be
guaranteed in accordance with the procedures set forth herein. See Instruction
1. All capitalized terms used herein and not otherwise defined herein are used
herein with the meanings ascribed to them in the Offer to Exchange (as
defined).

HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE THE TENDER OFFER CONSIDERATION
PURSUANT TO THE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR 6%
DEBENTURES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.

This Letter of Transmittal is to be used only if 6% Convertible Debentures
due 2012 (the "6% Debentures") of StreamLogic Corporation (the "Company") are
to be physically delivered to the Exchange Agent or delivered by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company
("DTC") or the Philadelphia Depository Trust Company ("PDTC") (each a "Book-
Entry Transfer Facility") pursuant to the book-entry transfer procedures set
forth in the Company's Offer to Exchange dated October 7, 1996 (as the same
may be amended or supplemented from time to time, the "Offer to Exchange")
under the heading "The Exchange Offer--Procedures for Tendering--Book-Entry
Transfer." See Instruction 2. Delivery of documents to a Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.

Holders whose 6% Debentures are not immediately available or who cannot
deliver their 6% Debentures and all other required documents to the Exchange
Agent, or who cannot complete the procedure for book-entry transfer, prior to
the Expiration Date, may nevertheless tender their 6% Debentures in accordance
with the guaranteed delivery procedures set forth in the Offer to Exchange
under the heading "The Exchange Offer--Procedures for Tendering--Guaranteed
Delivery." See Instruction 2.

HOLDERS WHO WISH TO TENDER THEIR 6% DEBENTURES MUST, AT A MINIMUM, COMPLETE
COLUMNS (1) THROUGH (3) IN THE BOX HEREIN ENTITLED "DESCRIPTION OF 6%
DEBENTURES TENDERED" AND SIGN IN THE APPROPRIATE BOX BELOW. If only those
columns are completed, the holder will be deemed to have tendered all the 6%
Debentures listed in the table. If a holder wishes to tender less than all of
such 6% Debentures, column (4) must be completed in full, and such holder
should refer to Instruction 4.

2
<PAGE>

[_] CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED BY BOOK ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH ONE OF
THE BOOK ENTRY FACILITIES AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS ONLY):

Name of Tendering Institution ______________________________________________

Applicable Book-Entry Transfer Facility:
DTC [_] PDTC [_]

Account Number _____________________________________________________________

Transaction Code Number ____________________________________________________

[_] CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):

Name(s) of Registered Holder(s) ____________________________________________

Date of Execution of Notice of Guaranteed Delivery _________________________

Window Ticket Number (if available) ________________________________________

Name of Institution which Guaranteed Delivery ______________________________

If Delivered by Book-Entry Transfer, Check Box of Applicable Book-Entry
Transfer Facility:
DTC [_] PDTC [_]

Account Number _____________________________________________________________

Transaction Code Number ____________________________________________________

3
<PAGE>

NOTE: SIGNATURES MUST BE PROVIDED BELOW

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

By execution hereof, the undersigned hereby acknowledges receipt of the
Offer to Exchange and this Letter of Transmittal relating to the Company's
offer to exchange (the "Offer") each outstanding $1,000 principal amount of
the 6% Debentures for (i) $120.00 in cash, (ii) $113.33 principal amount of
the Company's increasing rate unsecured promissory notes due 1998, (iii)
216,66667 shares of the Company's Common Stock, $1.00 par value ("Common
Stock") and (iv) five-year warrants ("Warrants") to purchase 40 shares of
Common Stock at an initial exercise price of $3.60 per share, subject to
certain rights of each Warrant holder to reduce such exercise price under
certain circumstances on a one time basis (collectively, the "Tender Offer
Consideration"), and otherwise upon the terms and subject to the conditions
set forth in the Offer to Exchange. The undersigned hereby acknowledges that,
in accordance with the terms of the Offer, the undersigned is not entitled to
any payment in respect of accrued interest on the 6% Debentures tendered
herewith and accepted pursuant to the Offer (including without limitation
interest otherwise scheduled for payment on September 15, 1996). The
undersigned further acknowledges that it will be entitled to receive a cash
payment (as provided in the Offer to Exchange) in lieu of any fractional
shares of Common Stock issuable in the Offer.

Upon the terms and subject to the conditions of the Offer, the undersigned
hereby tenders to the Company the principal amount of 6% Debentures indicated
above.

Subject to, and effective upon, the acceptance by the Company of the
principal amount of 6% Debentures tendered hereby for exchange pursuant to the
terms of the Offer, the undersigned hereby sells, assigns and transfers to, or
upon the order of, the Company, all right, title and interest in and to, and
any and all claims in respect of or arising or having arisen as a result of
the undersigned's status as a holder of, all 6% Debentures tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange Agent
as the true and lawful agent and attorney-in-fact of the undersigned with
respect to such 6% Debentures with full power of substitution (such power-of-
attorney being deemed to be an irrevocable power coupled with an interest) to
(a) deliver such 6% Debentures, or transfer ownership of such 6% Debentures on
the account books maintained by a Book-Entry Transfer Facility, together, in
either case, with all accompanying evidences of transfer and authenticity, to
or upon the order of the Company, (b) present such 6% Debentures for transfer
on the books of the Company, and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such 6% Debentures, all in
accordance with the terms of the Offer.

The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the 6% Debentures
tendered hereby and that when such 6% Debentures are accepted for exchange by
the Company, the Company will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and that none of such 6% Debentures will be subject to any adverse claim or
right. The undersigned, upon request, will execute and deliver all additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the sale, assignment and transfer of the 6% Debentures
tendered hereby.

The undersigned understands that tenders of 6% Debentures pursuant to any of
the procedures described in the Offer to Exchange under the caption "The
Exchange Offer--Procedures for Tendering" and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. The Company's acceptance of such 6% Debentures for exchange pursuant to
the terms of the Offer will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of
the Offer.

All authority conferred or agreed to be conferred by this Letter of
Transmittal shall survive the death or incapacity of the undersigned and every
obligation of the undersigned under this Letter of Transmittal shall be
binding upon the undersigned's heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other

4
<PAGE>

legal representatives. 6% DEBENTURES PURSUANT TO THE OFFER MAY BE WITHDRAWN AT
ANY TIME PRIOR TO THE EXPIRATION DATE. See the information set forth under the
heading "The Exchange Offer--Withdrawal of Tenders" in the Offer to Exchange.

Unless otherwise indicated herein in the box entitled "Special Payment
Instructions," please issue the Tender Offer Consideration with respect to 6%
Debentures accepted for exchange, and return any certificates for 6%
Debentures not tendered or not accepted for exchange, in the name(s) of the
registered holder(s) appearing in the box entitled "Description of 6%
Debentures Tendered" (and, in the case of 6% Debentures tendered by book-entry
transfer, by credit to the account at the Book-Entry Transfer Facility
designated above). Similarly, unless otherwise indicated herein in the box
entitled "Special Delivery Instructions," please deliver the Tender Offer
Consideration with respect to 6% Debentures for exchange, together with any
certificates for 6% Debentures not tendered or not accepted for exchange (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing in the box entitled "Description of 6% Debentures
Tendered." If both the "Special Payment Instructions" box and the "Special
Delivery Instructions" box are completed, please issue the Tender Offer
Consideration with respect to any 6% Debentures accepted for exchange, and
return any certificates for 6% Debentures not tendered or not accepted for
exchange, in the name(s) of, and deliver such Tender Offer Consideration and
any such certificates to, the person(s) at the address(es) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Payment Instructions" box or "Special Delivery Instructions" box
provisions of this Letter of Transmittal to transfer any 6% Debentures from
the name of the registered holder(s) thereof if the Company does not accept
any of such 6% Debentures for exchange pursuant to the terms of the Offer.

SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)

To be completed ONLY (i) if cer- To be completed ONLY if certifi-
tificates for 6% Debentures in a cates for 6% Debentures in a
principal amount not accepted principal amount not accepted
and/or the certificates repre- and/or the Certificate represent-
senting the Tender Offer Consid- ing the Tender Offer Considera-
eration, as the case may be, are tion, as the case may be, are to
to be issued in the name of some- be sent to someone other than the
one other than the undersigned. undersigned or to the undersigned
at an address other than that
Issue and mail shown in the box entitled "De-
(check appropriate box(es)) scription of 6% Debentures" on
the face of this Letter.

[_] 6% Debentures to: Mail or deliver

(check appropriate box(es))
[_] the Tender Offer Considera-
tion to: [_] 6% Debentures to:

Name _____________________________ [_] the Tender Offer Considera-
(PLEASE PRINT) tion to:
Address __________________________ Name______________________________
__________________________________ (PLEASE PRINT)
__________________________________ Address __________________________
(INCLUDE ZIP CODE) __________________________________
__________________________________ __________________________________
(TAX IDENTIFICATION OR SOCIAL (INCLUDE ZIP CODE)
SECURITY NUMBER) __________________________________

Please complete the Substitute Form W-9 below.

5
<PAGE>

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

SIGN HERE

(TO BE COMPLETED BY ALL TENDERING HOLDERS OF 6% DEBENTURES REGARDLESS OF
WHETHER 6% DEBENTURES ARE BEING PHYSICALLY DELIVERED HEREWITH)

X __________________________________ Address: ___________________________

X __________________________________ ____________________________________
Signature(s) of Holder(s) of (Including Zip Code)
Authorized Signatory

Date: ________________________, 1996 Area Code and Telephone No.: _______

Must be signed by the registered Tax Identification or Social
holder(s) of the 6% Debentures Security No.: ______________________
tendered hereby exactly as their
name(s) appear(s) on the SIGNATURE GUARANTEE (If required,
certificate(s) for such 6% see Instructions 1 and 5 below)
Debentures or, if tendered by a
participant in one of the Book- X __________________________________
Entry Transfer Facilities, exactly (Name of Eligible Institution
as such participant's name appears Guaranteeing Signatures)
on a security position listing as
the owner of the 6% Debentures, or X __________________________________
by person(s) authorized to become (Address (including zip code) and
registered holder(s) by Telephone Number
endorsements and documents (including area code) of Eligible
transmitted with this Letter of Institution)
Transmittal. If signature is by a
trustee, executor, administrator, X __________________________________
guardian, attorney-in-fact, officer (Authorized Signature)
of a corporation, agent or other
person acting in a fiduciary or X __________________________________
representative capacity, please (Printed Name)
provide the following information
and see Instruction 5. X __________________________________
(Title)

Name(s): ___________________________ Date: ________________________, 1996

X __________________________________
(Please Print)

Capacity (full title): _____________

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

6
<PAGE>

INSTRUCTIONS FOR HOLDERS
TENDERING 6% DEBENTURES

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., by a commercial bank or trust company having an office or correspondent
in the United States or by any other "Eligible Guarantor Institution" as such
term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (each of the foregoing being referred to herein as an "Eligible
Institution") unless (a) this Letter of Transmittal is signed by the
registered holder of the 6% Debentures tendered herewith (or by a participant
in one of the Book-Entry Transfer Facilities whose name appears on a security
position listing as the owner of such 6% Debentures) and neither the "Special
Payment Instructions" box nor the "Special Delivery Instructions" box of this
Letter of Transmittal has been completed or (b) such 6% Debentures are
tendered for the account of an Eligible Institution. See Instruction 5.

2. DELIVERY OF LETTER OF TRANSMITTAL AND 6% DEBENTURES; GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if 6% Debentures
tendered hereby are to be physically delivered to the Exchange Agent or
delivered by book-entry transfer to the Exchange Agent's account at a Book-
Entry Transfer Facility pursuant to the procedures set forth in the Offer to
Exchange under the heading "The Exchange Offer--Procedures for Tendering--
Book-Entry Transfer." All physically tendered 6% Debentures or confirmations
of book-entry transfer into the Exchange Agent's account with a Book-Entry
Transfer Facility, together with a properly completed and validly executed
Letter of Transmittal (or facsimile thereof) and any other documents required
by this Letter of Transmittal, must be received by the Exchange Agent at one
of its addresses set forth on the cover page hereof prior to the Expiration
Date. If 6% Debentures are forwarded to the Exchange Agent in multiple
deliveries, a properly completed and validly executed Letter of Transmittal
must accompany each such delivery.

If a holder desires to tender 6% Debentures pursuant to the Offer and (a)
certificates representing such 6% Debentures are not immediately available,
(b) time will not permit this Letter of Transmittal, certificates representing
such 6% Debentures and all other required documents to reach the Exchange
Agent prior to the Expiration Date, or (c) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date, such holder may
effect a tender of 6% Debentures in accordance with the guaranteed delivery
procedure set forth in the Offer to Exchange under the caption "The Exchange
Offer--Procedures for Tendering--Guaranteed Delivery."

Pursuant to such procedure:

(a) such tender must be made by or through an Eligible Institution;

(b) prior to the Expiration Date, the Exchange Agent must have received
from such Eligible Institution, at one of the addresses of the Exchange
Agent set forth on the cover page hereof, a properly completed and validly
executed Notice of Guaranteed Delivery (by telegram, facsimile, mail or
hand delivery) substantially in the form provided by the Company, setting
forth the name and address of the registered holder and the principal
amount or number of 6% Debentures being tendered and stating that the
tender is being made thereby and guaranteeing that, within three Nasdaq
SmallCap Market trading days after the date of the Notice of Guaranteed
Delivery, this Letter of Transmittal validly executed (or a facsimile
hereof), together with certificates evidencing the 6% Debentures (or
confirmation of book-entry transfer of such 6% Debentures into the Exchange
Agent's account with a Book-Entry Transfer Facility), and any other
documents required by this Letter of Transmittal and these instructions,
will be deposited by such Eligible Institution with the Exchange Agent; and

(c) this Letter of Transmittal or a facsimile hereof, properly completed
and validly executed, with any required signature guarantees, certificates
representing the 6% Debentures in proper form for transfer (or confirmation
of book-entry transfer into the Exchange Agent's account with a Book-Entry
Transfer Facility) and all other documents required by this Letter of
Transmittal must be received by the Exchange Agent within three Nasdaq
SmallCap Market trading days after the date of such Notice of Guaranteed
Delivery.

7
<PAGE>

THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, 6% DEBENTURES AND ALL
OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE TENDERING
HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, THE MAILING
SHOULD BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE, TO PERMIT
DELIVERY TO THE EXCHANGE AGENT PRIOR TO SUCH DATE. NO ALTERNATIVE, CONDITIONAL
OR CONTINGENT TENDERS OF 6% DEBENTURES WILL BE ACCEPTED. BY EXECUTION OF THIS
LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), ALL TENDERING HOLDERS WAIVE ANY
RIGHT TO RECEIVE ANY NOTICE OF THE ACCEPTANCE OF THEIR 6% DEBENTURES FOR
PAYMENT.

3. INADEQUATE SPACE. If the space provided herein under "Description of 6%
Debentures Tendered" is inadequate, the certificate numbers of the 6%
Debentures and the principal amount of 6% Debentures tendered should be listed
on a separate schedule and attached hereto.

4. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). Tenders of 6% Debentures will be accepted only in integral
multiples of $1,000 principal amount. The aggregate principal amount of all 6%
Debentures delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If tenders of 6% Debentures are made with
respect to less than the entire principal amount of 6% Debentures delivered
herewith, certificate(s) for the principal amount of 6% Debentures not
tendered will be issued and sent to the registered holder, unless otherwise
specified in the "Special Payment Instructions" or "Special Delivery
Instructions" boxes in this Letter of Transmittal.

5. SIGNATURES ON LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the 6%
Debentures tendered hereby, the signature(s) must correspond with the name(s)
as written on the face of the certificates representing such 6% Debentures
without alteration, enlargement or any other change whatsoever. If this Letter
of Transmittal is signed by a participant in one of the Book-Entry Transfer
Facilities whose name is shown on a security position listing as the owner of
the 6% Debentures tendered hereby, the signature must correspond with the name
shown on the security position listing as the owner of the 6% Debentures.

If any 6% Debentures tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.

If any 6% Debentures tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal, and any necessary accompanying documents, as
there are different registrations of such 6% Debentures.

If this Letter of Transmittal is signed by the registered holder of 6%
Debentures tendered hereby, no endorsements of such 6% Debentures or separate
bond powers are required, unless the Tender Offer Consideration is to be
issued to, or 6% Debentures not tendered or not accepted for exchange are to
be issued in the name of, a person other than the registered holder(s), in
which case the 6% Debentures tendered hereby must be endorsed or accompanied
by appropriate bond powers, in either case signed exactly as the name(s) of
the registered holder(s) appear(s) on such 6% Debentures (and with respect to
a participant in a Book-Entry Transfer Facility whose name appears on a
security position listing as the owner of 6% Debentures, exactly as the
name(s) of the participant(s) appear(s) on such security position listing as
the owner of the 6% Debentures). Signatures on such 6% Debentures and bond
powers must be guaranteed by an Eligible Institution. See Instruction 1.

If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the 6% Debentures tendered hereby, the 6% Debentures
must be endorsed or accompanied by appropriate bond powers, in either case
signed exactly as the name(s) of the registered holder(s) appear(s) on the
certificates representing such 6% Debentures. Signatures on such 6% Debentures
and bond powers must be guaranteed by an Eligible Institution. See Instruction
1.

If this Letter of Transmittal or any 6% Debentures or bond powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Company of such person's authority so to act must be
submitted with this Letter of Transmittal.

8
<PAGE>

6. TRANSFER TAXES. Except as otherwise provided in this Instruction 6, the
Company will pay all transfer taxes with respect to the delivery and exchange
of 6% Debentures pursuant to the Offer. If, however, issuance of the Tender
Offer Consideration is to be made to, or 6% Debentures not tendered or not
accepted for exchange are to be issued in the name of, a person other than the
registered holder(s), the amount of any transfer taxes (whether imposed on the
registered holder(s), such other person or otherwise) payable on account of
the transfer to such other person will be deducted from the Tender Offer
Consideration unless evidence satisfactory to the Company of the payment of
such taxes, or exemption therefrom, is submitted. Except as provided in this
Instruction 6, it will not be necessary for transfer tax stamps to be affixed
to the 6% Debentures tendered hereby.

7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the Tender Offer
Consideration with respect to any 6% Debentures tendered hereby is to be
issued, or 6% Debentures not tendered or not accepted for exchange are to be
issued, in the name of a person other than the person(s) signing this Letter
of Transmittal or to the person(s) signing this Letter of Transmittal but at
an address other than that shown in the box entitled "Description of 6%
Debentures Tendered," the appropriate boxes in this Letter of Transmittal must
be completed.

8. TAXPAYER IDENTIFICATION NUMBER. Each tendering holder is required to
provide the Exchange Agent with the holder's correct taxpayer identification
number ("TIN"), generally, the holders' social security or federal employer
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below, and to certify whether such person is
subject to backup withholding of federal income tax.

A holder must cross out item (2) in Part 2 of the Substitute Form W-9 if
such holder is subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering holder to 31%
federal income tax backup withholding on the reportable payments made to the
holder or other payee with respect to 6% Debentures exchanged pursuant to the
Offer. The box in Part 3 of the form should be checked if the tendering holder
has not been issued a TIN and has applied for a TIN or intends to apply for a
TIN in the near future. If the box in Part 3 is checked and the Exchange Agent
is not provided with a TIN within 60 days, thereafter the Exchange Agent will
hold 31% of all reportable payments until a TIN is provided to the Exchange
Agent.

9. LOST OR MISSING CERTIFICATES. If a holder desires to tender 6% Debentures
pursuant to the Exchange Offer but the certificates evidencing such 6%
Debentures have been mutilated, lost, stolen or destroyed, such holder should
write to or telephone the Exchange Agent, at the address or telephone number
listed on the front page of this Letter of Transmittal, about procedures for
obtaining replacement certificates for such 6% Debentures or arranging for
indemnification or any other matter that requires handling by the Exchange
Agent.

10. CONFLICTS. In the event of any conflict between the terms of the Offer
to Exchange and the terms of this Letter of Transmittal, the terms of the
Offer to Exchange will control.

9
<PAGE>

IMPORTANT TAX INFORMATION

Under the federal income tax law, a holder whose tendered 6% Debentures are
accepted for payment is required by law to provide the Exchange Agent (as
payer) with such holder's correct TIN on Substitute Form W-9 below. If such
holder is an individual, the TIN is his or her social security number. If the
Exchange Agent is not provided with the correct TIN, a $50 penalty may be
imposed by the Internal Revenue Service, and payments of Tender Offer
Consideration may be subject to backup withholding.

Certain holders (including, among others, corporations) are not subject to
these backup withholdings and reporting requirements. Exempt holders should
indicate their exempt status on Substitute Form W-9. In order for a foreign
individual to qualify as an exempt recipient, such individual must submit a
statement, signed under penalties of perjury, attesting to such individual's
exempt status. Forms of such statements can be obtained from the Exchange
Agent. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.

If backup withholding applies, the Exchange Agent is required to withhold
31% of any reportable payments made to the holder or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.

PURPOSE OF SUBSTITUTE FORM W-9

To prevent backup withholding on reportable payments made with respect to 6%
Debentures accepted for exchange pursuant to the Offer, the holder is required
to notify the Exchange Agent of such holder's correct TIN by completing the
form below, certifying that the TIN provided on the Substitute From W-9 is
correct (or that such holder is awaiting a TIN) and that (a) such holder is
exempt from backup withholding, (b) such holder has not been notified by the
Internal Revenue Service that he is subject to backup withholding as a result
of a failure to report all interest or dividends or (c) the Internal Revenue
Service has notified such holder that such holder is no longer subject to
backup withholding.

10
<PAGE>

WHAT NUMBER TO GIVE THE EXCHANGE AGENT

The holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the holder of the 6%
Debentures tendered hereby. If the 6% Debentures are held in more than one
name or are not held in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional guidance on which number to report.

PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

- --------------------------------------------------------------------------------
SUBSTITUTE
FORM W-9

Please fill in your name, address and type of entity below

_____________________________________________
Name

_____________________________________________
Address (number and street)

_____________________________________________
City, State and Zip Code

_____________________________________________
Individual, Corporation, Partnership or Other

PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER ("TIN")

- --------------------------------------------------------------------------------
PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY
SIGNING AND DATING BELOW

_____________________________________________
Social Security Number

_____________________________________________
Employer Identification Number

- --------------------------------------------------------------------------------
PART 2--CERTIFICATION--UNDER PENALTIES OF PERJURY, I CERTIFY THAT:

(1) The number shown on this form is my correct Taxpayer Identification Number
(or I am waiting for a number to be issued to me) and

(2) I am not subject to backup withholding either because (a) I am exempt from
backup withholding or (b) I have not been notified by the Internal Revenue
Service ("IRS") that I am subject to backup withholding as a result of
failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.

- --------------------------------------------------------------------------------
PART 3--

Awaiting TIN [_]

_______________________________________________

PART 4--

Exempt [_]

- --------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in Part 2 above if
you have been notified by the IRS that you are subject to backup withholding
because of underreporting interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS stating that you are no longer
subject to backup withholding, do not cross out item (2). If you are exempt
from backup withholding check the box in Part 4 above.

SIGNATURE _____________________________________ DATE ___________________, 1996
- --------------------------------------------------------------------------------

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3
OF THE SUBSTITUTE FORM W-9

- --------------------------------------------------------------------------------
CERTIFICATE OF TAXPAYER AWAITING IDENTIFICATION NUMBER

I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
60 days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.

_____________________________________________ ______________________ , 1996
Signature Date
- --------------------------------------------------------------------------------

<PAGE>

NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF 6% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2012 OF
STREAMLOGIC CORPORATION

This Notice of Guaranteed Delivery or a form substantially equivalent hereto
must be used to accept the offer by StreamLogic Corporation (the "Company") to
exchange each $1,000 principal amount of the Company's 6% Convertible
Subordinated Debentures due 2012 (the "6% Debentures") for $120.00 in cash,
$113.33 principal amount of StreamLogic Corporation's increasing rate
unsecured promissory notes due 1998, 216.66667 shares of StreamLogic
Corporation Common Stock and five-year warrants to purchase 40 shares of
StreamLogic Common Stock (the "Offer") if, (a) certificates representing the
6% Debentures are not immediately available, (b) the procedures for book-entry
transfer cannot be completed prior to the Expiration Date (as defined), or (c)
time will not permit the 6% Debentures and all other required documents to
reach the Exchange Agent prior to the Expiration Date. This form may be
delivered by an Eligible Institution by mail or hand delivery or transmitted,
via facsimile, telegram or telex to the Exchange Agent as set forth below. All
capitalized terms used herein but not otherwise defined herein shall have the
meanings ascribed to them in the Offer to Exchange dated October 7, 1996 of
the Company (as the same may be amended or supplemented from time to time, the
"Offer to Exchange").

To:

CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand Delivery or
Midtown Station (201) 329-8936 Overnight Delivery:
P.O. Box 798 120 Broadway--13th Floor
New York, NY 10018 New York, NY 10271
Attention: Reorganization Dept. For Confirmation of Attention: Reorganization Dept.
(201) 296-4983 Facsimile Transmission:
</TABLE>

DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OR TELEX, OTHER THAN
AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.

This form is not to be used to guarantee signatures. If a signature on the
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.

THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON NOVEMBER 4,
1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF 6% CONVERTIBLE
SUBORDINATED DEBENTURES DUE 2012 MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.

<PAGE>

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

The undersigned hereby tender(s) to the Company, upon the terms and subject
to the conditions set forth in the Offer to Exchange and the related Letter of
Transmittal, receipt of both of which is hereby acknowledged, the principal
amount of 6% Debentures set forth below, pursuant to the guaranteed delivery
procedures set forth in the Offer to Exchange under the heading "The Exchange
Offer--Procedures for Tendering--Guaranteed Delivery."

All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death or incapacity of the undersigned
and every obligation of the undersigned under this Notice of Guaranteed
Delivery shall be binding upon the heirs, personal representatives, executors,
administrators, successors, assigns, trustees in bankruptcy and other legal
representatives of the undersigned.

PLEASE SIGN AND COMPLETE

Principal Amount of 6% Debentures Signature(s) of Registered Holder(s)
Tendered or Authorized Signatory
______________________________________ ______________________________________
______________________________________

Certificate No(s). of 6% Debentures
(if available) Name(s) of Registered Holder(s)
______________________________________ ______________________________________
______________________________________ ______________________________________
Date _________________________________ ______________________________________
Address(es) __________________________
Social Security or Taxpayer
Identification No.
______________________________________
Area Code and Telephone No.
______________________________________
If 6% Debentures will be delivered
bybook-entry transfer, check
appropriate box below
[_] The Depository Trust Company
[_] Philadelphia Depository Trust
Company
Account No. __________________________
<PAGE>

This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of 6% Debentures exactly as their name(s) appear(s) on the
certificates representing such 6% Debentures or on a security position listing
as the owner(s) of the 6% Debentures, or by person(s) authorized to become
registered holder(s) by endorsements and documents transmitted with this
Notice of Guaranteed Delivery. If signature is by a trustee, guardian,
attorney-in-fact, officer of a corporation, executor, administrator, agent or
other representative, such person must provide the following information.

PLEASE PRINT NAME(S) AND ADDRESS(ES)

Name(s): ______________________________________________________________________

Capacity: _____________________________________________________________________

Address(es): __________________________________________________________________

Do not send 6% Debentures with this form. 6% Debentures should be sent to
the Exchange Agent, together with a properly completed and validly executed
Letter of Transmittal.

GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)

The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States or another "Eligible Guarantor Institution" as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby
guarantees that, within three Nasdaq SmallCap Market trading days from the
date of this Notice of Guaranteed Delivery, a properly completed and validly
executed Letter of Transmittal (or a facsimile thereof), together with 6%
Debentures tendered hereby in proper form for transfer (or confirmation of
the book-entry transfer of such 6% Debentures into the Exchange Agent's
account at a Book-Entry Transfer Facility, pursuant to the procedure for
book-entry transfer set forth in the Offer to Exchange under the heading
"The Exchange Offer--Procedures for Tendering--Book-Entry Transfer"), and
all other required documents will be deposited by the undersigned with the
Exchange Agent at one of its addresses set forth above.

Name of Firm: ________________________ Name: _______________________________

Address: _____________________________ Title: ______________________________

Area Code and Telephone No.: ________

______________________________________ Date: _______________________________
City State Zip Code

______________________________________
Authorized Signature

NOTE: DO NOT SEND 6% DEBENTURES WITH THIS FORM. ACTUAL SURRENDER OF 6%
DEBENTURES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY
COMPLETED AND VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS.
<PAGE>

INSTRUCTIONS

1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. The Exchange Agent must
receive at one of its addresses set forth on the cover hereof prior to the
Expiration Date a properly completed and duly executed Notice of Guaranteed
Delivery that (i) contains a signature guaranteed by an Eligible Institution
in the form set forth in such Notice of Guaranteed Delivery, (ii) sets forth
the name and address of the holder of 6% Debentures and the amount of 6%
Debentures tendered, (iii) states that the tender is being made thereby and
(iv) guarantees within three Nasdaq SmallCap Market trading days after the
Expiration Date, the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, together with the 6% Debentures and any required
signature guarantees and any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent. The method of delivery of this Notice of Guaranteed Delivery and all
other required documents to the Exchange Agent is at the election and risk of
the holder, but, except as otherwise provided below, the delivery will be
deemed made only when actually received by the Exchange Agent. If such
delivery is by mail, it is recommended that the holder use properly insured,
registered mail with return receipt requested. For a full description of the
guaranteed delivery procedures, see the Offer to Exchange under the section
entitled "The Exchange Offer--Procedures for Tendering--Guaranteed Delivery."
In all cases, sufficient time should be allowed to assure timely delivery to
the Exchange Agent prior to the Expiration Date, as applicable. No Notice of
Guaranteed Delivery should be sent to the Company or to the trustee under the
Indenture for the 6% Debentures.

2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF
SIGNATURES. If this Notice of Guaranteed Delivery is signed by the registered
holder(s) of the 6% Debentures referred to herein, the signature must
correspond with the name(s) as written on the face of such 6% Debentures
without alteration, enlargement or any change whatsoever.

If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any 6% Debentures listed, this Notice of Guaranteed
Delivery must be accompanied by an appropriate instrument or instruments of
transfer or exchange from the registered holder (with signatures on such
instrument or instruments guaranteed by an Eligible Institution) signed as the
name of the registered holder(s) appear(s) on the face of such 6% Debentures
without alteration, enlargement or any change whatsoever.

If this Notice of Guaranteed Delivery is signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such person should so
indicate when signing, and proper evidence satisfactory to the Company of
their authority so to act must be submitted.

3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
Offer or the procedure for exchanging, as well as requests for assistance or
for additional copies of the Offer to Exchange and the Letter of Transmittal,
may be directed to the Company at the address set forth in the Offer to
Exchange.

<PAGE>

STREAMLOGIC CORPORATION

OFFER TO EXCHANGE EACH $1,000 PRINCIPAL AMOUNT OF 6% CONVERTIBLE
SUBORDINATED DEBENTURES DUE 2012 FOR (I) $120.00 IN CASH, (II) $113.33
PRINCIPAL AMOUNT OF STREAMLOGIC CORPORATION'S INCREASING RATE UNSECURED
PROMISSORY NOTES DUE 1998, (III) 216.66667 SHARES OF STREAMLOGIC
CORPORATION'S COMMON STOCK, $1.00 PAR VALUE AND (IV) FIVE-YEAR
WARRANTS TO PURCHASE 40 SHARES OF COMMON STOCK.

CUSIP NO. 863238-AA-9

THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,ON NOVEMBER 4,
1996, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF 6% CONVERTIBLE
SUBORDINATED DEBENTURES DUE 2012 MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.

October 7, 1996

To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:

We are enclosing herewith the material listed below relating to the offer
(the "Offer") by StreamLogic Corporation (the "Company") to exchange each
$1,000 principal amount of the Company's 6% Convertible Subordinated
Debentures due 2012 (the "6% Debentures") for (i) $120.00 in cash, (ii)
$113.33 principal amount of StreamLogic Corporation's increasing rate
unsecured promissory notes due 1998, (iii) 216.66667 shares of StreamLogic
Corporation's Common Stock, $1.00 par value and (iv) five-year Warrants to
purchase 40 shares of Common Stock (collectively, the "Tender Offer
Consideration"). Consummation of the Offer is subject to, among other things,
satisfaction of the conditions set forth in the Offer to Exchange referred to
below under the heading "The Exchange Offer--Conditions."

We are asking you to contact your clients for whom you hold 6% Debentures
registered in your name or in the name of your nominee. In addition, we are
asking you to contact your clients who, to your knowledge, hold 6% Debentures
registered in their own name.

Enclosed for your information and use are copies of the following documents:

1. The Company's Offer to Exchange dated October 7, 1996 (as the same may be
further amended or supplemented from time to time, the "Offer to Exchange");

2. A BLUE Letter of Transmittal for your use in connection with the tender
of 6% Debentures and for the information of your clients;

3. A YELLOW form of letter that may be sent to your clients for whose
accounts you hold 6% Debentures registered in your name or the name of your
nominee, with space provided for obtaining the clients' instructions with
regard to the Offer;
<PAGE>

4. A GREEN form of Notice of Guaranteed Delivery;

5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and

6. A return envelope addressed to the Exchange Agent.

WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THIS OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON NOVEMBER
4, 1996 UNLESS EXTENDED (THE "EXPIRATION DATE"). 6% DEBENTURES TENDERED
PURSUANT TO THE OFFER MAY BE WITHDRAWN, SUBJECT TO THE PROCEDURES DESCRIBED IN
THE OFFER TO EXCHANGE, AT ANY TIME PRIOR TO THE EXPIRATION DATE.

In all cases, the Tender Offer Consideration will be issued for 6%
Debentures accepted for exchange pursuant to the Offer only after timely
receipt by the Exchange Agent of such 6% Debentures (or confirmation of book-
entry transfer of such 6% Debentures into the Exchange Agent's account at one
of the Book-Entry Transfer Facilities (as defined in the Offer to Exchange)),
a Letter of Transmittal (or facsimile thereof), properly completed and validly
executed, and any other required documents.

If holders of 6% Debentures wish to tender, but it is impracticable for them
to forward their 6% Debentures or other required documents prior to the
Expiration Date, a tender may be effected by following the guaranteed delivery
procedures described in the Offer to Exchange under the heading "The Exchange
Offer--Procedures for Tendering--Guaranteed Delivery."

Procedures for tendering 6% Debentures are set forth in the Offer to
Exchange under the caption "The Exchange Offer--Procedures for Tendering."
Holders of 6% Debentures who wish to tender their 6% Debentures must use
either the Letter of Transmittal distributed with the Offer to Exchange (the
"Letter of Transmittal") or a facsimile thereof. In addition, holders of 6%
Debentures who are following the procedures for guaranteed delivery set forth
in the Offer to Exchange must use the Notice of Guaranteed Delivery
distributed with the Offer to Exchange.

The Company will not pay any fees or commissions to any broker, dealer or
other person in connection with the solicitation of tenders of 6% Debentures
pursuant to the Offer to Exchange. However, the Company will reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of
the enclosed materials to your clients. The Company will pay or cause to be
paid any transfer taxes payable with respect to the transfer of 6% Debentures
to it, except as otherwise provided in the Letter of Transmittal.

Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Company at its address and telephone number set forth on the back cover page
of the Offer to Exchange.

Very truly yours,

StreamLogic Corporation

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY, THE EXCHANGE AGENT, OR ANY
AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY
DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.

<PAGE>

STREAMLOGIC CORPORATION

To Our Clients:

Enclosed for your consideration is the Offer to Exchange dated October 7,
1996 (as the same may be further amended or supplemented from time to time,
the "Offer to Exchange") and a related form of Letter of Transmittal and
instructions thereto (the "Letter of Transmittal") relating to the offer (the
"Offer") by StreamLogic Corporation (the "Company") to convert each $1,000
principal amount of its 6% Convertible Subordinated Debentures due 2012 (the
"6% Debentures") into (i) $120.00 in cash, (ii) $113.33 principal amount of
StreamLogic Corporation's increasing rate unsecured promissory notes due 1998,
(iii) 216.66667 shares of StreamLogic Corporation's Common Stock, $1.00 par
value and (iv) five-year warrants to purchase 40 shares of Common Stock
(collectively, the "Tender Offer Consideration").

Consummation of the Offer is subject to, among other things, satisfaction of
the conditions set forth in the Offer to Exchange under the heading "The
Exchange Offer--Conditions."

WE ARE THE REGISTERED HOLDER OF 6% DEBENTURES HELD BY US FOR YOUR ACCOUNT. A
TENDER OF ANY SUCH 6% DEBENTURES CAN BE MADE ONLY BY US AS THE REGISTERED
HOLDER AND PURSUANT TO YOUR INSTRUCTIONS. THE BLUE LETTER OF TRANSMITTAL (THE
"LETTER OF TRANSMITTAL") IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND
CANNOT BE USED BY YOU TO TENDER 6% DEBENTURES HELD BY US FOR YOUR ACCOUNT.

Accordingly, we request instructions as to whether you wish us to tender any
or all of the 6% Debentures held by us for your account pursuant to the terms
and conditions set forth in the Offer to Exchange and the Letter of
Transmittal. We urge you to read the Offer to Exchange and the Letter of
Transmittal carefully before instructing us to tender your 6% Debentures.

Your instructions to us should be forwarded as promptly as possible in order
to permit us to tender 6% Debentures on your behalf in accordance with the
provisions of the Offer. The Offer will expire at 12:00 midnight, New York
City time, on November 4, 1996, unless extended. 6% Debentures tendered
pursuant to the Offer may be withdrawn, subject to the procedures described in
the Offer to Exchange, at any time prior to the Expiration Date.

Your attention is directed to the following:

1. The Offer is for all outstanding 6% Debentures.

2. Holders who tender their 6% Debentures in the Offer will not be
entitled to receive any payment in respect of accrued and unpaid interest
on 6% Debentures accepted for exchange (including without limitation
interest otherwise scheduled for payment on September 15, 1996).
<PAGE>

3. Consummation of the Offer is subject to, among other things,
satisfaction of the conditions set forth in the Offer to Exchange under the
heading "The Exchange Offer--Conditions."

4. Any transfer taxes incident to the transfer of 6% Debentures from the
tendering holder to the Company will be paid by the Company, except as
provided in the Offer to Exchange and the instructions to the Letter of
Transmittal.

If you wish to have us tender any or all of the Offer to Exchange held by
us for your account, please so instruct us by completing, executing and
returning to us the instruction form that follows.
<PAGE>

INSTRUCTIONS REGARDING THE OFFER TO EXCHANGE
WITH RESPECT TO THE 6% CONVERTIBLE
SUBORDINATED DEBENTURES DUE 2012
OF STREAMLOGIC CORPORATION

The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Offer of StreamLogic Corporation.

This will instruct you whether to tender the principal amount of 6%
Debentures indicated below held by you for the account of the undersigned
pursuant to the terms of and conditions set forth in the Offer to Exchange and
the Letter of Transmittal.

Box 1 [_] Please tender the 6% Debentures held by you for my account.

Box 2 [_] Please do not tender any 6% Debentures held by you for my account.

Date: , 1996

Principal Amount of Securities
to be Tendered: $ *

SIGN HERE

Signature(s) _________________________________________________________________

Please print name(s) here ____________________________________________________

Please type or print address _________________________________________________

Area Code and Telephone Number _______________________________________________

Taxpayer Identification or Social Security Number ____________________________

My Account Number With You ___________________________________________________

- --------
* Unless otherwise indicated, signature(s) hereon by beneficial owner(s)
shall constitute an instruction to the nominee to tender all 6% Debentures
of such beneficial owner(s).

<PAGE>

STREAMLOGIC CORPORATION
21329 NORDHOFF STREET
CHATSWORTH, CALIFORNIA 91311

October 7, 1996

Dear Holder of 6% Convertible Subordinated Debentures due 2012

StreamLogic Corporation (the "Company") is offering (the "Offer"), upon the
terms and subject to the conditions set forth in the enclosed Offer to
Exchange dated October 7, 1996 (as the same may be supplemented from time to
time, the "Offer to Exchange") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange each $1,000 principal amount of its 6%
Convertible Subordinated Debentures due 2012 (the "6% Debentures") for (i)
$120.00 in cash, (ii) $113.33 principal amount of the Company's increasing
rate unsecured promissory notes due 1998, (iii) 216.66667 shares of
StreamLogic Corporation's Common Stock, $1.00 par value and (iv) five-year
warrants to purchase 40 shares of Common Stock.

The consummation of the Offer is subject to certain conditions. The Offer to
Exchange and the Letter of Transmittal contain a more complete description of
the Offer and the conditions thereof.

Please read carefully the Offer to Exchange, the Letter of Transmittal and
the other enclosed materials relating to the Offer. If you require assistance,
you should consult your financial, tax or other professional advisors. Holders
of 6% Debentures who wish to participate in the Offer are asked to respond
promptly by completing and returning the Letter of Transmittal for the Offer
to ChaseMellon Shareholder Services, L.L.C. (the "Exchange Agent").
Instructions on how to complete and return the Letter of Transmittal are
included in the Offer to Exchange and the Letter of Transmittal. The Offer
will expire at 12:00 midnight, New York City time, on November 4, 1996 unless
extended. If you have any questions regarding the terms of the Offer, please
call the Company at (818) 701-8595. If you require assistance completing the
Letter of Transmittal, or if you require additional copies of the Offer to
Exchange or the Letter of Transmittal, please contact the Company at the
number or address set forth on the back cover of the Offer to Exchange.

Sincerely,

J. Larry Smart
President and Chief Executive
Officer

<PAGE>

EXHIBIT (a)(7)

[LETTERHEAD OF STREAMLOGIC]

(BW) (STREAMLOGIC) (STLC) StreamLogic Agrees on Terms for Exchange of 6%
Convertible Subordinated Debentures

Business Editors

CHATSWORTH, Calif.--(BUSINESS WIRE)--June 17, 1996--StreamLogic
Corporation (NASDAQ:STLC) today announced an agreement in principle with the
major holder of its $75 million 6% Convertible Subordinated Debentures (Loomis
Sayles & Co., L.P.) to exchange its debentures for a package of cash, common
stock and warrants to purchase common stock.

"We are extremely pleased with this agreement which would create a
virtually debt-free balance sheet," said J. Larry Smart, Chairman and CEO of
StreamLogic. "Our significantly improved financial flexibility would allow the
Company's management to focus on the market opportunities available in our core
video delivery and network data management businesses."

"On behalf of Loomis Sayles we feel that this agreement in principle
is a positive development for all parties and well positions the company for
future growth," said Skip Victor of Chanin and Company, financial advisors to
Loomis Sayles.

Pursuant to this agreement, StreamLogic plans to commence a tender
offer for the Debentures by mid-August. In the tender offer the company will
offer to exchange its Debentures for a package of cash, common stock, and
warrants to purchase common stock. For each $1,000 face amount of debentures
tendered the holders will receive (a) $233.33 in cash, (b) $520 in common stock,
and (c) warrants to purchase 40 shares of common stock at an initial exercise
price of 150% of market value as defined in the agreement. The exercise price
of the warrants is subject to downward adjustment in certain circumstances, and
contains customary antidilution adjustments. StreamLogic expects shareholder
approval will be required pursuant to Nasdaq rules and regulations.

If the holders of 100% of the outstanding debentures accept the
exchange, the Company will exchange the debentures for (a) $17.5 million in
cash, (b) issue between 5.2 and 9.8 million shares of common stock, and (c)
issue warrants to purchase approximately 3.0 million shares of common stock,
therefore, the transaction would increase the Company's net tangible assets by
more than $50 million. The company has been advised by Loomis Sayles that
certain institutional investors advised by Loomis Sayles hold in the aggregate
approximately 80% of the outstanding Debentures, and have agreed to exchange
their Debentures for the package of cash and securities offered by the Company
subject to certain conditions contained in the agreement in principle.

The obligations of the holders advised by Loomis Sayles to participate
in the tender offer is subject to various conditions
<PAGE>

including satisfaction of all necessary regulatory requirements, a 95%
participation by bond holders, and the average price of StreamLogic's common
stock immediately prior to the expiration of the tender offer falling within a
range of $4.00 and $7.50 as defined in the agreement. As a result, there can be
no assurance that the tender offer will be consummated. Offers to exchange the
Debentures will be made only pursuant to the tender offer, and no offer is being
made at this time. The last reported sales price of the debentures was $550 per
$1,000 face value on June 6, 1996.

StreamLogic develops and markets leading edge video delivery and
client/server data management solutions. Current product offerings include the
VIDEON family of video server subsystems, the VDR 110 video editing appliance,
and the industry leading RAIDION family of fault tolerant network management and
storage products. The company sells to OEMs and systems integrators, and has a
well established international network of distribution channel partners.
StreamLogic manufacturing operations and corporate headquarters are located in
Chatsworth, California.
- -0-

NOTE TO EDITORS: RAIDION, MICRODISK, VIDEON, and StreamLogic are
trademarks or registered trademarks of StreamLogic Corporation. All other brand
or product names are trademarks or registered trademarks of their respective
owners. Additional information on StreamLogic and its products can be found at
http://www.streamlogic.com.

--30--

CONTACT: StreamLogic
Lee Hilbert, 818/701-8404
Barbara Scherer, 818/701-8402
<PAGE>

[LETTERHEAD OF STREAMLOGIC]

FOR IMMEDIATE RELEASE

STREAMLOGIC AMENDS TERMS FOR EXCHANGE OF
6% CONVERTIBLE SUBORDINATED DEBENTURES

Chatsworth, Calif., September 16, 1996 - StreamLogic Corporation (NASDAQ:STLC)
today announced an amended agreement with the advisor to the holders of
approximately 80% of its $75 million 6% Convertible Subordinated Debentures
(Loomis Sayles & Co., L.P.) pursuant to which Loomis agreed to advise such
holders to exchange their debentures for a package of cash, increasing rate
unsecured promissory notes, common stock and warrants to purchase common stock.
The amendment to the terms of the original agreement dated June 14, 1996 with
Loomis Sayles removes the conditions based on the company's stock price, fixes
the number of shares of common stock to be issued, increases the number of
directors on the company's board of directors and allows under certain
circumstances payment of a portion of the previously agreed to cash until 1998.

"We are very pleased to have successfully renegotiated an agreement that
would strengthen our balance sheet and supports our efforts to restructure the
company," said J. Larry Smart, President and CEO of StreamLogic Corporation.

Pursuant to the amended agreement, StreamLogic plans to commence a tender
offer for the Debentures shortly. In the tender offer the company will offer to
exchange its Debentures for a package of cash, unsecured promissory notes,
common stock, and warrants to purchase common stock. For each $1,000 face amount
of debentures tendered the holders will receive (a) $120 in cash, (b) $113.33 in
increasing rate unsecured promissory notes, (c) approximately 148.5 shares of
common stock, and (d) warrants to purchase 40 shares of common stock at an
initial exercise price of $5.25 per share of common stock as defined in the
agreement. The exercise price of the warrants remains subject to downward
adjustment in certain circumstances, and contains customary antidilution
adjustments. Shareholder approval will be required pursuant to Nasdaq rules and
regulations.

If the holders of 100% of the outstanding debentures accept the exchange,
the Company will exchange the debentures for (a) $9 million in cash, (b) $8.5
million in increasing rate unsecured promissory notes due 1998, (c)
approximately 11.1 million shares of common stock, and (d) warrants to purchase
3.0 million shares of common stock, in which case the transaction would increase
the Company's net tangible assets by more than $50 million. Certain
institutional investors who hold in the aggregate approximately 80% of the
outstanding Debentures will be advised by Loomis Sayles to exchange their
Debentures for the package of cash, unsecured promissory notes and securities
offered by the Company subject to certain conditions contained in the amended
agreement.

The obligations of Loomis Sayles to advise the holders to participate in
the tender offer remains subject to various conditions including, among others,
satisfaction of all necessary regulatory requirements and a 95% participation by
debenture holders. In addition, such holders are not obligated to participate.
As a result, there can be no assurance that the tender offer will be
consummated. Offers to exchange the Debentures will be made only pursuant to the
tender offer, and no offer is being made at this time.

-more-
<PAGE>

StreamLogic develops and markets leading-edge video delivery, digital media
storage, and networking RAID and data management solutions. Current product
offerings include VIDEON (TM), the industry's first family of video-on-demand
server subsystems, the innovative Video Disk Recorder (VDR) video editing
appliance, the award-winning Hammer (R) high-performance storage products, and
the industry leading RAIDION (R) family of fault-tolerant network RAID and data
management solutions. The company sells to OEMs and systems integrators and
has a well-established international network of distribution and dealer channel
partners. StreamLogic corporate headquarters are located in Chatsworth,
California, with marketing, sales, engineering, customer service, and
manufacturing operations in Menlo Park and Chatsworth California.

StreamLogic, VIDEON, Hammer and RAIDION, are trademarks or registered
trademarks of StreamLogic Corporation. Additional information on StreamLogic
can be found at http://www.streamlogic.com

For more information, please contact: Lee Hilbert (818) 701-8404
Barbara Scherer (818) 701-8402
<PAGE>

[LETTERHEAD OF STREAMLOGIC]

FOR IMMEDIATE RELEASE
- --------------------------------------------------------------------------------
STREAMLOGIC ANNOUNCES AMENDED AGREEMENT AND NASDAQ APPEAL

CHATSWORTH, Calif., October 6, 1996 - StreamLogic Corporation (NASDAQ:STLC)
today announced an amended agreement with the advisor to the holders of
approximately 80% of its $75 million 6% Convertible Subordinated Debentures
(Loomis Sayles & Co., L.P.) pursuant to which Loomis Sayles agreed to advise
such holders to exchange their debentures for a package of cash, increasing rate
unsecured promissory notes, common stock and warrants to purchase common stock.
For each $1,000 face amount of debentures tendered the holders will receive (a)
$120 in cash, (b) $113.33 in increasing rate unsecured promissory notes, (c)
approximately 216.67 shares of common stock, and (d) warrants to purchase 40
shares of common stock at an initial exercise price of $3.60 per share of common
stock. The exercise price of the warrants remains subject to downward
adjustment in certain circumstances, and contains customary antidilution
adjustments. Shareholder approval will be required pursuant to Nasdaq rules and
regulations.

If the holders of 100% of the outstanding debentures accept the exchange,
the Company will exchange the Debentures for (a) $9 million in cash, (b) $8.5
million in increasing rate unsecured promissory notes due 1998, (c)
approximately 16.25 million shares of common stock, and (d) warrants to purchase
3 million shares of common stock, in which case the transaction would increase
the Company's net tangible assets by more than $50 million. Certain
institutional investors who hold in the aggregate approximately 80% of the
outstanding Debentures will be advised by Loomis Sayles to exchange their
Debentures for the package of cash, unsecured promissory notes and securities
offered by the Company.

The obligations of Loomis Sayles to advise the holders to participate in the
tender offer remains subject to various conditions including, among others,
satisfaction of all necessary regulatory requirements and a 95% participation by
debenture holders. In addition, such holders are not obligated to participate.
As a result, there can be no assurance that the tender offer will be
consummated. Offers to exchange the Debentures will be made only pursuant to the
tender offer, and no offer is being made at this time.

In addition, StreamLogic today announced that it will appeal a decision by
The Nasdaq Stock Market refusing to extend the period of time during which the
company's stock would continue to trade on the Nasdaq National Market pending
completion of the exchange. The company's stock will continue to trade on the
Nasdaq National Market during the appeal, which is expected to extend for a
number of weeks. There can be no assurances as to whether the appeal to Nasdaq
will be successful or as to when such determination will be made by Nasdaq.

As previously reported, the original terms of the proposed exchange offer
had been revised pursuant to an amendment to the company's agreement with Loomis
Sayles. However, certain objections by Nasdaq to the directorship provisions of
the amended agreement required a further amendment.

"StreamLogic is hopeful its appeal will be successful if we are able to
demonstrate to Nasdaq that we have resolved the directorship issues and that
prompt completion of the exchange offer is likely," said Lee Hilbert, Chief
Financial Officer of StreamLogic Corporation.

In another development, the company reported that its second quarter
revenues will be slightly under $13 million. "Shipments for the last week of
September were disappointing as the company experienced late component
deliveries and was unable to fulfill its entire backlog," Hilbert continued. "We
are optimistic about our third quarter prospects for StreamLogic products."

This news release includes forward-looking statements. For a detailed
discussion of important factors that could cause actual results of the company
to differ materially from those described herein, please refer to the company's
Current Report on Form 8-K as filed on August 15, 1996, with the Securities and
Exchange Commission.

StreamLogic develops and markets leading-edge video delivery, digital media
storage, and networking RAID and data management solutions. Current product
offerings include VIDEON, the industry's first family of video-on-demand server
subsystems, the innovative Video Disk Recorder (VDR) video editing appliance,
the award-winning hammer high-performance storage products, and the industry
leading RAIDION family of fault-tolerant network RAID and data management
solutions. The company sells to OEMs and systems integrators and has a well-
established international network of distribution and dealer channel partners.
StreamLogic corporate headquarters are located in Chatsworth, California, with
marketing, sales, engineering, customer service, and manufacturing operations in
Menlo Park and Chatsworth, California.

StreamLogic, VIDEON, Hammer, and RAIDION, are trademarks or registered
trademarks of StreamLogic Corporation. Additional information on StreamLogic
can be found at http://www.streamlogic.com

For more information, please contact: Lee Hilber (818) 701-8404
Barbara Scherer (818) 701-8402

<PAGE>

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number to Give the Payer. -
Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------- -----------------------------------------------------------------
Give the Give the EMPLOYER
For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION
number of-- number of---
- ------------------------------------------------------------- -----------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 6. A valid trust, estate or pension The legal entity (Do
trust not furnish the
2. Two or more individuals (joint The actual owner or identifying number
account) the account, or if of the personal
combined funds, any representative or
one of the trustee unless the
individuals(1) legal-entity itself is
3. Custodian account of a minor The minor(2) designated in the
(Uniform Gift to Minors Act) account title.)(4)

4.a. The usual revocable savings The grantor- 7. Corporate The corporation
trust account (grantor is also trustee(1)
trustee) 8. Religious, charitable or The organization
b. So-called trust account that is The actual owner(1) educational organization
not a legal or valid trust under account
State law
9. Partnership The partnership
5. Sole proprietorship account The owner(3) 10. Association, club or other tax- The organization
exempt organization
11. A broker or registered nominee The broker or
nominee
12. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school
district, or prison) that receives
agricultural program payments.
====================================================================================================================================
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the individual name, but may also enter the business or "doing
business as" name. Use either individual's social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.

<PAGE>

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9

Page 2

Obtaining a Number

If you don't have a taxpayer identification number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.

Payees Exempt from Backup Withholding

Payees specifically exempted from backup withholding on ALL payments including
the following:

. A Corporation.
. A financial institution.
. An organization exempt from tax under Section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A state, the District of Columbia, a possession of the United States,
or any political subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
. An international organization or any agency or instrumentality
thereof.
. A dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a).
. A trust exempt from tax under Section 664 or described in Section
4947.
. An entity registered at all times during the tax year under the
Investment Company Act of 1940.
. A foreign central bank of issue.
. A middleman known in the investment community as a nominee or listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
. A futures commission merchant registered with the Commodity Futures
Trading Commission.

Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:

. Payments to nonresident aliens subject to withholding under Section
1441.
. Payments to partnerships not engaged in a trade or business in the
U.S. and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid
in money.
. Payments made by certain foreign organizations.

Payments of interest not generally subject to backup withholding include the
following:

. Payments of interest on obligations issued by individuals. Note: You
may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the
payer.

. Payments of tax-exempt interest (including exempt-interest dividends
under Section 852).
. Payments described in Section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under Section 1451.
. Payments made by certain foreign organizations.
. Mortgage interest paid by you.

Exempt payees described above should file Substitute Form W-9 to avoid possible
erroneous backup withholding. FILE SUBSTITUTE FORM W-9 WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM. If you are a nonresident alien not
subject to backup withholding, submit a completed Form W-8, Certificate of
Foreign Status.

Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholdings. For details, see Sections 6041, 6041(A)(a), 6042, 6044, 6045,
6049, 6050A and 6050N, and the regulations thereunder.

Privacy Act Notice.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. The IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of certain
taxable payments to a payee who does not furnish a taxpayer identification
number to a payer. Certain penalties may also apply.

Penalties

(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.

(2) Civil Penalty for False Information with Respect to Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.

(3) Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines, and/or imprisonment.

(4) Misuse of Tins.--If the requester discloses or uses the Tins in violation
of Federal law, the requester may be subject to civil and criminal penalties.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.

<PAGE>

June 14, 1996

CONFIDENTIAL

StreamLogic Corporation
21211 Nordhoff Street
Chatsworth, California 91311
Attention: Mr. Larry Smart

Agreement re: Tender Offer for All Outstanding 6%
Convertible Subordinated Debentures Due 2012

Dear Mr. Smart:

(i) cash in the amount of $233.33 per Debenture;

A1-1
<PAGE>

(B) StreamLogic shall adjust, on a weighted average basis, the number
of Warrant Shares to be issued upon exercise of a Warrant to avoid
dilution which might result from any of the following:

(3) changes in the exercise price or conversion rate of options to
purchase StreamLogic's common stock or securities exchangeable or
convertible into StreamLogic's common stock; and

(4) dividends and distributions to holders of StreamLogic's common
stock.

Notwithstanding the foregoing, no adjustments shall be made pursuant
to this section 3 (iii) (A) and (B) on account of the transactions
set forth on Exhibit A.

A1-2
<PAGE>

(a) The Exchange Price shall not be (i) greater than $7.50 nor (ii) less
than $4.00.

A1-3
<PAGE>

herein. Loomis Sayles will take all actions reasonably necessary to assist
StreamLogic in obtaining such approvals.

(o) Any press release by Loomis Sayles or StreamLogic concerning the
terms set forth in this letter shall be subject to the prior reasonable
approval of the other party.

A1-4
<PAGE>

(q) Loomis Sayles shall be satisfied that the common stock of StreamLogic
will continue to be listed and quoted by the NASDAQ-National Market System.

(s) StreamLogic shall have obtained all required approvals by its
shareholders.

6. StreamLogic's obligations to complete the Tender Offer shall be subject
to each of the following terms and conditions:

(a) The Exchange Price shall not be (i) greater than $7.50 nor (ii) less
than $4.00.

(b) The conditions set forth in Sections 5(g), 5(l), 5(r), 5(s) and 5(t)
of this letter.

(c) The definitive documentation evidencing the issuance of the Warrants
shall be reasonably satisfactory in form, substance and in all other
respects to StreamLogic.

(d) Compliance with all applicable laws.

(e) The continued listing and quotation of StreamLogic's common stock on
the NASDAQ-National Market System.

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

Loomis Sayles

Loomis, Sayles & Co., L.P.

By: Loomis, Sayles & Co., Inc.

By Frederick D. Vyn
Its Vice President

AGREED:

STREAMLOGIC:

STREAMLOGIC CORPORATION

By J. Larry Smart
Title: President, CEO

A1-5
<PAGE>

EXHIBIT A

Warrants outstanding to Linder as of June 13, 1996.... 1,500,000 at an exercise
price of $4.00 per share
STOCK OPTIONS:
StreamLogic Option.................................... 787,200

Micropolis Options (exercise lapse by 6/29/96)........ 838,860

Options granted on April 1, 1996...................... 657,000

Options granted on May 22, 1996....................... 70,000

Options expected to be granted by September 1, 1996... 150,000

TOTAL OPTIONS..................................... 2,503,060
</TABLE>

A1-6

<PAGE>

September 13, 1996

StreamLogic Corporation
21211 Nordhoff Street
Chatsworth, California 91311
Attention: Mr. Larry Smart

Amendment to June 14, 1996 Agreement re:
Tender Offer for All Outstanding 6% Convertible Subordinated Debentures Due
2012

Dear Mr. Smart:

1. Section 2 is amended by deleting it in its entirety and substituting the
following therefor:

2. clause (i) of Section 3 is amended by deleting it in its entirety and
substituting the following therefor:

3. clause (ii) of Section 3 is amended by deleting it in its entirety and
substituting the following therefor:

"(ii) StreamLogic's common stock in the amount of 148.57143 shares of
common stock per Debenture (the "Exchange Shares");"

4. Clause (iii) of Section 3 is amended by deleting the first paragraph of
this clause in its entirety and substituting the following therefor:

A2-1
<PAGE>

5. Section 4 shall be amended by adding the following sentence after the
fifth sentence of Section 4:

the introductory paragraph of Section 5 shall be amended by deleting it in its
entirety and substituting the following therefor:

"5. Agreement to Tender. Loomis Sayles agrees that it will

(i) advise the institutional clients it advises as of the Closing
Date, and

(a) the Tender Offer includes each of the terms described in paragraphs 1
through 4 above, and

(b) each of the following terms and conditions are met to the
satisfaction of Loomis Sayles:"

6. clause (a) of Section 5 shall be amended by deleting it in entirety and
substituting the following therefor:

7. clause (d) of Section 5 shall be amended by deleting it in its entirety
and substituting the following therefor:

A2-2
<PAGE>

8. clause (a) of Section 6 shall be deleted in its entirety.

9. Exhibit A is amended by deleting it in its entirety and substituting
Exhibit A attached hereto therefor.

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

Loomis, Sayles & Co., L.P.

By: Loomis, Sayles & Co., Inc.

By Frederick D. Vyn
Title: Vice President

Agreed:

STREAMLOGIC CORPORATION

By Lee Hilbert
Title: Chief Financial Officer

A2-3
<PAGE>

EXHIBIT A

<TABLE>
<CAPTION>
NO. OF SHARES,
TRANSACTION OPTIONS, WARRANTS
- ----------- -----------------
<S> <C>
Shares issued to FWB at Closing as of July 1, 1996
(subject to adjustment 120 days after closing)....... 1,256,123
Warrants outstanding to Salomon as of September 18,
1996................................................. 80,081 at an exercise
price of $5.00 per share
Warrants outstanding to Lindner as of September 18,
1996................................................. 1,500,000 at an exercise
price of $4.00 per share
STOCK OPTIONS:
Options outstanding September 18, 1996................ 1,657,300
Options expected to be granted by October 31, 1996.... 150,000
Total stock options................................. 1,807,300
</TABLE>

A2-4

<PAGE>

October 3, 1996

StreamLogic Corporation
21211 Nordhoff Street
Chatsworth, California 91311
Attention: Mr. Larry Smart

Second Amendment to June 14, 1996 Agreement re:
Tender Offer for All Outstanding 6% Convertible Subordinated Debentures Due
2012

Dear Mr. Smart:

This letter sets forth out mutual understanding and agreement with respect
to amendments to the June 14, 1996 Agreement re: Tender Offer for All
Outstanding 6% Convertible Subordinated Debentures Due 2012 between Loomis
Sayles & Company, L.P. and StreamLogic Corporation, as amended by the
September 13, 1996 amendment to June 14, 1996 Agreement re: Tender Offer for
All Outstanding 6% Convertible Subordinated Debentures Due 2012 (the
"Agreement"). Loomis Sayles & Company, L.P. and StreamLogic Corporation hereby
agree that the Agreement shall be amended as follows:

1. Section 2 is amended by deleting it in its entirety and substituting the
following therefor:

2. clause (ii) of Section 3 is amended by deleting it in its entirety and
substituting the following therefor:

"(ii) StreamLogic's common stock in the amount of 216.6667 shares of common
stock per Debenture (the "Exchange Shares");"

3. Clause (iii) of Section 3 is amended by deleting the first paragraph of
this clause in its entirety and substituting the following therefor:

A3-1
<PAGE>

4. clause (a) of Section 5 shall be amended by deleting it in entirety and
substituting the following therefor:

5. clause (d) of Section 5 shall be amended by deleting it in its entirety
and substituting the following therefor:

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

Loomis Sayles & Company, L.P.

By: Loomis Sayles & Company, Inc.

By Frederick D. Vyn
Title: Vice President

Agreed:

STREAMLOGIC CORPORATION

By Lee Hilbert
Title: Chief Financial Officer

A3-2