<PAGE>   1
                                                                   EXHIBIT 10.43


                           LETTER OF CREDIT AGREEMENT


         This LETTER OF CREDIT AGREEMENT ("Agreement") is entered into as of
January 24, 1997, by and among StorMedia Incorporated, a Delaware corporation
("Guarantor"), Union Bank of California, N.A. ("Bank") and Canadian Imperial
Bank of Commerce, New York Agency ("Agent").

                                    RECITALS

         A. Guarantor, Bank and Agent are parties, together with others, to a
Credit Agreement (defined below) pursuant to which, inter alia, Guarantor has
guaranteed the obligations of its subsidiaries (the Borrowers) to the Banks
(including Bank) thereunder.

         B. Guarantor has requested that Bank issue its L/C (in the form
attached hereto as Exhibit A, the "Credit") to the Assuming Bank (as defined
below) in support of Bank's obligations to lend money to the Borrowers under the
Credit Agreement, and Guarantor has agreed to support the payment of such Credit
by entering into this Letter of Credit Agreement.

         NOW THEREFORE, in consideration of the issuance by the Bank of the
Credit, Guarantor, Bank and Agent hereby agree as follows with respect to the
Credit.

                                    AGREEMENT

         1.       Definitions.

         "Credit Agreement" means that certain Credit Agreement dated as of
August 23, 1996 by and among StorMedia International, Ltd. and Strates Pte.
Ltd., as Borrowers, and StorMedia Incorporated, as Guarantor, the Banks named
therein, as Banks, and Canadian Imperial Bank of Commerce, New York Agency, as
agent for the Banks and Banque Nationale de Paris, San Francisco Branch, as
co-agent for the Banks, and Canadian Imperial Bank of Commerce, Singapore Branch
as Designated Issuer, as amended by the First Amendment and Limited Waiver dated
as of September 30, 1996 and the Second Amendment to Credit Agreement and First
Amendment to Certain Security Documents dated as of January 24, 1997, and as
further amended and in effect from time to time.

         "Assuming Bank" means CIBC [Asia] Ltd. as Assuming bank under the
Interbank Agreement.
<PAGE>   2
         "Interbank Agreement" means the Interbank Agreement dated as of January
24, 1997 by and among Canadian Imperial Bank of Commerce, New York Agency,
Banque Nationale de Paris, San Francisco Branch, Canadian Imperial Bank of
Commerce, Singapore Branch and each of the Banks listed on the signature pages
thereof and CIBC [Asia] Ltd., as Assuming bank, and acknowledged and agreed to
by StorMedia International, Ltd. and Strates Pte. Ltd., and StorMedia
Incorporated.

         "Uniform Customs and Practice" means the Uniform Customs and Practice
for Documentary Credits approved by the International Chamber of Commerce
(publication No. 500) and in effect and adhered to by the Bank as of the date of
issuance of the Credit.

         Other capitalized terms used but not defined herein shall have the
meanings assigned to them, directly or indirectly by reference, in the Credit
Agreement. The "Other Definitional Provisions" set forth in Section 1.02 of the
Credit Agreement shall likewise govern this Agreement.

         2. Issuance of Credits. The Bank will issue the Credit for the account
of the Guarantor and for the benefit of the Assuming Bank on the date hereof and
subject to the terms and conditions set forth in the Interbank Agreement.

         3. Reimbursement. The Guarantor shall reimburse the Agent, for the
benefit of the Bank (but subject to the sharing provisions contained in the
Credit Agreement and the Interbank Agreement), on demand to the account of the
Agent as designated in the signature pages of the Credit Agreement (or such
other account as the Agent may designate), in cash, the amount required to pay
each drawing under the Credit. Upon the occurrence of an Event of Default under
the Credit Agreement, the Guarantor shall pledge to the Agent, for the benefit
of the Bank, cash to be held as cash collateral in an amount sufficient to pay
all monies that are or will be due to be paid at any time by the Bank pursuant
to the Credit regardless of whether the beneficiary under the Credit has
requested payment or whether those obligations have matured or remain
contingent.

         4. Obligations Absolute. The obligations of Guarantor to reimburse the
Agent, for the benefit of the Bank, for drawings made under the Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including the following
circumstances:

            i)  any lack of validity or enforceability of the Credit;

            ii) the existence of any claim, set-off, defense (other than payment
of all monies due) or other right which Guarantor or Borrowers may have at any
time against the beneficiary or any transferee of the Credit (or any Persons for
whom any such transferee


                                       2
<PAGE>   3
may be acting), the Bank, the Agent or any Bank or any other Person whether in
connection with this Agreement, the Credit Agreement, the transactions
contemplated therein or any unrelated transaction;

            iii) any draft, certificate or any other document presented under
the Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

            iv) payment against any draft, document or other demand for payment
that does not comply with the terms of the Credit, provided that such payment
does not constitute gross negligence or wilful misconduct on the part of the
Bank;

            v) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.

         5. Credit. As between Guarantor on the one hand and the Bank and the
Agent on the other hand, Guarantor assumes all risks of the acts and omissions
of, or misuse of the Credit by, the beneficiaries of the Credit. In furtherance
and not in limitation of the foregoing, neither the Bank nor the Agent shall be
responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for an issuance of or draw under the Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) failure of the
beneficiary of a Credit to comply fully with conditions required in order to
draw upon such Credit (it being understood that this clause (iii) does not
address the payment by the Bank following failure of the beneficiary of a Credit
to comply fully with the conditions required to draw upon such Credit); (iv)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (v) errors in interpretation of technical terms; (vi) any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under the Credit or of the proceeds thereof; (vii) the misapplication
by the beneficiary of a Credit of the proceeds of any drawing under such Credit;
and (viii) any consequences arising from causes beyond the control of the Agent
or the Bank, including any act or omission by any government or governmental
authority. None of the above shall affect, impair, or prevent the vesting of any
of the Agent's or the Bank's rights or powers hereunder. In furtherance and
extension and not in limitation of the specific provisions set forth herein, any
action taken or omitted by the Agent or the Bank, under or in connection with
the Credit or the related certificates, if taken or omitted in good faith, shall
not put the Agent or the Bank under any resulting liability to any Loan Party.
Notwithstanding anything


                                       3
<PAGE>   4
in this Agreement to the contrary, neither the Agent nor the Bank shall be
relieved of any liability that they may otherwise have as a result of their
gross negligence or willful misconduct, but each Loan Party shall remain liable
with respect to any Loans made or participations in the Credit purchased by the
Banks other than the Bank.

         6. L/C Fees. The Guarantor will pay to the Agent, for the account of
the Bank, the L/C Fees described in the Interbank Agreement plus the Bank's
standard fees for drawing, amendment, or transfer of the Credit, in accordance
with the Bank's then effective schedule of such fees.

         7. Indemnification. The Guarantor agrees to indemnify and hold the
Agent and the Bank and its correspondents harmless from and against any and all
claims, damages, losses, liabilities, costs or expenses whatsoever which the
Agent and the Bank or their correspondents may incur (or which may be claimed
against the Agent or the Bank or their correspondents by any person) by reason
of, or in connection with, the execution and delivery or transfer of, or payment
or failure to pay under, any Credit, or by reason of, or in connection with, any
other matters arising under this Agreement, or any of the transactions
contemplated hereby; provided, however, the Guarantor shall not be required to
indemnify the Agent or the Bank or their correspondents for any claims, damages,
losses, liabilities, costs or expenses to the extent caused by the Agent's,
Bank's or any of their correspondents' willful misconduct or gross negligence.

         8. Expenses. The Guarantor will pay on demand all reasonable costs and
expenses (including without limitation, reasonable attorneys' fees and expenses)
incurred by the Agent or the Bank in connection with the administration,
amendment or enforcement of this Agreement and such other documents which may be
delivered in connection with this Agreement or any action or proceeding relating
to a court order, injunction or other process or decree restraining or seeking
to restrain the Bank from paying any amount under any Credit.

         9. Uniform Laws. This Agreement and the Credit shall be subject to the
Uniform Customs and Practice and, in the event any provision of the Uniform
Customs and Practice is or is construed to vary from or be in conflict with any
provision of the California Uniform Commercial Code, as from time to time
amended and in full force (the "Commercial Code"), the Uniform Customs and
Practice shall prevail.

         10. Obligations Due. If any of the obligations and/or liabilities of
the Guarantor to the Agent or the Bank shall not be paid or performed when due;
or if there is a breach in any warranty or representation herein in any material
respect; or if the Guarantor shall become insolvent (however such insolvency may
be evidenced) or make a general assignment for the benefit of creditors; or if
the Guarantor shall suspend the transaction of its usual


                                       4
<PAGE>   5
business or be expelled or suspended from any exchange; or if an application is
made by any judgment creditor of the Guarantor for an order directing the Bank
to pay over money or to deliver other property; or if a petition in bankruptcy
shall be filed by or against the Guarantor; or if a petition shall be filed by
or against the Guarantor or any proceeding shall be instituted by or against the
Guarantor for any relief under any bankruptcy or insolvency laws or any law
relating to the relief of debtors, readjustment of indebtedness, reorganization,
composition or extensions; or if any governmental authority, or any court at the
instance of any governmental authority, shall take possession of any substantial
part of the property of the Guarantor or shall assume control over the affairs
or operations of the Guarantor; or if a receiver shall be appointed of, or a
writ or order of attachment or garnishment shall be issued or made against, any
of the property or assets of the Guarantor; or if the Bank shall in good faith
exercising its reasonable credit judgment deem itself insecure at any time;
thereupon, unless Agent, on behalf of Bank shall otherwise elect, any and all
obligations and liabilities of the Guarantor to the Agent or the Bank, whether
now existing or hereafter incurred, shall become and be due and payable
forthwith without presentation, demand or notice, all of which are waived.

         11. No Waiver. Neither the Agent nor the Bank shall be deemed to have
waived any of its rights hereunder, unless the Agent or the Bank or their
authorized agents shall have signed such waiver in writing. No such waiver
unless expressly stated herein, shall be effective as to any transaction which
occurs subsequent to the date of such waiver, nor as to any continuance of a
breach after such waiver.

         12. Successors and Assigns. The obligations hereof shall bind the
successors and assigns of the Guarantor, and all rights, benefits and privileges
conferred on the Agent and the Bank shall be and are extended to and conferred
upon and may be enforced by their successors and assigns.

         13. Merger. This Agreement is a Loan Document under the Credit
Agreement. This Agreement, together with the Credit Agreement and the other Loan
Documents, constitute the entire agreement of the parties with respect to the
subject matter hereof, and may not be amended except in writing signed by all
parties hereto.

         14. Provide Information. The Guarantor agrees that the Agent or the
Bank may provide information relating to any Credit or relating to the Guarantor
to the Agent's or the Bank's parent, affiliates, subsidiaries and service
providers.

         15. Conflict. In the event any term or provision in this Agreement
shall conflict with any term or provision in any application for standby letter
of credit which has been executed by the Guarantor and the Bank, the terms and
provisions of this Agreement or, if applicable, the Interbank Agreement shall
prevail.


                                       5
<PAGE>   6
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.


                                     STORMEDIA INCORPORATED


                                     By:  /s/  WILLIAM S. ALMON
                                        --------------------------------

                                     Title:  Chairman
                                           -----------------------------


                                     UNION BANK OF CALIFORNIA, N.A.


                                     By:  /s/  [ILLEGIBLE]
                                        --------------------------------

                                     Title:  Vice President
                                           -----------------------------



                                     CANADIAN IMPERIAL BANK OF COMMERCE, New
                                     York Agency, as Agent

                                     By:________________________________

                                     Title:_____________________________


                                        6
<PAGE>   7
                                    EXHIBIT A

                                  [FORM OF L/C]
















                                        8
<PAGE>   8

                           LETTER OF CREDIT AGREEMENT


         This LETTER OF CREDIT AGREEMENT ("Agreement") is entered into as of
January 24, 1997, by and among StorMedia Incorporated, a Delaware corporation
("Guarantor"), Sanwa Bank California ("Bank") and Canadian Imperial Bank of
Commerce, New York Agency ("Agent").

                                    RECITALS

         A. Guarantor, Bank and Agent are parties, together with others, to a
Credit Agreement (defined below) pursuant to which, inter alia, Guarantor has
guaranteed the obligations of its subsidiaries (the Borrowers) to the Banks
(including Bank) thereunder.

         B. Guarantor has requested that Bank issue its L/C (in the form
attached hereto as Exhibit A, the "Credit") to the Assuming Bank (as defined
below) in support of Bank's obligations to lend money to the Borrowers under the
Credit Agreement, and Guarantor has agreed to support the payment of such Credit
by entering into this Letter of Credit Agreement.

         NOW THEREFORE, in consideration of the issuance by the Bank of the
Credit, Guarantor, Bank and Agent hereby agree as follows with respect to the
Credit.

                                    AGREEMENT

         1.       Definitions.

         "Credit Agreement" means that certain Credit Agreement dated as of
August 23, 1996 by and among StorMedia International, Ltd. and Strates Pte.
Ltd., as Borrowers, and StorMedia Incorporated, as Guarantor, the Banks named
therein, as Banks, and Canadian Imperial Bank of Commerce, New York Agency, as
agent for the Banks and Banque Nationale de Paris, San Francisco Branch, as
co-agent for the Banks, and Canadian Imperial Bank of Commerce, Singapore Branch
as Designated Issuer, as amended by the First Amendment and Limited Waiver dated
as of September 30, 1996 and the Second Amendment to Credit Agreement and First
Amendment to Certain Security Documents dated as of January 24, 1997, and as
further amended and in effect from time to time.

         "Assuming Bank" means CIBC [Asia] Ltd. as Assuming bank under the
Interbank Agreement.
<PAGE>   9
         "Interbank Agreement" means the Interbank Agreement dated as of January
24, 1997 by and among Canadian Imperial Bank of Commerce, New York Agency,
Banque Nationale de Paris, San Francisco Branch, Canadian Imperial Bank of
Commerce, Singapore Branch and each of the Banks listed on the signature pages
thereof and CIBC [Asia] Ltd., as Assuming bank, and acknowledged and agreed to
by StorMedia International, Ltd. and Strates Pte. Ltd., and StorMedia
Incorporated.

         "Uniform Customs and Practice" means the Uniform Customs and Practice
for Documentary Credits approved by the International Chamber of Commerce
(publication No. 500) and in effect and adhered to by the Bank as of the date of
issuance of the Credit.

         Other capitalized terms used but not defined herein shall have the
meanings assigned to them, directly or indirectly by reference, in the Credit
Agreement. The "Other Definitional Provisions" set forth in Section 1.02 of the
Credit Agreement shall likewise govern this Agreement.

         2. Issuance of Credits. The Bank will issue the Credit for the account
of the Guarantor and for the benefit of the Assuming Bank on the date hereof and
subject to the terms and conditions set forth in the Interbank Agreement.

         3. Reimbursement. The Guarantor shall reimburse the Agent, for the
benefit of the Bank (but subject to the sharing provisions contained in the
Credit Agreement and the Interbank Agreement), on demand to the account of the
Agent as designated in the signature pages of the Credit Agreement (or such
other account as the Agent may designate), in cash, the amount required to pay
each drawing under the Credit. Upon the occurrence of an Event of Default under
the Credit Agreement, the Guarantor shall pledge to the Agent, for the benefit
of the Bank, cash to be held as cash collateral in an amount sufficient to pay
all monies that are or will be due to be paid at any time by the Bank pursuant
to the Credit regardless of whether the beneficiary under the Credit has
requested payment or whether those obligations have matured or remain
contingent.

         4. Obligations Absolute. The obligations of Guarantor to reimburse the
Agent, for the benefit of the Bank, for drawings made under the Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including the following
circumstances:

            i) any lack of validity or enforceability of the Credit;

            ii) the existence of any claim, set-off, defense (other than payment
of all monies due) or other right which Guarantor or Borrowers may have at any
time against the beneficiary or any transferee of the Credit (or any Persons for
whom any such transferee


                                       2
<PAGE>   10
may be acting), the Bank, the Agent or any Bank or any other Person whether in
connection with this Agreement, the Credit Agreement, the transactions
contemplated therein or any unrelated transaction;

            iii) any draft, certificate or any other document presented under 
the Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

            iv) payment against any draft, document or other demand for payment
that does not comply with the terms of the Credit, provided that such payment
does not constitute gross negligence or wilful misconduct on the part of the
Bank;

            v) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.

         5. Credit. As between Guarantor on the one hand and the Bank and the
Agent on the other hand, Guarantor assumes all risks of the acts and omissions
of, or misuse of the Credit by, the beneficiaries of the Credit. In furtherance
and not in limitation of the foregoing, neither the Bank nor the Agent shall be
responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for an issuance of or draw under the Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) failure of the
beneficiary of a Credit to comply fully with conditions required in order to
draw upon such Credit (it being understood that this clause (iii) does not
address the payment by the Bank following failure of the beneficiary of a Credit
to comply fully with the conditions required to draw upon such Credit); (iv)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (v) errors in interpretation of technical terms; (vi) any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under the Credit or of the proceeds thereof; (vii) the misapplication
by the beneficiary of a Credit of the proceeds of any drawing under such Credit;
and (viii) any consequences arising from causes beyond the control of the Agent
or the Bank, including any act or omission by any government or governmental
authority. None of the above shall affect, impair, or prevent the vesting of any
of the Agent's or the Bank's rights or powers hereunder. In furtherance and
extension and not in limitation of the specific provisions set forth herein, any
action taken or omitted by the Agent or the Bank, under or in connection with
the Credit or the related certificates, if taken or omitted in good faith, shall
not put the Agent or the Bank under any resulting liability to any Loan Party.
Notwithstanding anything


                                       3
<PAGE>   11
in this Agreement to the contrary, neither the Agent nor the Bank shall be
relieved of any liability that they may otherwise have as a result of their
gross negligence or willful misconduct, but each Loan Party shall remain liable
with respect to any Loans made or participations in the Credit purchased by the
Banks other than the Bank.

         6. L/C Fees. The Guarantor will pay to the Agent, for the account of
the Bank, the L/C Fees described in the Interbank Agreement plus the Bank's
standard fees for drawing, amendment, or transfer of the Credit, in accordance
with the Bank's then effective schedule of such fees.

         7. Indemnification. The Guarantor agrees to indemnify and hold the
Agent and the Bank and its correspondents harmless from and against any and all
claims, damages, losses, liabilities, costs or expenses whatsoever which the
Agent and the Bank or their correspondents may incur (or which may be claimed
against the Agent or the Bank or their correspondents by any person) by reason
of, or in connection with, the execution and delivery or transfer of, or payment
or failure to pay under, any Credit, or by reason of, or in connection with, any
other matters arising under this Agreement, or any of the transactions
contemplated hereby; provided, however, the Guarantor shall not be required to
indemnify the Agent or the Bank or their correspondents for any claims, damages,
losses, liabilities, costs or expenses to the extent caused by the Agent's,
Bank's or any of their correspondents' willful misconduct or gross negligence.

         8. Expenses. The Guarantor will pay on demand all reasonable costs and
expenses (including without limitation, reasonable attorneys' fees and expenses)
incurred by the Agent or the Bank in connection with the administration,
amendment or enforcement of this Agreement and such other documents which may be
delivered in connection with this Agreement or any action or proceeding relating
to a court order, injunction or other process or decree restraining or seeking
to restrain the Bank from paying any amount under any Credit.

         9. Uniform Laws. This Agreement and the Credit shall be subject to the
Uniform Customs and Practice and, in the event any provision of the Uniform
Customs and Practice is or is construed to vary from or be in conflict with any
provision of the California Uniform Commercial Code, as from time to time
amended and in full force (the "Commercial Code"), the Uniform Customs and
Practice shall prevail.

         10. Obligations Due. If any of the obligations and/or liabilities of
the Guarantor to the Agent or the Bank shall not be paid or performed when due;
or if there is a breach in any warranty or representation herein in any material
respect; or if the Guarantor shall become insolvent (however such insolvency may
be evidenced) or make a general assignment for the benefit of creditors; or if
the Guarantor shall suspend the transaction of its usual


                                       4
<PAGE>   12
business or be expelled or suspended from any exchange; or if an application is
made by any judgment creditor of the Guarantor for an order directing the Bank
to pay over money or to deliver other property; or if a petition in bankruptcy
shall be filed by or against the Guarantor; or if a petition shall be filed by
or against the Guarantor or any proceeding shall be instituted by or against the
Guarantor for any relief under any bankruptcy or insolvency laws or any law
relating to the relief of debtors, readjustment of indebtedness, reorganization,
composition or extensions; or if any governmental authority, or any court at the
instance of any governmental authority, shall take possession of any substantial
part of the property of the Guarantor or shall assume control over the affairs
or operations of the Guarantor; or if a receiver shall be appointed of, or a
writ or order of attachment or garnishment shall be issued or made against, any
of the property or assets of the Guarantor; or if the Bank shall in good faith
exercising its reasonable credit judgment deem itself insecure at any time;
thereupon, unless Agent, on behalf of Bank shall otherwise elect, any and all
obligations and liabilities of the Guarantor to the Agent or the Bank, whether
now existing or hereafter incurred, shall become and be due and payable
forthwith without presentation, demand or notice, all of which are waived.

         11. No Waiver. Neither the Agent nor the Bank shall be deemed to have
waived any of its rights hereunder, unless the Agent or the Bank or their
authorized agents shall have signed such waiver in writing. No such waiver
unless expressly stated herein, shall be effective as to any transaction which
occurs subsequent to the date of such waiver, nor as to any continuance of a
breach after such waiver.

         12. Successors and Assigns. The obligations hereof shall bind the
successors and assigns of the Guarantor, and all rights, benefits and privileges
conferred on the Agent and the Bank shall be and are extended to and conferred
upon and may be enforced by their successors and assigns.

         13. Merger. This Agreement is a Loan Document under the Credit
Agreement. This Agreement, together with the Credit Agreement and the other Loan
Documents, constitute the entire agreement of the parties with respect to the
subject matter hereof, and may not be amended except in writing signed by all
parties hereto.

         14. Provide Information. The Guarantor agrees that the Agent or the
Bank may provide information relating to any Credit or relating to the Guarantor
to the Agent's or the Bank's parent, affiliates, subsidiaries and service
providers.

         15. Conflict. In the event any term or provision in this Agreement
shall conflict with any term or provision in any application for standby letter
of credit which has been executed by the Guarantor and the Bank, the terms and
provisions of this Agreement or, if applicable, the Interbank Agreement shall
prevail.


                                       5
<PAGE>   13
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.


                                         STORMEDIA INCORPORATED


                                         By:   /s/  STEPHEN M. ABELY
                                            -----------------------------------

                                         Title:  Chief Financial Officer
                                               --------------------------------


                                         SANWA BANK CALIFORNIA


                                         By:   /s/  [ILLEGIBLE]
                                            -----------------------------------

                                         Title:  Vice President
                                               --------------------------------


                                         CANADIAN IMPERIAL BANK OF COMMERCE, New
                                         York Agency, as Agent

                                         By:  /s/   [ILLEGIBLE]
                                            -----------------------------------

                                         Title:  Vice President
                                               --------------------------------




                                       6
<PAGE>   14
                                    EXHIBIT A

                                  [FORM OF L/C]
















                                        8
<PAGE>   15

                           LETTER OF CREDIT AGREEMENT


         This LETTER OF CREDIT AGREEMENT ("Agreement") is entered into as of
January 24, 1997, by and among StorMedia Incorporated, a Delaware corporation
("Guarantor"), Fleet National Bank ("Bank") and Canadian Imperial Bank of
Commerce, New York Agency ("Agent").

                                    RECITALS

         A. Guarantor, Bank and Agent are parties, together with others, to a
Credit Agreement (defined below) pursuant to which, inter alia, Guarantor has
guaranteed the obligations of its subsidiaries (the Borrowers) to the Banks
(including Bank) thereunder.

         B. Guarantor has requested that Bank issue its L/C (in the form
attached hereto as Exhibit A, the "Credit") to the Assuming Bank (as defined
below) in support of Bank's obligations to lend money to the Borrowers under the
Credit Agreement, and Guarantor has agreed to support the payment of such Credit
by entering into this Letter of Credit Agreement.

         NOW THEREFORE, in consideration of the issuance by the Bank of the
Credit, Guarantor, Bank and Agent hereby agree as follows with respect to the
Credit.

                                    AGREEMENT

         1.       Definitions.

         "Credit Agreement" means that certain Credit Agreement dated as of
August 23, 1996 by and among StorMedia International, Ltd. and Strates Pte.
Ltd., as Borrowers, and StorMedia Incorporated, as Guarantor, the Banks named
therein, as Banks, and Canadian Imperial Bank of Commerce, New York Agency, as
agent for the Banks and Banque Nationale de Paris, San Francisco Branch, as
co-agent for the Banks, and Canadian Imperial Bank of Commerce, Singapore Branch
as Designated Issuer, as amended by the First Amendment and Limited Waiver dated
as of September 30, 1996 and the Second Amendment to Credit Agreement and First
Amendment to Certain Security Documents dated as of January 24, 1997, and as
further amended and in effect from time to time.

         "Assuming Bank" means CIBC [Asia] Ltd. as Assuming bank under the
Interbank Agreement.

         "Interbank Agreement" means the Interbank Agreement dated as of January
24, 1997 by and among Canadian Imperial Bank of Commerce, New York Agency,
Banque Nationale de
<PAGE>   16
Paris, San Francisco Branch, Canadian Imperial Bank of Commerce, Singapore
Branch and each of the Banks listed on the signature pages thereof and CIBC
[Asia] Ltd., as Assuming bank, and acknowledged and agreed to by StorMedia
International, Ltd. and Strates Pte. Ltd., and StorMedia Incorporated.

         "Uniform Customs and Practice" means the Uniform Customs and Practice
for Documentary Credits approved by the International Chamber of Commerce
(publication No. 500) and in effect and adhered to by the Bank as of the date of
issuance of the Credit.

         Other capitalized terms used but not defined herein shall have the
meanings assigned to them, directly or indirectly by reference, in the Credit
Agreement. The "Other Definitional Provisions" set forth in Section 1.02 of the
Credit Agreement shall likewise govern this Agreement.

         2. Issuance of Credits. The Bank will issue the Credit for the account
of the Guarantor and for the benefit of the Assuming Bank on the date hereof and
subject to the terms and conditions set forth in the Interbank Agreement.

         3. Reimbursement. The Guarantor shall reimburse the Agent, for the
benefit of the Bank (but subject to the sharing provisions contained in the
Credit Agreement and the Interbank Agreement), on demand to the account of the
Agent as designated in the signature pages of the Credit Agreement (or such
other account as the Agent may designate), in cash, the amount required to pay
each drawing under the Credit. Upon the occurrence of an Event of Default under
the Credit Agreement, the Guarantor shall pledge to the Agent, for the benefit
of the Bank, cash to be held as cash collateral in an amount sufficient to pay
all monies that are or will be due to be paid at any time by the Bank pursuant
to the Credit regardless of whether the beneficiary under the Credit has
requested payment or whether those obligations have matured or remain
contingent.

         4. Obligations Absolute. The obligations of Guarantor to reimburse the
Agent, for the benefit of the Bank, for drawings made under the Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including the following
circumstances:

            i)  any lack of validity or enforceability of the Credit;

            ii) the existence of any claim, set-off, defense (other than
payment of all monies due) or other right which Guarantor or Borrowers may have
at any time against the beneficiary or any transferee of the Credit (or any
Persons for whom any such transferee may be acting), the Bank, the Agent or any
Bank or any other Person whether in connection


                                       2
<PAGE>   17
with this Agreement, the Credit Agreement, the transactions contemplated therein
or any unrelated transaction;

            iii) any draft, certificate or any other document presented under
the Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

            iv) payment against any draft, document or other demand for payment
that does not comply with the terms of the Credit, provided that such payment
does not constitute gross negligence or wilful misconduct on the part of the
Bank;

            v) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.

         5. Credit. As between Guarantor on the one hand and the Bank and the
Agent on the other hand, Guarantor assumes all risks of the acts and omissions
of, or misuse of the Credit by, the beneficiaries of the Credit. In furtherance
and not in limitation of the foregoing, neither the Bank nor the Agent shall be
responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for an issuance of or draw under the Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) failure of the
beneficiary of a Credit to comply fully with conditions required in order to
draw upon such Credit (it being understood that this clause (iii) does not
address the payment by the Bank following failure of the beneficiary of a Credit
to comply fully with the conditions required to draw upon such Credit); (iv)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (v) errors in interpretation of technical terms; (vi) any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under the Credit or of the proceeds thereof; (vii) the misapplication
by the beneficiary of a Credit of the proceeds of any drawing under such Credit;
and (viii) any consequences arising from causes beyond the control of the Agent
or the Bank, including any act or omission by any government or governmental
authority. None of the above shall affect, impair, or prevent the vesting of any
of the Agent's or the Bank's rights or powers hereunder. In furtherance and
extension and not in limitation of the specific provisions set forth herein, any
action taken or omitted by the Agent or the Bank, under or in connection with
the Credit or the related certificates, if taken or omitted in good faith, shall
not put the Agent or the Bank under any resulting liability to any Loan Party.
Notwithstanding anything in this Agreement to the contrary, neither the Agent
nor the Bank shall be relieved of any


                                       3
<PAGE>   18
liability that they may otherwise have as a result of their gross negligence or
willful misconduct, but each Loan Party shall remain liable with respect to any
Loans made or participations in the Credit purchased by the Banks other than the
Bank.

         6. L/C Fees. The Guarantor will pay to the Agent, for the account of
the Bank, the L/C Fees described in the Interbank Agreement plus the Bank's
standard fees for drawing, amendment, or transfer of the Credit, in accordance
with the Bank's then effective schedule of such fees.

         7. Indemnification. The Guarantor agrees to indemnify and hold the
Agent and the Bank and its correspondents harmless from and against any and all
claims, damages, losses, liabilities, costs or expenses whatsoever which the
Agent and the Bank or their correspondents may incur (or which may be claimed
against the Agent or the Bank or their correspondents by any person) by reason
of, or in connection with, the execution and delivery or transfer of, or payment
or failure to pay under, any Credit, or by reason of, or in connection with, any
other matters arising under this Agreement, or any of the transactions
contemplated hereby; provided, however, the Guarantor shall not be required to
indemnify the Agent or the Bank or their correspondents for any claims, damages,
losses, liabilities, costs or expenses to the extent caused by the Agent's,
Bank's or any of their correspondents' willful misconduct or gross negligence.

         8. Expenses. The Guarantor will pay on demand all reasonable costs and
expenses (including without limitation, reasonable attorneys' fees and expenses)
incurred by the Agent or the Bank in connection with the administration,
amendment or enforcement of this Agreement and such other documents which may be
delivered in connection with this Agreement or any action or proceeding relating
to a court order, injunction or other process or decree restraining or seeking
to restrain the Bank from paying any amount under any Credit.

         9. Uniform Laws. This Agreement and the Credit shall be subject to the
Uniform Customs and Practice and, in the event any provision of the Uniform
Customs and Practice is or is construed to vary from or be in conflict with any
provision of the California Uniform Commercial Code, as from time to time
amended and in full force (the "Commercial Code"), the Uniform Customs and
Practice shall prevail.

         10. Obligations Due. If any of the obligations and/or liabilities of
the Guarantor to the Agent or the Bank shall not be paid or performed when due;
or if there is a breach in any warranty or representation herein in any material
respect; or if the Guarantor shall become insolvent (however such insolvency may
be evidenced) or make a general assignment for the benefit of creditors; or if
the Guarantor shall suspend the transaction of its usual business or be expelled
or suspended from any exchange; or if an application is made by any


                                       4
<PAGE>   19
judgment creditor of the Guarantor for an order directing the Bank to pay over
money or to deliver other property; or if a petition in bankruptcy shall be
filed by or against the Guarantor; or if a petition shall be filed by or against
the Guarantor or any proceeding shall be instituted by or against the Guarantor
for any relief under any bankruptcy or insolvency laws or any law relating to
the relief of debtors, readjustment of indebtedness, reorganization, composition
or extensions; or if any governmental authority, or any court at the instance of
any governmental authority, shall take possession of any substantial part of the
property of the Guarantor or shall assume control over the affairs or operations
of the Guarantor; or if a receiver shall be appointed of, or a writ or order of
attachment or garnishment shall be issued or made against, any of the property
or assets of the Guarantor; or if the Bank shall in good faith exercising its
reasonable credit judgment deem itself insecure at any time; thereupon, unless
Agent, on behalf of Bank shall otherwise elect, any and all obligations and
liabilities of the Guarantor to the Agent or the Bank, whether now existing or
hereafter incurred, shall become and be due and payable forthwith without
presentation, demand or notice, all of which are waived.

         11. No Waiver. Neither the Agent nor the Bank shall be deemed to have
waived any of its rights hereunder, unless the Agent or the Bank or their
authorized agents shall have signed such waiver in writing. No such waiver
unless expressly stated herein, shall be effective as to any transaction which
occurs subsequent to the date of such waiver, nor as to any continuance of a
breach after such waiver.

         12. Successors and Assigns. The obligations hereof shall bind the
successors and assigns of the Guarantor, and all rights, benefits and privileges
conferred on the Agent and the Bank shall be and are extended to and conferred
upon and may be enforced by their successors and assigns.

         13. Merger. This Agreement is a Loan Document under the Credit
Agreement. This Agreement, together with the Credit Agreement and the other Loan
Documents, constitute the entire agreement of the parties with respect to the
subject matter hereof, and may not be amended except in writing signed by all
parties hereto.

         14. Provide Information. The Guarantor agrees that the Agent or the
Bank may provide information relating to any Credit or relating to the Guarantor
to the Agent's or the Bank's parent, affiliates, subsidiaries and service
providers.

         15. Conflict. In the event any term or provision in this Agreement
shall conflict with any term or provision in any application for standby letter
of credit which has been executed by the Guarantor and the Bank, the terms and
provisions of this Agreement or, if applicable, the Interbank Agreement shall
prevail.


                                       5
<PAGE>   20
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

                                         STORMEDIA INCORPORATED


                                         By:  /s/  WILLIAM J. ALMON
                                            -----------------------------------

                                         Title:  Chairman
                                               --------------------------------


                                         FLEET NATIONAL BANK


                                         By:  /s/  [ILLEGIBLE]
                                            -----------------------------------

                                         Title:  Vice President
                                               --------------------------------


                                         CANADIAN IMPERIAL BANK OF COMMERCE, New
                                         York Agency, as Agent

                                         By:  /s/  [ILLEGIBLE]
                                            -----------------------------------

                                         Title:  Vice President
                                               --------------------------------


                                       6
<PAGE>   21
                                    EXHIBIT A

                                  [FORM OF L/C]











 
 



                                        7
<PAGE>   22

To the Agent, Co-Agent, Designated Issuer,
Banks, and Assuming Bank from time to
time who are parties to the Interbank
Agreement described below

         RE:      CREDIT AGREEMENT DATED AS OF AUGUST 23, 1996 BY AND AMONG
                  STORMEDIA INTERNATIONAL, LTD. AND STRATES PTE. LTD., AS
                  BORROWERS, AND STORMEDIA INCORPORATED, AS GUARANTOR, THE BANKS
                  NAMED THEREIN, AS BANKS, AND CANADIAN IMPERIAL BANK OF
                  COMMERCE, NEW YORK AGENCY, AS AGENT, AND BANQUE NATIONALE DE
                  PARIS, SAN FRANCISCO BRANCH, AS CO-AGENT, AND CANADIAN
                  IMPERIAL BANK OF COMMERCE, SINGAPORE BRANCH AS DESIGNATED
                  ISSUER, AS AMENDED BY THE FIRST AMENDMENT AND LIMITED WAIVER
                  DATED AS OF SEPTEMBER 30, 1996 AND THE SECOND AMENDMENT TO
                  CREDIT AGREEMENT AND FIRST AMENDMENT TO CERTAIN SECURITY
                  DOCUMENTS DATED AS OF JANUARY 24, 1997, AND AS FURTHER AMENDED
                  AND IN EFFECT FROM TIME TO TIME, (THE "CREDIT AGREEMENT"); AND
                  INTERBANK AGREEMENT DATED AS OF JANUARY 24, 1997, BY AND AMONG
                  CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, AS AGENT,
                  BANQUE NATIONALE DE PARIS, SAN FRANCISCO BRANCH, AS CO-AGENT,
                  CANADIAN IMPERIAL BANK OF COMMERCE, SINGAPORE BRANCH, AS
                  DESIGNATED ISSUER, EACH OF THE BANKS LISTED ON THE SIGNATURE
                  PAGES THEREOF, AND CIBC [ASIA] LTD., AS ASSUMING BANK, AND
                  ACKNOWLEDGED AND AGREED TO BY STORMEDIA INTERNATIONAL, LTD.
                  AND STRATES PTE. LTD., AND STORMEDIA INCORPORATED (THE
                  "INTERBANK AGREEMENT").

Ladies and Gentlemen:

         In consideration for the Banks' agreement to enter into that certain
Second Amendment to Credit Agreement and First Amendment to Certain Security
Documents by and among the Borrowers, the Guarantor, the Agent, the Co-Agent,
the Banks named therein, and the Designated Issuer dated as of the date hereof
(the "Second Amendment"), StorMedia International, Ltd. and Strates Pte. Ltd.,
as Borrowers, and StorMedia Incorporated, as Guarantor, hereby agree as follows:

         1.       Interest and Fees.

                  (a) L/C Fees and Interest. Guarantor will pay to the Agent,
for the benefit of each L/C Bank (ratably in accordance with the Effective
Stated Amount of their respective L/Cs), in arrears on each Interest Payment
Date, an L/C Fee equal to one and three-quarters percent (1.75%) on the average
daily balance of the Effective Stated Amount of the L/Cs. Borrowers' obligation
to pay interest on the Loans as provided in Section 2.05 of the Credit 
<PAGE>   23
Agreement shall only apply to (i) the principal amount of Term Loans funded by
the Funding Banks and (ii) the principal amount of all Revolving Loans.

                  (b) Cost of Funds. Borrowers will pay to the Agent, for the
benefit of the Assuming Bank, in arrears on each Interest Payment Date, the
Assuming Bank's Cost of Funds on the average daily balance of the Aggregate
Assumed Funding Amount.

                  (c) Administrative Fee. Guarantor will pay to the Agent, for
the benefit of the Assuming Bank, in arrears on each Interest Payment Date, an
administrative fee equal to twenty basis points on the average daily balance of
the aggregate Effective Stated Amount of all L/Cs outstanding during that
period.

                  (d) Payment of Interest on Funding Date. Borrowers shall pay
to the Agent, for the benefit of the Banks, on the Funding Date, all accrued and
unpaid interest on the Term Loan to the Funding Date.

         2.       Loan Document.  This side letter agreement is a Loan Document
under the Credit Agreement.

         3.       Terms.  Terms used but not otherwise defined herein shall have
the meanings provided, whether directly or indirectly by reference, in the
Credit Agreement and the Interbank Agreement.

         Dated as of January 24, 1997


                                                   STORMEDIA INTERNATIONAL, LTD.


                                                   By: /s/ STEPHEN M. ABELY
                                                      --------------------------

                                                   Title: Secretary
                                                          ----------------------








                                        2
<PAGE>   24
                                                     STRATES PTE. LTD.


                                                     By: /s/ WILLIAM J. ALMON
                                                        ------------------------

                                                     Title:  Director
                                                           ---------------------



                                                     STORMEDIA INCORPORATED


                                                     By: /s/ WILLIAM J. ALMON
                                                        ------------------------

                                                     Title:  Chairman
                                                           ---------------------











                                        3
<PAGE>   25
ACCEPTED AND AGREED TO:


CANADIAN IMPERIAL BANK OF COMMERCE,
New York Agency


By: /s/ ILLEGIBLE
   -----------------------------------

Title:  Vice President
      --------------------------------







                                        4
<PAGE>   26
BANQUE NATIONALE DE PARIS,
San Francisco Branch


By: /s/ ILLEGIBLE
   -----------------------------------

Title:  Vice President
      --------------------------------


By:
   -----------------------------------

Title:
      --------------------------------








                                        5
<PAGE>   27
CANADIAN IMPERIAL BANK OF COMMERCE,
Singapore Branch



By: /s/ ILLEGIBLE
   -----------------------------------

Title:  Vice President
      --------------------------------







                                        6
<PAGE>   28
CIBC [Asia] LTD.



By: /s/ ILLEGIBLE
   -----------------------------------

Title:  Vice President
      --------------------------------






                                        7
<PAGE>   29
                      [THIS PAGE INTENTIONALLY LEFT BLANK]






                                        8
<PAGE>   30
BANQUE NATIONALE DE PARIS,
Singapore Branch



By: /s/ Illegible
    -----------------------------------------

Title: Vice President
       --------------------------------------

By: /s/ Illegible
    -----------------------------------------
Title: Vice President
       --------------------------------------





                                        9
<PAGE>   31
FLEET NATIONAL BANK



By: /s/ Illegible
    -----------------------------------------
Title: Vice President
       --------------------------------------





                                       10
<PAGE>   32
SANWA BANK CALIFORNIA



By: /s/ Illegible
    -----------------------------------------
Title: Vice President
       --------------------------------------





                                       11
<PAGE>   33
UNION BANK OF CALIFORNIA, N.A.



By: /s/ Illegible
    -----------------------------------------
Title: Vice President
       --------------------------------------



                                       12
<PAGE>   34

           SECOND AMENDMENT TO CREDIT AGREEMENT AND FIRST AMENDMENT TO
                           CERTAIN SECURITY DOCUMENTS

         This SECOND AMENDMENT TO CREDIT AGREEMENT AND FIRST AMENDMENT TO
CERTAIN SECURITY DOCUMENTS (this "Amendment") dated as of January 24, 1997, is
entered into by and among StorMedia International, Ltd., a Cayman Islands
corporation, and Strates Pte. Ltd., a Singapore corporation (each a "Borrower"
and collectively, the "Borrowers"), StorMedia Incorporated, a Delaware
corporation (the "Guarantor", and together with the Borrowers, the "Loan
Parties", each a "Loan Party"), the financial institutions listed on the
signature pages hereof (each a "Bank" and collectively, the "Banks"), Canadian
Imperial Bank of Commerce, New York Agency, as Agent (the "Agent"), and Banque
Nationale de Paris, San Francisco Branch as Co-Agent (the "Co-Agent"), and
Canadian Imperial Bank of Commerce, Singapore Branch, as the Designated Issuer
(the "Designated Issuer"), and is made with reference to the following: (1) that
certain Credit Agreement dated as of August 23, 1996, among the Borrowers, the
Guarantor, the Banks, the Agent, the Co-Agent, and the Designated Issuer, as
amended by that certain First Amendment and Limited Waiver dated as of September
30, 1996 by and among the Borrowers, the Banks, the Agent, the Co-Agent, and the
Designated Issuer, and consented to by the Guarantor (the "Credit Agreement");
(2) that certain Security Agreement dated as of August 23, 1996, by and among
the Borrowers and the Agent (the "Security Agreement"); (3) that certain
Guarantor's Security Agreement dated as of August 23, 1996, by and between the
Guarantor and the Agent (the "Guarantor's Security Agreement"); (4) that certain
Collateral Assignment, Patent Mortgage and Security Agreement made as of August
23, 1996, by and between Strates Pte. Ltd., a Singapore corporation, as
Assignor, and the Agent (the "Strates Pte. Ltd. Collateral Assignment"); and (5)
that certain Collateral Assignment, Patent Mortgage and Security Agreement made
as of August 23, 1996, by and between StorMedia International, Ltd., a Cayman
Islands corporation, as Assignor, and the Agent (the "StorMedia International,
Ltd. Collateral Assignment").

         Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Credit Agreement, and the "Other
Definitional Provisions" in Section 1.02 of the Credit Agreement shall likewise
govern this Agreement.

                                    RECITALS

                  WHEREAS, the Loan Parties and Banks desire to amend certain
provisions contained in the Credit Agreement, the Security Agreement, the
Guarantor's Security Agreement, the Strates Pte. Ltd. Collateral Assignment, and
the StorMedia International, Ltd. Collateral Assignment, as set forth below;

                  NOW THEREFORE, in consideration of the promises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:

Section 1.  AMENDMENTS TO THE CREDIT AGREEMENT.
<PAGE>   35
         The Credit Agreement is hereby amended as follows:

             A. Section 1.01 is amended by adding the following defined terms in
their proper alphabetical order:

         "'Debenture C': The Debenture to be executed by SIL in favour of the
         Agent to secure the obligations of the Loan Parties under the Loan
         Documents."

         "'Debenture D': The Debenture to be executed by Strates in favour of
         the Agent to secure the obligations of the Loan Parties under the Loan
         Documents."

         "'Guarantor Documents': The Guarantor Collateral Assignment, the
         Guarantor Security Agreement, each Letter of Credit Agreement and all
         L/Cs issued thereunder, and the Interbank Agreement."

         "'Interbank Agreement': That certain Interbank Agreement dated as of
         January 24, 1997 by and among Canadian Imperial Bank of Commerce, New
         York Agency, Banque Nationale de Paris, San Francisco Branch, Canadian
         Imperial Bank of Commerce, Singapore Branch, each of the Banks listed
         on the signature pages thereof, and CIBC [Asia] Ltd., and acknowledged
         and agreed to by StorMedia International, Ltd. and Strates Pte. Ltd.,
         and StorMedia Incorporated."

         "'Letter of Credit Agreements': Three separate Letter of Credit
         Agreements in substantially the form attached to the Interbank
         Agreement, among the Agent, the Guarantor and each of Fleet National
         Bank, Sanwa Bank California, and Union Bank of California, N.A.,
         respectively."

             B. The defined term "Loan Documents" in Section 1.01 is amended to 
read as follows:

         "'Loan Documents': This Agreement, the Letters of Credit, the Security
         Agreement, the Collateral Assignment, Debenture A, Debenture B,
         Debenture C, Debenture D, the Mortgage, the Letter of Credit
         applications delivered in connection with each request for the issuance
         of a Letter of Credit, the Guarantor Documents, and each other
         certificate or document delivered by any of the Loan Parties to the
         Agent, the Designated Issuer or any Bank prior to the date hereof
         pursuant to Article IV, any amendment to this Agreement or any other
         Loan Document, any waiver to this Agreement or any other Loan Document,
         and any other agreement, certificate or document delivered by any Loan
         Party to the Agent or any Bank which by its terms states that it is a
         Loan Document under this Agreement."

             C. The second sentence of Section 2.02(b)(i) is amended to read as
follows:


                                       2
<PAGE>   36
                        "(i) Borrowers shall deliver to the Agent irrevocable
         notice in the form of Exhibit A hereto, "Notice of Revolving Loan," not
         later than 11:00 a.m., New York time, at least (y) five (5) LIBO
         Business Days in advance if any portion of the Revolving Loan is to be
         a LIBO Rate Loan, and (z) three (3) Business Days in advance if any
         portion of the Revolving Loan is to be a Base Rate Loan."

                  D.    Section 2.02(c) is amended to read as follows:

                        "(c) Commitment Fee. Borrowers agree to pay to the Agent
         for the ratable account of the Banks (in accordance with their pro rata
         shares of the Revolving Commitment) a commitment fee on the average
         daily unused portion of the Revolving Commitment (i.e., the Revolving
         Commitment minus all outstanding Revolving Loans and the Letter of
         Credit Usage) from the date hereof until the Maturity Date at the rate
         of thirty-seven and one-half basis points (.375%) per annum, payable in
         arrears on the last day of each calendar quarter commencing the first
         such date occurring after the date of this Agreement, and on the
         Maturity Date."

                  E.    Section 2.02(d) is amended to read as follows:

                        "(d) Reduction of the Revolving Commitment. Borrowers 
         shall have the right, upon at least two (2) Business Days' notice to
         the Agent, to terminate in whole or reduce in part the Revolving
         Commitment, without premium or penalty, provided that (i) each partial
         reduction shall be in the aggregate amount of Five Million Dollars
         ($5,000,000) or an integral multiple of One Million Dollars
         ($1,000,000) in excess thereof and (ii) such reduction shall not reduce
         the Revolving Commitment to an amount less than the then outstanding
         principal amount of Revolving Loans plus the then outstanding Letter of
         Credit Usage on the effective date of the reduction."

                  F.    Section 2.03 is amended to read as follows:

                  "SECTION 2.03. Fees. From time to time, Loan Parties shall pay
         to the Agent and the Banks non-refundable fees in the amount agreed to
         separately between such parties."

                  G.    Section 2.04(a) is amended to read as follows:

                        "(a) Revolving Loans. The aggregate principal amount of
         the Revolving Loans outstanding on the Maturity Date, together with
         accrued interest thereon, shall be due and payable in full on the
         Maturity Date. If at any time the outstanding Borrowings under Section
         2.02 plus the Letter of


                                       3
<PAGE>   37
         Credit Usage exceed the lesser of (i) the Revolving Commitment then in
         effect or (ii) the Borrowing Base, Borrowers jointly and severally
         shall immediately repay the excess to the Agent for the ratable
         accounts of the Banks."

                  H.    Section 2.04(b) is amended to read as follows:

                        "(b) Term Loans. The aggregate principal amount of the
         Term Loans, together with interest thereon, shall be repaid in equal
         quarterly installments of Five Million Dollars ($5,000,000) each,
         beginning November 15, 1997 through May 15, 1999, and a final
         installment of Fifteen Million Dollars ($15,000,000) on the Maturity
         Date. All outstanding principal and interest on all Loans shall be due
         and payable on the Maturity Date."

                  I.    Clause (ii) of Section 2.07(f) is amended to read as 
follows:

                        "(ii) with respect to each Letter of Credit, a 
non-refundable Letter of Credit fee for the period from and including the date
of issuance of the Letter of Credit to and including the date such Letter of
Credit is drawn in full, expires or is terminated for the ratable benefit of the
Banks at the rate of one and three-quarters of one percent (1.75%) per annum of
the stated amount of the Letter of Credit, payable on the date of issuance of
the Letter of Credit for the period from the date of issuance to the last day of
the next occurring March, June, September and December, and thereafter payable
quarterly in arrears on the last day of each March, June, September and
December;"

                  J.    Section 3.04 is amended to read as follows:

                  "SECTION 3.04 Payments. Borrowers shall make each payment of
         principal, interest and fees hereunder, without setoff or counterclaim,
         not later than 11:00 a.m., New York time, on the day when due in lawful
         money of the United States of America to the account of the Agent
         designated on the signature pages hereof (or such other account as may
         be designated by the Agent) in immediately available funds. The Agent
         shall promptly pay to the applicable Lending Office of each Bank its
         pro rata share of each payment of principal, interest, and fees
         received by the Agent."

                  K.    Section 3.06 is amended to read as follows:

                  "If any Bank or the Issuing Bank shall have determined that
         any applicable law, regulation, rule or regulatory requirement
         ("Requirement") regarding capital adequacy, or any change therein, or
         any change in the interpretation or administration thereof by any
         governmental authority, central bank or comparable agency charged with
         the interpretation or administration thereof, or compliance by such
         Bank or the Issuing Bank with any request or


                                       4
<PAGE>   38
         directive regarding capital adequacy (whether or not having the force
         of law) of any such authority, central bank or comparable agency, in
         any such case, effective or announced after the date hereof, has or
         would have the effect of reducing the rate of return on that Bank's or
         the Issuing Bank's capital as a consequence of its Commitments and
         obligations hereunder and under the Loan Documents, the Letters of
         Credit issued hereunder or its obligation to purchase a participation
         in the Letters of Credit to a level below that which would have been
         achieved but for such Requirement, change or compliance (taking into
         consideration that Bank's or the Issuing Bank's, as the case may be,
         policies with respect to capital adequacy) by an amount deemed by that
         Bank or the Issuing Bank, as the case may be, to be material (which
         amount shall be determined by that Bank's or the Issuing Bank's, as the
         case may be, reasonable allocation of the aggregate of such reductions
         resulting from such events), then from time to time, within five (5)
         Business Days after demand by such Bank or the Issuing Bank, as the
         case may be, Borrowers jointly and severally agree to pay to that Bank
         or the Issuing Bank, as the case may be, such additional amount or
         amounts as will compensate that Bank or the Issuing Bank, as the case
         may be, for such reduction; provided, however, that Borrowers shall not
         be obligated to pay any Bank or the Issuing Bank, as the case may be,
         for any such additional amount incurred more than one hundred and
         eighty (180) days prior to the date of demand for payment by such Bank
         or the Issuing Bank, as the case may be; provided, further, however,
         that Borrowers shall not be obligated to pay any Bank or the Issuing
         Bank, as the case may be, for any additional amount otherwise payable
         pursuant to this Section 3.06 to the extent such amount is reflected in
         adjustments to the interest rates applicable to the Loans."

                  L.    The first sentence of Section 3.07(a) is amended to read
as follows:

                  "Whether or not the transactions contemplated hereby shall be
         consummated, each Loan Party jointly and severally agrees to indemnify,
         pay and hold the Agent, the Co-Agent, the Issuing Bank and each Bank,
         and the shareholders, officers, directors, Affiliates, employees and
         agents of the Agent, the Co-Agent, the Issuing Bank and
         each Bank (each, an "Indemnified Person"), harmless from and against
         any and all claims, liabilities, losses, damages, costs and expenses,
         including reasonable attorneys' fees and costs (including the
         reasonable estimate of the allocated cost of in-house legal counsel and
         staff) and including costs of investigation, document production,
         attendance at deposition or other discovery, that may be incurred by or
         asserted against any Indemnified Person, in each case arising out of or
         in connection with or by reason of, or in connection with the
         preparation for a defense of, any investigation, litigation or
         proceeding arising out of, related to or in connection with the
         transactions contemplated by this Agreement or any Loan Document or any
         contemplated use of the proceeds of the Loans, or the issuance of any


                                       5
<PAGE>   39
         Letter of Credit, whether or not an Indemnified Person is a party
         thereto (collectively, the "Indemnified Liabilities"), except to the
         extent that such Indemnified Liabilities result from the gross
         negligence or wilful misconduct of the Agent, the Co-Agent, the Issuing
         Bank or any Bank."

                  M.    The last sentence of Section 3.13(a) is amended to read 
as follows:

                  "If any Loan Party shall be required by law to deduct any
         Taxes from or in respect of any sum payable hereunder to any Bank, the
         Issuing Bank, the Co-Agent or the Agent, (i) the sum payable shall be
         increased as may be necessary so that after making all required
         deductions (including deductions applicable to additional sums payable
         under this Section 3.13) such Bank, the Issuing Bank, the Co-Agent or
         the Agent, as the case may be, receives an amount equal to the sum it
         would have received had no such deductions been made, (ii) such Loan
         Party shall make such deductions and (iii) such Loan Party shall pay
         the full amount deducted to the relevant taxation authority or other
         authority in accordance with applicable law; provided that any Loan
         Party shall not be required pursuant to clause (i) above to increase
         the sum payable to any Bank, the Issuing Bank, the Co-Agent or the
         Agent organized under the laws of a jurisdiction outside of the United
         States if such Bank, the Issuing Bank, the Co-Agent or the Agent, as
         the case may be, shall have failed to provide either the forms or
         documents referred to in Section 3.13(e) indicating exemption from (or
         reduction via applicable tax treaty of) Singapore withholding tax."

                  N.    A new Section 3.13(g) is added to the Credit Agreement,
as follows:

                  "(g) Indemnities. Without limiting the generality of Section
         3.13 and for the avoidance of doubt, the Loan Parties jointly and
         severally agree to indemnify each Bank, the Issuing Bank, the Co-Agent
         and the Agent against all penalties, fines, costs or other expenses
         howsoever suffered or incurred by any Bank, the Issuing Bank, the Co-
         Agent or the Agent arising out of or in connection with any Loan
         Documents or amendments from time to time made to this Agreement
         (including any non-compliance by such Bank, the Issuing Bank, the
         CoAgent or the Agent with any taxation or other laws or regulations of
         the State of California or any other jurisdiction) except for any
         penalties, fines, costs or other expenses suffered or incurred on
         account of (i) any gross negligence or wilful misconduct of such Bank,
         the Issuing Bank, the Co-Agent or the Agent, or (ii) failure by any
         Bank, the Issuing Bank, the Co-Agent or the Agent organized under the
         laws of a jurisdiction outside of the United States to provide either
         the forms or documents referred to in Section 3.13(e) indicating
         exemption from (or reduction via applicable tax treaty of) Singapore
         withholding tax."


                                       6
<PAGE>   40
                  O.    Section 3.14 is amended to read as follows:

                  "SECTION 3.14. Sharing of Payments, Etc. If any Bank shall
         obtain any payment (whether voluntary, involuntary, through the
         exercise of any right of set-off, or otherwise) on account of the
         obligations of the Loan Parties under the Loan Documents, including
         reimbursement or other payment under any Letter of Credit Agreement, in
         excess of its ratable share of payments on account of all obligations
         of the Loan Parties under the Loan Documents obtained by all the Banks,
         then such Bank shall forthwith purchase from the other Banks such
         participations in the Loans owing to them as shall be necessary to
         cause such purchasing Bank to share the excess payment ratably with
         each of them; provided, however, that if all or any portion of such
         excess payment is thereafter recovered from such purchasing Bank, such
         purchase from each Bank shall be rescinded and such Bank shall repay to
         the purchasing Bank the purchase price to the extent of such recovery
         together with an amount equal to the Bank's ratable share (according to
         the proportion of (i) the amount of such Bank's required repayment to
         (ii) the total amount so recovered from the purchasing Bank) of any
         interest or other amount paid or payable by the purchasing Bank in
         respect of the total amount so recovered. Borrowers agree that any Bank
         so purchasing a participation from another Bank pursuant to this
         Section 3.14 or any other provision of this Agreement may, to the
         fullest extent permitted by law, exercise all of its rights of payment
         (including the right to set-off) with respect to such participation as
         fully as if such Bank were the direct creditor of Borrowers in the
         amount of such participation."

                  P.    Section 7.01(a) is amended to read as follows:

                  "(a) Any Loan Party shall fail to pay any installment of the
         principal when due hereunder or under any Loan Document, or shall fail
         to pay any installment of interest within three (3) Business Days of
         the date when due hereunder or under any Loan Document, or shall fail
         to pay any other amount payable within five (5) Business Days of the
         date when due hereunder or under any Loan Document."

                  Q.    The Notice Address for STORMEDIA INCORPORATED, as 
Guarantor, as set forth in the signature pages, is amended to read as follows:

                            "385 Reed Street
                            Santa Clara, CA 95050

                            Telephone: (408) 988-1409
                            Telephone: (408) 727-4928
                            Attention: Chief Financial Officer"


                                       7
<PAGE>   41
                  R.    The Attention line of the Notice Address for BANQUE
NATIONALE DE PARIS, Singapore Branch, on the appropriate signature page, is
amended to read as follows:

                           "Attention: Mr. Andre Luu"

                  S.    Annex I is amended in its entirety to read as shown in 
the attachment marked as ANNEX I attached hereto.

                  T.    Annex II is amended in its entirety to read as shown in
the attachment marked as ANNEX II attached hereto.

                  U.    Exhibit E [Form of Compliance Certificate] is amended in
its entirety to read as shown in the attachment marked as EXHIBIT E attached
hereto.

Section 2.  AMENDMENTS TO THE SECURITY AGREEMENT.

         The Security Agreement is hereby amended as follows:

         A.       Section 2 is amended to read as follows:

                  "SECTION 2. Security for Obligations. This Agreement secures,
         and the Collateral is collateral security for, the prompt payment or
         performance in full when due, whether at stated maturity, by required
         prepayment, declaration, acceleration, demand or otherwise, of all
         obligations and liabilities of every nature of any Borrower or
         Borrowers or the Guarantor, now or hereafter existing, under or arising
         out of or in connection with the Credit Agreement, any Loan Documents
         (as defined in the Credit Agreement) or otherwise, and all extensions
         or renewals thereof, whether for principal, interest, fees, expenses,
         indemnities or otherwise, whether voluntary or involuntary, direct or
         indirect, absolute or contingent, liquidated or unliquidated, whether
         or not jointly owed with others, and whether or not from time to time
         decreased or extinguished and later increased, created or incurred, and
         all or any portion of such obligations or liabilities that are paid, to
         the extent all or any part of such payment is avoided or recovered
         directly or indirectly from Agent or a Bank as a preference, fraudulent
         transfer or otherwise (all such obligations and liabilities being the
         "Underlying Debt"), and all obligations of every nature of any Borrower
         or Borrowers now or hereafter existing under this Agreement (all such
         obligations, together with the Underlying Debt, being the "Secured
         Obligations")."

Section 3.  AMENDMENTS TO THE GUARANTOR'S SECURITY AGREEMENT.

         The Guarantor's Security Agreement is hereby amended as follows:


                                       8
<PAGE>   42
A.       Section 2 is amended to read as follows:

                  "SECTION 2. Security for Obligations. This Agreement secures,
         and the Collateral is collateral security for, the prompt payment or
         performance in full when due, whether at stated maturity, by required
         prepayment, declaration, acceleration, demand or otherwise, of all
         obligations and liabilities of every nature of Guarantor now or
         hereafter existing, under or arising out of or in connection with the
         Credit Agreement, any Loan Documents (as defined in the Credit
         Agreement) or otherwise, and all extensions or renewals thereof,
         whether for principal, interest, fees, expenses, indemnities or
         otherwise, whether voluntary or involuntary, direct or indirect,
         absolute or contingent, liquidated or unliquidated, whether or not
         jointly owed with others, and whether or not from time to time
         decreased or extinguished and later increased, created or incurred, and
         all or any portion of such obligations or liabilities that are paid, to
         the extent all or any part of such payment is avoided or recovered
         directly or indirectly from Agent or a Bank as a preference, fraudulent
         transfer or otherwise (all such obligations and liabilities being the
         "Underlying Debt"), and all obligations of every nature of Guarantor
         now or hereafter existing under this Agreement (all such obligations,
         together with the Underlying Debt, being the "Secured Obligations").

Section 4. AMENDMENTS TO THE STRATES PTE. COLLATERAL ASSIGNMENT.

         The Strates Pte. Ltd. Collateral Assignment is hereby amended as 
follows:

A.       The introductory clause of Section 1 is amended to read as follows:

                  "1.      Assignment, Patent Mortgage and Grant of Security
         Interest.  As collateral security for the prompt and complete payment
         and performance of all of Assignor's or Guarantor's (as Guarantor is
         defined in the Credit Agreement) present or future indebtedness,
         obligations and liabilities to Assignee, Assignor hereby assigns,
         transfers, conveys and grants a security interest and mortgage to
         Assignee, as security, in and to Assignor's entire right, title and
         interest in, to and under the following (all of which shall
         collectively be called the "Collateral"):"

Section 5. AMENDMENTS TO THE STORMEDIA INTERNATIONAL, LTD. COLLATERAL 
ASSIGNMENT.

         The StorMedia International, Ltd. Collateral Assignment is hereby 
amended as follows:

A.       The introductory clause of Section 1 is amended to read as follows:


                                       9
<PAGE>   43
                  "1. Assignment, Patent Mortgage and Grant of Security
         Interest. As collateral security for the prompt and complete payment
         and performance of all of Assignor's or Guarantor's (as Guarantor is
         defined in the Credit Agreement) present or future indebtedness,
         obligations and liabilities to Assignee, Assignor hereby assigns,
         transfers, conveys and grants a security interest and mortgage to
         Assignee, as security, in and to Assignor's entire right, title and
         interest in, to and under the following (all of which shall
         collectively be called the "Collateral"):"

Section 6. CONDITIONS TO EFFECTIVENESS.

                  This Amendment shall become effective as of January 24, 1997
(the "Closing Date"), only upon:

                  (i) receipt by the Agent of the following (each of which shall
be in form and substance satisfactory to the Agent and its counsel, with
sufficient copies for each of the Banks):

                      (a) counterparts of this Amendment duly executed on behalf
of the Borrowers, the Guarantor, the Agent, the Designated Issuer, and each of
the Banks, and the consent by the Guarantor;

                      (b) copies of resolutions of the Board of Directors or
other authorizing documents of each of the Loan Parties, approving the Amended
Agreement (as defined below);

                      (c) favorable opinions of counsel to Loan Parties, as to
such other matters as any Bank may reasonably request, dated as of the effective
date of this Amendment; and

                  (ii) completion of such other matters (including the due
execution of Forms 33 and 34 in relation to the relevant Loan Documents) and
delivery of such other agreements, documents and certificates as any Bank
through the Agent may reasonably request.

Section 7. THE LOAN PARTIES' REPRESENTATIONS AND WARRANTIES.

                  In order to induce the Banks to enter into this Amendment, the
Loan Parties represent and warrant to the Agent and each Bank that after giving
effect to this Amendment the following statements are true, correct and
complete:

                  A. Corporate Power and Authority. Each Loan Party has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
the Credit Agreement as


                                       10
<PAGE>   44
amended by this Amendment (the "Amended Agreement"). The Articles of
Incorporation and Bylaws of each Loan Party have not been amended since the
copies previously delivered to the Agent or Banks.

                  B. Authorization of Agreements. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of each Loan Party.

                  C. No Conflict. After giving effect to the items described in
Section 2 of this Amendment, the execution and delivery by each Loan Party of
this Amendment do not and will not contravene (i) any law or any governmental
rule or regulation applicable to any Loan Party or any of their Subsidiaries,
(ii) the Articles of Incorporation or Bylaws of any Loan Party, (iii) any order,
judgment or decree of any court or other agency of government binding on any
Loan Party or any of their Subsidiaries, or (iv) any material agreement or
instrument binding on any Loan Party or any of their Subsidiaries.

                  D. Governmental Consents. The execution and delivery by each
Loan Party of this Amendment and the performance by each Loan Party of the
Amended Agreement do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal, state or
other governmental authority or regulatory body.

                  E. Binding Obligation. This Amendment and the Amended
Agreement have been duly executed and delivered by each Loan Party and are the
binding obligations of each Loan Party, enforceable against each Loan Party in
accordance with their respective terms, except in each case as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and
equitable principles relating to or affecting creditors' rights.

                  F. Incorporation of Representations and Warranties From Credit
Agreement and Security Agreement. The representations and warranties contained
in Article V of the Credit Agreement are and will be true, correct and complete
in all material respects on and as of the Closing Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.

                  G. Absence of Default. No event has occurred and is continuing
or will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.

Section 8.  MISCELLANEOUS.


                                       11
<PAGE>   45
                  A.    Reference to and Effect on the Credit Agreement and the
Other Loan Documents.

                  (i)   On and after the Closing Date, each reference in the
         Credit Agreement to "this Agreement", "hereunder", "hereof", "herein"
         or words of like import referring to the Credit Agreement, and each
         reference in the other Loan Documents to the "Credit Agreement,"
         "thereunder", "thereof" or words of like import referring to the Credit
         Agreement, shall mean and be a reference to the Amended Agreement.

                  (ii)  Except as specifically amended by this Amendment, the
         Credit Agreement and the other Loan Documents shall remain in full
         force and effect and are hereby ratified and confirmed.

                  (iii) The execution, delivery and performance of this
         Amendment shall not, except as expressly provided herein, constitute a
         waiver of any provision of, or operate as a waiver of any right, power
         or remedy of the Agent or any Bank under the Credit Agreement or any of
         the other Loan Documents.

                  B.    Fees and Expenses. All expenses, including, but not 
limited to, reasonable attorneys' fees, incurred by Agent and Banks in the
preparation and implementation of this Amendment and the Guarantor Documents
constitute costs and expenses in connection with the amendment and restructuring
of the Loan Documents and as such are payable by the Loan Parties in accordance
with Section 9.05 of the Credit Agreement.

                  C.    Headings. Section and subsection headings in this 
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.

                  D.    Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

                  E.    Counterparts. This Amendment may be executed in any 
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document.


                                       12
<PAGE>   46
                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.


                                STORMEDIA INTERNATIONAL, LTD., as Borrower



                                By: /s/ STEPHEN M. ABELY
                                   ---------------------------------------------

                                Title:  Secretary
                                      ------------------------------------------



                                STRATES PTE. LTD., as Borrower



                                By: /s/ WILLIAM J. ALMON
                                   ---------------------------------------------

                                Title:  Director
                                      ------------------------------------------




                                StorMedia Incorporated hereby agrees and
                                consents to the foregoing Amendment and
                                the related documentation, and confirms
                                and ratifies its guaranty of the obligations
                                of Borrowers under the Credit Agreement
                                (as defined in the foregoing Amendment).

                                STORMEDIA INCORPORATED, as Guarantor



                                By:  /s/ WILLIAM J. ALMON
                                   ---------------------------------------------

                                Title: Chairman
                                      ------------------------------------------



                                       S-1
<PAGE>   47
                                        CANADIAN IMPERIAL BANK OF
                                        COMMERCE, New York Agency, as
                                        Agent


                                        By: /s/ ILLEGIBLE
                                           --------------------------------
                                        Title:


                                       S-2
<PAGE>   48

                                        BANQUE NATIONALE DE PARIS,
                                        San Francisco Branch, as Co-Agent


                                        By: /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: V.P.
                                              -----------------------------


                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: V.P.
                                              -----------------------------


                                       S-3
<PAGE>   49

                                        DESIGNATED ISSUER:

                                        CANADIAN IMPERIAL BANK OF
                                        COMMERCE, Singapore Branch

                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: V.P.
                                              -----------------------------


                                       S-4
<PAGE>   50

                      [THIS PAGE INTENTIONALLY LEFT BLANK]


                                       S-5
<PAGE>   51

                                        CIBC [Asia] LTD.


                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: V.P.
                                              -----------------------------


                                       S-6

<PAGE>   52

                                        BANQUE NATIONALE DE PARIS,
                                        Singapore Branch


                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                       S-7
<PAGE>   53

                                        FLEET NATIONAL BANK


                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                       S-8
<PAGE>   54

                                        SANWA BANK CALIFORNIA


                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                       S-9
<PAGE>   55

                                        UNION BANK OF CALIFORNIA, N.A.


                                        By: /s/ illegible
                                           --------------------------------
                                        Title:  Vice President
                                              -----------------------------


                                      S-10
<PAGE>   56

                                     ANNEX I
                     FINANCIAL INSTITUTIONS AND COMMITMENTS

<TABLE>
<CAPTION>
                               TOTAL                              REVOLVING                      
BANK                           TERM COMMITMENT                    COMMITMENT                 COMMITMENT
<S>                            <C>                                <C>                        <C>           
CIBC [Asia] Ltd.               $13,333,333.33                     $6,666,666.67              $20,000,000.00



Banque Nationale               $10,000,000.00                     $5,000,000.00              $15,000,000.00
de Paris

Fleet National                 $10,000,000.00                     $5,000,000.00              $15,000,000.00
Bank

Sanwa Bank                     $10,000,000.00                     $5,000,000.00              $15,000,000.00
California

Union Bank of                  $ 6,666,666.67                     $3,333,333.33              $10,000,000.00
California, N.A.
</TABLE>


                                    ANNEX I-1
<PAGE>   57

                                    ANNEX II
                                 LENDING OFFICES

<TABLE>
<CAPTION>
BANK                            BASE RATE LOANS                 LIBO RATE LOANS                 LETTERS OF CREDIT
----                            ---------------                 ---------------                 -----------------
<S>                             <C>                             <C>                             <C>
CIBC [Asia] Ltd.                CIBC [Asia] Ltd.                CIBC [Asia] Ltd.                Canadian Imperial
                                                                                                Bank of Commerce,
                                                                                                Singapore Branch

Banque Nationale                BNP, Singapore                  BNP, Singapore                  BNP, Singapore
de Paris                        Branch                          Branch                          Branch

Fleet National                  Fleet National                  Fleet National                  Fleet National
Bank                            Bank (Boston)                   Bank (Boston)                   Bank (Boston)

Sanwa Bank                      Sanwa Bank                      Sanwa Bank                      Sanwa Bank
California                      California (SJ)                 California (SJ)                 California (SJ)

Union Bank of                   Union Bank of                   Union Bank of                   Union Bank of
California, N.A.                California, N.A.                California, N.A.                California, N.A.
                                (SF)                            (SF)                            (SF)
</TABLE>


                                   ANNEX II-1
<PAGE>   58

                                    EXHIBIT E

                        [FORM OF COMPLIANCE CERTIFICATE]
                             COMPLIANCE CERTIFICATE


                  1.       This Compliance Certificate ("Compliance
Certificate") is executed and delivered by StorMedia Incorporated, a Delaware
corporation, to Canadian Imperial Bank of Commerce, New York Agency (the
"Agent") pursuant to Section 6.01(a)(iii) of the Credit Agreement, dated as of
August 23, 1996, (as amended from time to time the "Agreement") among Borrowers,
Guarantor, the financial institutions named therein and the Agent. Any terms
used herein and not defined herein shall have the meanings defined in the
Agreement. This Compliance Certificate covers the Loan Parties':

                  Fiscal quarter ended ___________________________ , 199__
                  Fiscal year ended ___________________________ , 199__

                  2.       The following paragraphs set forth calculations in
compliance with obligations pursuant to Sections 6.02(a), (b), (c), (d), (e),
(f) and (l) of the Agreement, as of the end of the applicable fiscal period set
forth in paragraph 1 hereof.


I.       Quick Ratio (Sec. 6.02(a)):


         (a)      Consolidated Quick Assets       $__________
                                                  -

         (b)      Consolidated Current
                  Liabilities                     $__________
                                                  -

                  Quick Ratio (a:b)               ___________

         Minimum Permitted Quick Ratio      1.10 to 1.00 for each fiscal quarter

II.      Consolidated Tangible Net Worth (Sec. 6.02(b))

         1.       Consolidated Tangible Net
                  Worth                           $__________

                  Required                        greater than or equal to
                                                  $152,000,000


                                      E-1
<PAGE>   59

         2.       (a)      $152,000,000 plus

                  (b)      85% of Consolidated
                           Net Income (but not
                           loss) for each fiscal
                           quarter of the Loan
                           Parties commencing
                           with the quarter
                           ending  September
                           30, 1996               $__________

                  (c)      100% of the increase
                           in Consolidated
                           Tangible Net Worth
                           occurring after June
                           30, 1996 resulting
                           from an Equity
                           Issuance after
                           September 30, 1996

                                                  $__________

                  Minimum Required Consolidated
                  Tangible Net Worth              ((a) + (b) + (c))   $_________

         3.       Actual Consolidated Tangible Net Worth         $__________

III.     Leverage Ratio (Sec. 6.02(c)):

         (a)      Consolidated Liabilities        $__________
                                                  -

         (b)      Consolidated Tangible Net
                  Worth (same as II (3) above)    $__________
                                                  -

         Leverage Ratio (a:b) __________

         Maximum Permitted    0.75 to 1.00 for each fiscal quarter


                                      E-2
<PAGE>   60

IV.      Consolidated Net Income (Sec. 6.02(d)):

         (a)      Consolidated Net Income
                  during the most recent
                  fiscal quarter of the Loan
                  Parties                         $__________
                                                  -

         (b)      Consolidated Net Income
                  during the fiscal quarter of
                  the Loan Parties preceding
                  the most recent fiscal
                  quarter of the Loan Parties     $__________
                                                  -

                  Required:        greater than $0 for any two fiscal quarters
                                   in any four consecutive fiscal quarter period

V.       Operating Performance Ratio (Sec. 6.02(e)):

         (a)      Annualized Consolidated
                  Cash Flow for the Loan
                  Parties and their
                  Subsidiaries for the most
                  recent fiscal quarter ending    $__________
                                                  -

         (b)      Quarterly Interest plus the
                  greater of:                     $__________
                                                  -

                  (i)      current portion of
                           long term debt

                  (ii)     $20,000,000 plus       $__________
                           outstanding Revolving  -
                           Loans $__________

         Operating Performance Ratio (4xa:b) $__________


         Required:

                  Quarter Ending                              Ratio


                                      E-3
<PAGE>   61

                  September 30, 1996                          1.50 to 1.00
                  December 31, 1996                           1.50 to 1.00
                  March 31, 1997                              1.50 to 1.00
                  June 30, 1997                               1.75 to 1.00
                  September 30, 1997                          2.00 to 1.00
                  December 31, 1997                           2.25 to 1.00
                  March 31, 1998 and thereafter               3.00 to 1.00


VI.      Debt (Sec. 6.02(g)(iii)):                               $__________

         Permitted                           Up to $20,000,000


VII.     Consolidated Capital Expenditures (Sec. 6.02(l)):

         (a)      Consolidated Capital Expenditures         $__________
                  in most recent fiscal year

         Permitted

         Fiscal Year Ending         Amount

<TABLE>
<S>                                 <C>         
         1996                       $100,000,000
         1997                       $100,000,000
         1998                       $ 75,000,000
         1999                       $ 75,000,000
</TABLE>

         (b)      Consolidated Capital Expenditures         $__________
                  in most recent fiscal quarter

         Permitted

         not more than 40% of the total amount permitted in any fiscal year
         shall be spent in any fiscal quarter of that year


         3.       The undersigned has reviewed the terms of the Agreement and
has made, or caused to be made under his/her supervision, a review in reasonable
detail of the transactions and condition of Loan Parties and their Subsidiaries
during the fiscal period covered by this Compliance Certificate. The undersigned
does not (either as a result of such review or otherwise) have any knowledge of
the existence as of the 


                                      E-4
<PAGE>   62
date of this Compliance Certificate of any condition or event that constitutes
an Event of Default or a Potential Event of Default, with the exceptions set
forth below, in response to which Loan Parties are taking or proposes to take
the following actions (if none, so state):

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


                                      E-5
<PAGE>   63

         4.       This Compliance Certificate is executed on __________ , 199_,
by the Chief Executive Officer, Chief Financial Officer, Treasurer or Controller
of Guarantor. The undersigned hereby certifies that each and every matter
contained herein is derived from the Loan Parties' books and records and is, to
the best knowledge of the undersigned, true and correct.


                                        StorMedia Incorporated,
                                        a Delaware corporation


                                        By:________________________________

                                        Title:_____________________________


                                      E-6
<PAGE>   64
                               INTERBANK AGREEMENT

         This Interbank Agreement (this "Agreement") is made as of January 24,
1997 by and among Canadian Imperial Bank of Commerce, New York Agency (the
"Agent"), Banque Nationale de Paris, San Francisco Branch (the "Co-Agent"),
Canadian Imperial Bank of Commerce, Singapore Branch (the "Designated Issuer")
and each of the Banks listed on the signature pages hereof (each, a "Bank" and
collectively, the "Banks"), and CIBC [Asia] Ltd., as assuming bank (the
"Assuming Bank"), and is acknowledged and agreed to by StorMedia International,
Ltd. and Strates Pte. Ltd., (the "Borrowers") and StorMedia Incorporated (the
"Guarantor"). Capitalized terms used in this Agreement without definition shall
have the respective meanings assigned to such terms, whether directly or
indirectly by reference, in the Credit Agreement (as defined below), and the
"Other Definitional Provisions" in Section 1.02 of the Credit Agreement shall
likewise govern this Agreement.

                                    RECITALS

         A.       WHEREAS, the Agent, the Co-Agent, the Banks, the Borrowers and
the Guarantor have entered into that certain Credit Agreement dated as of August
23, 1996 as amended by that certain First Amendment and Limited Waiver dated as
of September 30, 1996, and are concurrently herewith entering into a Second
Amendment to Credit Agreement and First Amendment to Certain Security Documents
(as so amended, the "Credit Agreement") and certain related documents.

         B.       WHEREAS, pursuant to the Credit Agreement and subject to the
terms and conditions thereof, Banks have agreed to make loans to, and issue
letters of credit for the benefit of, Borrowers, and Guarantor has agreed to
guarantee the obligations of Borrowers under the Loan Documents.

         C.       WHEREAS, the Borrowers and the Guarantor have requested that
the parties set forth terms whereby some Banks will issue letters of credit for
the account of the Guarantor and for the benefit of the Assuming Bank (the
"L/Cs"); and that the Assuming Bank will agree to fund certain loans on behalf
of each of those Banks.

         D.       WHEREAS, the Guarantor has agreed to (i) to cause L/Cs to be
issued and (ii) to repay amounts drawn under the L/Cs.

         E.       WHEREAS, the Banks and the Assuming Bank are willing to agree
to the Borrowers' and Guarantor's requests, provided that the parties set forth
certain respective rights and duties with respect to the L/Cs and the ratable
sharing of amounts collected from Borrowers and Guarantor under the Credit
Agreement and the Loan Documents.

         F.       WHEREAS, the Borrowers and the Guarantor are willing to
acknowledge and agree to the arrangements among the Banks and the Assuming Bank
set forth in this Agreement.

<PAGE>   65

         NOW, THEREFORE, in consideration of the mutual promises and agreements
contained in this Agreement, the parties hereto agree as follows:

                                    AGREEMENT

         1.       Defined Terms. As used in this Agreement, the following terms
have the following meanings:

         "Aggregate Assumed Funding Amount": The aggregate amount of all Loans
funded by the Assuming Bank.

         "Assumed Funding Amount": As to any Loan, the amount of each L/C Bank's
pro rata share of such Loan funded by the Assuming Bank.

         "Assuming Bank": CIBC [Asia] Ltd., in its capacity as Assuming Bank
under this Agreement.

         "BNP": Banque Nationale de Paris, Singapore Branch.

         "Collateral": As defined in the Security Agreement.

         "Cost of Funds": As to any Loan, (i) with respect to LIBO Rate Loans,
the LIBO Rate, and (ii) with respect to Base Rate Loans, the interest rate per
annum quoted by the Assuming Bank as its cost of funds at the time of the
requested Loan.

         "Fleet": Fleet National Bank.

         "Funding Banks": BNP and CIBC [Asia] Ltd., each in its capacity as a
funding bank under this Agreement.

         "Funding Date: The date established by the Agent and communicated to
the other parties hereto as the Funding Date.

         "L/C": A letter of credit issued by an L/C Bank in an amount equal to
its pro rata share of the Term Commitment, in favor of the Assuming Bank, in
substantially the form attached hereto as Exhibit B.

         "L/C Bank": Sanwa, Union, and Fleet, each of which will issue an L/C in
accordance with the terms of this Agreement. The term "L/C Bank" shall also
apply to any purchasers from and successors and assigns of Sanwa, Union and
Fleet which issue an L/C in accordance with the terms of this Agreement.

         "L/C Fee": The fee payable for the account of the L/C Banks as
described in Section 3(a) hereof.


                                       2
<PAGE>   66

         "Letter of Credit Agreement": A Letter of Credit Agreement among an L/C
Bank, the Guarantor and the Agent, in substantially the form attached hereto as
Exhibit A.

         "Sanwa": Sanwa Bank California.

         "Side Letter": That certain letter agreement dated as of the date
hereof, executed by Borrowers and Guarantor, and accepted and agreed to by the
parties hereto.

         "Union": Union Bank of California, N.A.

         2.       LOANS, LETTERS OF CREDIT AND L/Cs.

                  (a)      L/C Banks, Funding Banks, and Assuming Bank. Sanwa,
Union and Fleet each agree to act as an L/C Bank with respect to the Term Loan
on the terms and conditions set forth herein, and will fund Revolving Loans or
unreimbursed drawings on Letters of Credit subject to the terms and conditions
of the Credit Agreement. BNP and CIBC [Asia] Ltd. each agree to act as a Funding
Bank with respect to the Term Loan, and will fund Loans or unreimbursed drawings
on Letters of Credit subject to the terms and conditions of the Credit
Agreement. CIBC [Asia] Ltd. agrees to act as the Assuming Bank for the L/C Banks
for the Term Loan, on the terms and conditions set forth herein. On the Funding
Date, (i) each L/C Bank shall enter into a separate Letter of Credit Agreement
with the Guarantor and the Agent substantially in the form attached as Exhibit A
hereto and (ii) each L/C Bank shall issue its L/C in substantially the form
attached as Exhibit B hereto. Each L/C shall cover only the payment of principal
(and not interest) of the Term Loan. The parties agree that the issuance by each
L/C Bank of its L/C on the terms set forth herein and other provisions of the
L/Cs as described herein, together with the funding of the Term Loan (by the
Assuming Bank or otherwise), shall satisfy such L/C Bank's Commitment under the
Credit Agreement to make the Term Loan under the Credit Agreement, for all
purposes of the Loan Documents. The parties further agree that each L/C Bank
shall constitute a "Bank" (as defined in the Credit Agreement) for all purposes
of the Loan Documents, and that each L/C Bank is entitled to all of the rights,
benefits, protections, and privileges of a Bank under the Loan Documents.

                  (b)      The Term Loan.

                           (i)      Not later than 11:00 a.m., New York time, on
the Funding Date, (x) the Assuming Bank shall deposit immediately available
funds in the amount of the Aggregate Assumed Funding Amount of the Term Loan to
the account of the Agent set forth on the signature pages of the Credit
Agreement, or such other account as the Agent may designate in writing to the
Assuming Bank; and (y) each L/C Bank shall issue and deliver to the Assuming
Bank its L/C in the principal amount of such L/C Bank's pro rata share of the
Term Loan. Not later than 2:00 p.m., New York time, on the Funding Date, the
Agent shall distribute to the L/C Banks in accordance with their pro rata shares
of the outstanding Term Loan, the Aggregate Assumed Funding Amount of the Term
Loan.


                                       3
<PAGE>   67

                           (ii)     Demands for payments under each L/C shall
not in the aggregate exceed the Effective Stated Amount. The Effective Stated
Amount of an L/C Bank's L/C shall at all times be equal to its respective pro
rata share of the Term Loan then outstanding. The "Effective Stated Amount" of
each L/C initially shall be equal to each L/C Bank's respective pro rata share
of the outstanding Term Loan, and shall be reduced thereafter as follows: (i)
each drawing made under each L/C shall automatically and permanently reduce the
Effective Stated Amount of each L/C by the amount of the drawing; (ii) the
Effective Stated Amount of each L/C shall be permanently reduced by the amount
of any regularly scheduled payment of principal paid to the Agent for the
benefit of the Assuming Bank and applied to the outstanding principal portion of
each L/C Bank's respective pro rata share of the Term Loan; and (iii) the
Effective Stated Amount of each L/C shall be permanently reduced by the amount
of any mandatory or voluntary prepayment made by or on behalf of Borrowers and
paid to the Agent for the benefit of the Assuming Bank and applied towards the
principal of each L/C Bank's respective pro rata share of the Term Loan. The
Effective Stated Amount of the L/Cs once reduced shall not be reinstated for any
reason.

         3.       Fees and Interest.

                  (a)      L/C Fees and Interest. Guarantor will pay to the
Agent, for the benefit of each L/C Bank (ratably in accordance with the
Effective Stated Amount of their respective L/Cs), in arrears on each Interest
Payment Date, an L/C Fee equal to one and three-quarters percent (1.75%) on the
average daily balance of the Effective Stated Amount of the L/Cs. Borrowers'
obligation to pay interest on the Loans as provided in Section 2.05 of the
Credit Agreement shall only apply to (i) the principal amount of Term Loans
funded by the Funding Banks and (ii) the principal amount of all Revolving
Loans.

                  (b)      Cost of Funds. Borrowers will pay to the Agent, for
the benefit of the Assuming Bank, in arrears on each Interest Payment Date, the
Assuming Bank's Cost of Funds on the average daily balance of the Aggregate
Assumed Funding Amount.

                  (c)      Administrative Fee. Guarantor will pay to the Agent,
for the benefit of the Assuming Bank, in arrears on each Interest Payment Date,
an administrative fee equal to twenty basis points on the average daily balance
of the aggregate Effective Stated Amount of all L/Cs outstanding during that
period.

                  (d)      Payment of Interest on Funding Date. It shall be a
condition precedent to the funding of the Term Loan as provided for under
Section 2 hereof, that Borrowers shall pay to the Agent, for the benefit of the
Banks, on the Funding Date, all accrued and unpaid interest on the Term Loan to
the Funding Date.

         4.       Drawings. Upon the failure by Borrowers to make a required
principal payment (whether scheduled, following notice of prepayment, upon
acceleration or otherwise) under the Credit Agreement with respect to the Term
Loan, which failure results in an Event of Default as defined in the Credit
Agreement, or upon the commencement of a proceeding relating to


                                       4
<PAGE>   68

bankruptcy, insolvency, reorganization, or relief of debtors in respect of one
or more of the Loan Parties, which has resulted in an Event of Default as
defined in the Credit Agreement, the Agent shall notify the Assuming Bank of
such Event of Default not later than 1:00 p.m., New York time, on the date such
Event of Default occurs, and the Assuming Bank may draw on the L/Cs in such
amounts as are allowed therein.

         5.       Payments.

                  (a)      Payments under Credit Agreement and Loan Documents.
All payments from the Loan Parties under the Credit Agreement or other Loan
Documents shall be made to the Agent. In the event any Bank shall receive any
payment directly from any of the Loan Parties, such payment shall be delivered
to Agent in the original form as received. The Agent shall distribute and apply
all payments received from the Loan Parties under the Credit Agreement and other
Loan Documents as follows:

                           (i)      If a payment received by the Agent is in the
exact amount due according to the records of the Agent such that upon
distribution of such payment to the Assuming Bank, the Funding Banks, or other
Banks, as the case may be, no amount will remain due and owing to such Assuming
Bank, Funding Banks or other Banks under any of the Loan Documents, the Agent
shall distribute and apply the payment in accordance with the terms of the Loan
Documents.

                           (ii)     If a payment received by the Agent is in an
amount other than the exact amount due according to the records of the Agent,
notwithstanding any provision in the Security Agreement or other Loan Document
to the contrary, the Agent shall distribute and apply such payment as follows:

                                    1.       Such payment shall first be applied
to interest, L/C Fees, Cost of Funds and principal then due and payable, and
distributed to the Banks, the Assuming Bank, and the Funding Banks, as
applicable, ratably in accordance with the amounts of interest, L/C Fees, Cost
of Funds and principal then due and payable to each such Bank, Assuming Bank or
Funding Bank. Principal payments shall be distributed to the Assuming Bank, the
Funding Banks or other Banks ratably in accordance with the outstanding amount
of the Loans funded by each of the Assuming Bank, the Funding Banks or other
Banks. For purposes of this Section, payments by L/C Banks of drawings made on
L/Cs shall constitute "funding" of Loans to the extent of such payments, and
payments received by the Assuming Bank from drawings made on L/Cs shall be
deducted from the amount of Loans funded by the Assuming Bank.

                                    2.       The remainder of such payment shall
then be applied to Letter of Credit Fees, Administrative Fees, Commitment Fees
and Agent fees then due and payable, and distributed to the Banks, Assuming
Bank, and Agent, as applicable, ratably in accordance with the amounts of
Administrative Fees, Commitment Fees and Agent fees then due and payable to each
such Bank, Assuming Bank or Agent.


                                       5
<PAGE>   69

                                    3.       The remainder of such payment shall
then be applied to other fees, expenses, and other amounts then due and payable,
and distributed to such Banks or other parties that are owed such amounts, as
determined by Agent.

                  (b)      Sharing of Payments. For the purposes of Section 3.14
of the Credit Agreement, the obligations of the Loan Parties under the Loan
Documents shall include (i) the obligation of the Guarantor to reimburse each
L/C Bank for amounts drawn under the L/Cs and (ii) the obligation of the
Guarantor to pay L/C Fees to the L/C Banks.

                  (c)      Majority Banks. For purposes of determining the
"Majority Banks" under the Credit Agreement, the Effective Stated Amount under
each L/C Bank's issued L/C shall be deemed to constitute "Loans" by such L/C
Bank. CIBC [Asia] Ltd., in its capacity as the Assuming Bank, shall not be
considered a "Bank" under the Credit Agreement except as expressly provided in
this Agreement.

                  (d)      Returned Payments. If any payment received by the
Agent or any Bank and paid over, distributed or applied as contemplated hereby
is subsequently set aside, avoided, or for any reason required to be returned,
each Person that received a distribution in respect of such payment shall, upon
demand by the Agent or such Bank, as the case may be, pay to the Agent or such
Bank the amount of the distribution received by such Person, and the obligations
owing to such Person, in respect of which such payment was originally made,
shall be restored to the extent such payment was set aside, avoided, or
returned.

         6.       Letter of Credit Agreements. All reimbursement payments made
pursuant to a Letter of Credit Agreement shall be made to the Agent, who shall
apply and distribute such payments in accordance with Section 5 hereof. Each L/C
Bank irrevocably appoints and authorizes the Agent to take such action as agent
on its behalf and to exercise such powers under each Letter of Credit Agreement
as are delegated to the Agent by the terms thereof, including remedial and
enforcement actions and powers, together with such powers as are reasonably
incidental thereto, all subject to the terms of Article VIII of the Credit
Agreement. No L/C Bank may unilaterally exercise any rights or powers it may
have under a Letter of Credit Agreement except upon the instructions of the
Majority Banks, and such instructions shall be binding upon all Banks.

         7.       Ratable Interests.

                  (a)      Rights in Collateral. Subject to Section 10, Agent,
the Loan Parties and each Bank acknowledge and agree that the rights and
interests inuring to each Bank under the Credit Agreement, Security Agreement or
other Loan Documents with respect to such Bank's rights to participate in, or
receive any distribution in respect of any collateral, security, guaranty, or
other credit support, shall be allocated ratably without preference or priority
among the Banks in accordance with their pro rata shares of the outstanding
Loans and reimbursement obligations under L/Cs. Without limiting the foregoing,
any proceeds of sales of Collateral, or any other payments or distributions in
respect of the Collateral, or in


                                       6
<PAGE>   70

respect of the Guaranty shall be distributed and applied in accordance with the
provisions of Section 5 hereof.

                  (b)      No Impairment. Nothing contained in this Agreement
shall be construed to limit or impair the rights of the Agent or the Banks under
the Loan Documents or otherwise. The Agent, the Banks, the Borrowers, and the
Guarantor agree that the ratable sharing and distribution provisions set forth
in this Agreement shall apply notwithstanding the fact that the Guarantor or a
Borrower is the primary obligor with respect to any particular Commitment,
obligation or Loan Document.

         8.       Assignment to Assuming Bank. The parties agree that
notwithstanding any provision of the Credit Agreement to the contrary
(including, but not limited to, Section 9.06), any Bank may assign, from time to
time, all or any portion of its pro rata share of the Commitments and its Loans
to the Assuming Bank, without notice to or the consent of the Agent, the
Borrowers, the Guarantor, or any other Bank, on such terms as the assigning Bank
and the Assuming Bank determine are appropriate. Upon any such assignment, and
to the extent thereof, the Assuming Bank shall constitute a "Bank" under the
Credit Agreement and the Loan Documents, entitled to all of the rights,
benefits, protections and privileges of a Bank under the Loan Documents.

         9.       Yield Protection Provisions. The Assuming Bank shall at all
times constitute a "Bank" under the Credit Agreement for purposes of Sections
3.06, 3.07, 3.09, 3.10 and 3.11 thereof.

         10.      Subrogation Rights of Assuming Bank. Notwithstanding any other
provision in this Agreement, if for any reason any L/C Bank shall fail to honor
a drawing attempted by the Assuming Bank under a L/C which attempted drawing was
made in accordance with the terms of this Agreement and the L/C, then at
Assuming Bank's option, the rights of the Assuming Bank shall be subrogated to
the rights of such L/C Bank under the Credit Agreement and the other Loan
Documents to the extent of that portion of the Loan for which such drawing was
attempted, and the Assuming Bank shall constitute a "Bank" under the Credit
Agreement and the other Loan Documents to the extent of that portion of the Loan
for which such drawing was attempted.

         11.      Resignation of Assuming Bank. The Assuming Bank may resign at
any time for any reason, or without any reason, by giving written notice thereof
to the Agent, which resignation shall be effective on the date specified in the
notice regardless of whether a successor Assuming Bank is selected pursuant to
the remainder of this Section. Upon any such resignation, the L/C Banks shall
have the right (a) to select a successor Assuming Bank with the Loan Parties'
consent (so long as no Event of Default or Potential Event of Default is then
continuing) which consent shall not be unreasonably withheld or delayed; or (b)
to not select a successor Assuming Bank. At the time such resignation shall
become effective, (i) each L/C Bank shall deposit immediately available funds in
the amount of the outstanding portion of such L/C Bank's Assumed Funding Amount
to the account of the Agent for the benefit of the resigning Assuming Bank
within five (5) Business Days of receipt of an invoice for such amounts, and
(ii) the Loan Parties agree to pay all accrued and unpaid Cost of Funds,
Administrative Fees and other fees in respect of Loans funded by the Assuming
Bank, to the Agent for the


                                       7
<PAGE>   71

benefit of the Assuming Bank within five (5) Business Days of receipt of an
invoice for such amounts. The acceptance of any selection as the Assuming Bank
hereunder by a successor Assuming Bank shall be evidenced by an agreement
entered into by such successor, in a form satisfactory to the Agent, and, from
and after the effective date of such agreement (i) such successor shall have all
the rights and obligations of the resigning Assuming Bank under this Agreement
and the other Loan Documents and (ii) references herein and in the other Loan
Documents to the term "Assuming Bank" shall be deemed to refer to such successor
or to any previous Assuming Bank, or to such successor Assuming Bank and all
previous Assuming Banks, as the context shall require. After the effective date
of the resignation of the Assuming Bank hereunder, the resigning Assuming Bank
shall remain a party hereto and shall continue to have all the rights of the
Assuming Bank under this Agreement and the Loan Documents to the extent
necessary to collect amounts due the Assuming Bank (or to the Agent for the
benefit of the Assuming Bank) in respect of Loans funded by the Assuming Bank
prior to such resignation, but shall not be required to fund additional Loans or
comply with any other obligation of the Assuming Bank hereunder or under any
other Loan Document. In the event the Assuming Bank resigns hereunder, and
provided that no successor shall have been selected and shall have accepted such
selection as specified herein prior to the effective date of the Assuming Bank's
resignation, then upon the date of the final indefeasible payment to the
Assuming Bank of all amounts owing to it hereunder and under the other Loan
Documents, (A) this Agreement shall be void (B) Subsections A and B of Section 1
of the Second Amendment to Credit Agreement and First Amendment to Certain
Security Documents shall be void and (C) the Side Letter shall be void.

         12.      Resignation. Upon the the downgrading of the credit rating of
any L/C Bank to BBB+ or below as determined by Moody's (or if Moody's no longer
publishes bank credit ratings, an equivalent credit rating determined by a
reputable firm which publishes such ratings), the Assuming Bank may, at its
option, require such L/C Bank to provide a facing letter of credit from a bank
to which Moody's has assigned a credit rating of at least AAA-, or resign as
specified herein.

         13.      Records. Agent shall keep and maintain internal records of all
Loans and other amounts funded by each Bank, Funding Bank, or Assuming Bank,
including all amounts of principal, interest, fees, expenses or other amounts
owing hereunder to each Bank, Funding Bank, Assuming Bank or Agent; all amounts
in respect of the L/Cs, including the Effective Stated Amount under the L/Cs,
and drawings made thereon; and all payments made by or on account of any Loan
Parties. The records maintained by the Agent in respect of such amounts shall be
deemed conclusive absent manifest error.

         14.      Indemnification of Assuming Bank. The Assuming Bank shall at
all times constitute a "Bank" under the Credit Agreement for purposes of
Sections 3.07 and 3.13 thereof.


                                       8
<PAGE>   72

         15.      Minimum Interest Period. If the Borrowers fail to designate
the Interest Period with respect to a requested LIBO Rate Loan under Section
2.01 or 2.02 of the Credit Agreement, the Interest Period with respect to such
LIBO Rate Loan shall be one month.

         16.      Further Assurances. At any time and from time to time each of
the parties hereto shall execute and deliver such further instruments and take
such further action as may reasonably be necessary to effectuate the purposes of
this Agreement.

         17.      General Provisions.

                  (a)      Loan Document. This Agreement is a Loan Document
under the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof.

                  (b)      Incorporation by Reference of Certain Provisions. Any
provision in the Credit Agreement or in any other Loan Document that is of
general applicability to the Loan Documents shall be and hereby is incorporated
in this Agreement as though set forth in full.

                  (c)      Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.

                  (d)      Severability. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

                  (e)      Entire Agreement. This Agreement, together with the
Credit Agreement and the other Loan Documents, constitute the entire agreement
of the parties with respect to the subject matter hereof.

                  (f)      Counterparts. This Agreement may be executed in any
number of counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and the same
Agreement.

                  (g)      Binding Effect; Governing Law. This Agreement shall
be binding upon and inure to the benefit of all the parties hereto, except that
Loan Parties shall not have the right to assign their rights hereunder or any
interest herein without the prior written consent of the Agent and all the
Banks. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California without giving effect to its choice of law
doctrine.

                  (h)      Survival. All covenants, representations and
warranties made in this Agreement shall continue in full force and effect until
the termination of the Credit


                                       9
<PAGE>   73

Agreement and the final indefeasible payment in full in cash of all amounts
owing thereunder.

                  (i)      Obligations Several. The obligation of each Bank
hereunder is several, and no Bank shall be responsible for the obligation or
commitment of any other Bank hereunder. Nothing contained in this Agreement and
no action taken by the Banks pursuant hereto shall be deemed to constitute the
Banks to be a partnership, an association, a joint venture or any other kind of
entity.


                                       10
<PAGE>   74

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                        CANADIAN IMPERIAL BANK OF COMMERCE,
                                        New York Agency, as Agent


                                        By:  /s/  illegible
                                           --------------------------------
                                        Title:  Vice President
                                              -----------------------------


                                       S-1
<PAGE>   75

                                        BANQUE NATIONALE DE PARIS,
                                        San Francisco Branch,
                                        as Co-Agent


                                        By:  /s/  illegible
                                           --------------------------------
                                        Title:  Vice President
                                              -----------------------------

                                        By:  /s/  illegible
                                           --------------------------------
                                        Title:  Vice President
                                              -----------------------------


                                       S-2
<PAGE>   76

                                        DESIGNATED ISSUER:

                                        CANADIAN IMPERIAL BANK OF COMMERCE,
                                        Singapore Branch


                                        By:  /s/  illegible
                                           --------------------------------
                                        Title:  Vice President
                                              -----------------------------


                                       S-3
<PAGE>   77

                                        ASSUMING BANK:

                                        CIBC [Asia] LTD.


                                        By: /s/ illegible
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                       S-4
<PAGE>   78

                                        BANKS:

                                        CIBC [Asia] LTD.


                                        By: /s/ illegible
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                       S-5
<PAGE>   79

                                        BANQUE NATIONALE DE PARIS,
                                        Singapore Branch


                                        By: /s/ illegible
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------

                                        By: /s/ illegible
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                       S-6
<PAGE>   80

                                        FLEET NATIONAL BANK


                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                       S-7
<PAGE>   81

                                        SANWA BANK CALIFORNIA


                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                       S-8
<PAGE>   82

                                        UNION BANK OF CALIFORNIA, N.A.


                                        By:  /s/ ILLEGIBLE
                                           --------------------------------
                                        Title: Vice President
                                              -----------------------------


                                       S-9
<PAGE>   83

                                        ACKNOWLEDGED AND AGREED:


                                        STORMEDIA INTERNATIONAL, LTD., as
                                        Borrower


                                        By:  /s/ STEPHEN M. ABELY
                                           --------------------------------
                                        Title: Secretary
                                              -----------------------------



                                        STRATES PTE. LTD., as Borrower


                                        By:  /s/ WILLIAM J. ALMON
                                           --------------------------------
                                        Title: Director
                                              -----------------------------


                                        STORMEDIA INCORPORATED, as Guarantor


                                        By:  /s/ WILLIAM J. ALMON
                                           --------------------------------
                                        Title: Chairman
                                              -----------------------------


                                      S-10
<PAGE>   84

                                    EXHIBIT A
                      [FORM OF LETTER OF CREDIT AGREEMENT]

                              (please see attached)


                                       A-1
<PAGE>   85

                      [FORM OF LETTER OF CREDIT AGREEMENT]

         This LETTER OF CREDIT AGREEMENT ("Agreement") is entered into as of
January 24, 1997, by and among StorMedia Incorporated, a Delaware corporation
("Guarantor"), [L/C Bank] ("Bank") and Canadian Imperial Bank of Commerce, New
York Agency ("Agent").

                                    RECITALS

         A. Guarantor, Bank and Agent are parties, together with others, to a
Credit Agreement (defined below) pursuant to which, inter alia, Guarantor has
guaranteed the obligations of its subsidiaries (the Borrowers) to the Banks
(including Bank) thereunder.

         B. Guarantor has requested that Bank issue its L/C (in the form
attached hereto as Exhibit A, the "Credit") to the Assuming Bank (as defined
below) in support of Bank's obligations to lend money to the Borrowers under the
Credit Agreement, and Guarantor has agreed to support the payment of such Credit
by entering into this Letter of Credit Agreement.

         NOW THEREFORE, in consideration of the issuance by the Bank of the
Credit, Guarantor, Bank and Agent hereby agree as follows with respect to the
Credit.

                                    AGREEMENT

         (j)      Definitions.

         "Credit Agreement" means that certain Credit Agreement dated as of
August 23, 1996 by and among StorMedia International, Ltd. and Strates Pte.
Ltd., as Borrowers, and StorMedia Incorporated, as Guarantor, the Banks named
therein, as Banks, and Canadian Imperial Bank of Commerce, New York Agency, as
agent for the Banks and Banque Nationale de Paris, San Francisco Branch, as
co-agent for the Banks, and Canadian Imperial Bank of Commerce, Singapore Branch
as Designated Issuer, as amended by the First Amendment and Limited Waiver dated
as of September 30, 1996 and the Second Amendment to Credit Agreement and First
Amendment to Certain Security Documents dated as of January 24, 1997, and as
further amended and in effect from time to time.

         "Assuming Bank" means CIBC [Asia] Ltd. as Assuming bank under the
Interbank Agreement.

         "Interbank Agreement" means the Interbank Agreement dated as of January
24, 1997 by and among Canadian Imperial Bank of Commerce, New York Agency,
Banque Nationale de Paris, San Francisco Branch, Canadian Imperial Bank of
Commerce, Singapore Branch and each of the Banks listed on the signature pages
thereof and CIBC [Asia] Ltd., as Assuming bank, and acknowledged and agreed to
by StorMedia International, Ltd. and Strates Pte. Ltd., and StorMedia
Incorporated.


                                       A-2
<PAGE>   86

         "Uniform Customs and Practice" means the Uniform Customs and Practice
for Documentary Credits approved by the International Chamber of Commerce
(publication No. 500) and in effect and adhered to by the Bank as of the date of
issuance of the Credit.

         Other capitalized terms used but not defined herein shall have the
meanings assigned to them, directly or indirectly by reference, in the Credit
Agreement. The "Other Definitional Provisions" set forth in Section 1.02 of the
Credit Agreement shall likewise govern this Agreement.

         (k) Issuance of Credits. The Bank will issue the Credit for the account
of the Guarantor and for the benefit of the Assuming Bank on the date hereof and
subject to the terms and conditions set forth in the Interbank Agreement.

         (l) Reimbursement. The Guarantor shall reimburse the Agent, for the
benefit of the Bank (but subject to the sharing provisions contained in the
Credit Agreement and the Interbank Agreement), on demand to the account of the
Agent as designated in the signature pages of the Credit Agreement (or such
other account as the Agent may designate), in cash, the amount required to pay
each drawing under the Credit. Upon the occurrence of an Event of Default under
the Credit Agreement, the Guarantor shall pledge to the Agent, for the benefit
of the Bank, cash to be held as cash collateral in an amount sufficient to pay
all monies that are or will be due to be paid at any time by the Bank pursuant
to the Credit regardless of whether the beneficiary under the Credit has
requested payment or whether those obligations have matured or remain
contingent.

         (m) Obligations Absolute. The obligations of Guarantor to reimburse the
Agent, for the benefit of the Bank, for drawings made under the Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including the following
circumstances:

                  any lack of validity or enforceability of the Credit;

                  the existence of any claim, set-off, defense (other than
payment of all monies due) or other right which Guarantor or Borrowers may have
at any time against the beneficiary or any transferee of the Credit (or any
Persons for whom any such transferee may be acting), the Bank, the Agent or any
Bank or any other Person whether in connection with this Agreement, the Credit
Agreement, the transactions contemplated therein or any unrelated transaction;

                  any draft, certificate or any other document presented under
the Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;


                                      A-3
<PAGE>   87

                  payment against any draft, document or other demand for
payment that does not comply with the terms of the Credit, provided that such
payment does not constitute gross negligence or wilful misconduct on the part of
the Bank;

                  any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.

         (n) Credit. As between Guarantor on the one hand and the Bank and the
Agent on the other hand, Guarantor assumes all risks of the acts and omissions
of, or misuse of the Credit by, the beneficiaries of the Credit. In furtherance
and not in limitation of the foregoing, neither the Bank nor the Agent shall be
responsible for: (i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for an issuance of or draw under the Credit, even if it should in
fact prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign a Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, which
may prove to be invalid or ineffective for any reason; (iii) failure of the
beneficiary of a Credit to comply fully with conditions required in order to
draw upon such Credit (it being understood that this clause (iii) does not
address the payment by the Bank following failure of the beneficiary of a Credit
to comply fully with the conditions required to draw upon such Credit); (iv)
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they be
in cipher; (v) errors in interpretation of technical terms; (vi) any loss or
delay in the transmission or otherwise of any document required in order to make
a drawing under the Credit or of the proceeds thereof; (vii) the misapplication
by the beneficiary of a Credit of the proceeds of any drawing under such Credit;
and (viii) any consequences arising from causes beyond the control of the Agent
or the Bank, including any act or omission by any government or governmental
authority. None of the above shall affect, impair, or prevent the vesting of any
of the Agent's or the Bank's rights or powers hereunder. In furtherance and
extension and not in limitation of the specific provisions set forth herein, any
action taken or omitted by the Agent or the Bank, under or in connection with
the Credit or the related certificates, if taken or omitted in good faith, shall
not put the Agent or the Bank under any resulting liability to any Loan Party.
Notwithstanding anything in this Agreement to the contrary, neither the Agent
nor the Bank shall be relieved of any liability that they may otherwise have as
a result of their gross negligence or willful misconduct, but each Loan Party
shall remain liable with respect to any Loans made or participations in the
Credit purchased by the Banks other than the Bank.

         (o) L/C Fees. The Guarantor will pay to the Agent, for the account of
the Bank, the L/C Fees described in the Interbank Agreement plus the Bank's
standard fees for drawing, amendment, or transfer of the Credit, in accordance
with the Bank's then effective schedule of such fees.


                                      A-4
<PAGE>   88

         (p)      Indemnification. The Guarantor agrees to indemnify and hold
the Agent and the Bank and its correspondents harmless from and against any and
all claims, damages, losses, liabilities, costs or expenses whatsoever which the
Agent and the Bank or their correspondents may incur (or which may be claimed
against the Agent or the Bank or their correspondents by any person) by reason
of, or in connection with, the execution and delivery or transfer of, or payment
or failure to pay under, any Credit, or by reason of, or in connection with, any
other matters arising under this Agreement, or any of the transactions
contemplated hereby; provided, however, the Guarantor shall not be required to
indemnify the Agent or the Bank or their correspondents for any claims, damages,
losses, liabilities, costs or expenses to the extent caused by the Agent's,
Bank's or any of their correspondents' willful misconduct or gross negligence.

         (q)      Expenses. The Guarantor will pay on demand all reasonable
costs and expenses (including without limitation, reasonable attorneys' fees and
expenses) incurred by the Agent or the Bank in connection with the
administration, amendment or enforcement of this Agreement and such other
documents which may be delivered in connection with this Agreement or any action
or proceeding relating to a court order, injunction or other process or decree
restraining or seeking to restrain the Bank from paying any amount under any
Credit.

         (r)      Uniform Laws. This Agreement and the Credit shall be subject
to the Uniform Customs and Practice and, in the event any provision of the
Uniform Customs and Practice is or is construed to vary from or be in conflict
with any provision of the California Uniform Commercial Code, as from time to
time amended and in full force (the "Commercial Code"), the Uniform Customs and
Practice shall prevail.

         (s)      Obligations Due. If any of the obligations and/or liabilities
of the Guarantor to the Agent or the Bank shall not be paid or performed when
due; or if there is a breach in any warranty or representation herein in any
material respect; or if the Guarantor shall become insolvent (however such
insolvency may be evidenced) or make a general assignment for the benefit of
creditors; or if the Guarantor shall suspend the transaction of its usual
business or be expelled or suspended from any exchange; or if an application is
made by any judgment creditor of the Guarantor for an order directing the Bank
to pay over money or to deliver other property; or if a petition in bankruptcy
shall be filed by or against the Guarantor; or if a petition shall be filed by
or against the Guarantor or any proceeding shall be instituted by or against the
Guarantor for any relief under any bankruptcy or insolvency laws or any law
relating to the relief of debtors, readjustment of indebtedness, reorganization,
composition or extensions; or if any governmental authority, or any court at the
instance of any governmental authority, shall take possession of any substantial
part of the property of the Guarantor or shall assume control over the affairs
or operations of the Guarantor; or if a receiver shall be appointed of, or a
writ or order of attachment or garnishment shall be issued or made against, any
of the property or assets of the Guarantor; or if the Bank shall in good faith
exercising its reasonable credit judgment deem itself insecure at any time;
thereupon, unless Agent, on behalf of Bank shall otherwise elect, any and all
obligations and


                                      A-5
<PAGE>   89

liabilities of the Guarantor to the Agent or the Bank, whether now existing or
hereafter incurred, shall become and be due and payable forthwith without
presentation, demand or notice, all of which are waived.

         (t)      No Waiver. Neither the Agent nor the Bank shall be deemed to
have waived any of its rights hereunder, unless the Agent or the Bank or their
authorized agents shall have signed such waiver in writing. No such waiver
unless expressly stated herein, shall be effective as to any transaction which
occurs subsequent to the date of such waiver, nor as to any continuance of a
breach after such waiver.

         (u)      Successors and Assigns. The obligations hereof shall bind the
successors and assigns of the Guarantor, and all rights, benefits and privileges
conferred on the Agent and the Bank shall be and are extended to and conferred
upon and may be enforced by their successors and assigns.

         (v)      Merger. This Agreement is a Loan Document under the Credit
Agreement. This Agreement, together with the Credit Agreement and the other Loan
Documents, constitute the entire agreement of the parties with respect to the
subject matter hereof, and may not be amended except in writing signed by all
parties hereto.

         (w)      Provide Information. The Guarantor agrees that the Agent or
the Bank may provide information relating to any Credit or relating to the
Guarantor to the Agent's or the Bank's parent, affiliates, subsidiaries and
service providers.

         (x)      Conflict. In the event any term or provision in this Agreement
shall conflict with any term or provision in any application for standby letter
of credit which has been executed by the Guarantor and the Bank, the terms and
provisions of this Agreement or, if applicable, the Interbank Agreement shall
prevail.


                                      A-6
<PAGE>   90

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

                                        STORMEDIA INCORPORATED


                                        By: ___________________________

                                        Title: ________________________


                                        [L/C BANK]


                                        By: ___________________________

                                        Title: ________________________


                                        CANADIAN IMPERIAL BANK OF COMMERCE, New
                                        York Agency, as Agent

                                        By: ___________________________

                                        Title: ________________________


                                      A-7
<PAGE>   91

                                    EXHIBIT A

                                  [FORM OF L/C]

                              (please see attached)


                                      A-8
<PAGE>   92

                                    EXHIBIT B
                                  [FORM OF L/C]

                              (please see attached)


                                      B-1
<PAGE>   93
        EXHIBIT: STANDBY: STORMEDIA INCORPORATED, A DELAWARE CORPORATION
________________________________________________________________________________


ISSUING BANK                       Irrevocable Standby Letter of Credit No._____
[Name]
[Address]
[City, State, Zip Code]
Date:__________

ADVISING BANK:
Canadian Imperial Bank of Commerce,
New York Agency
425 Lexington Avenue, Seventh Floor
New York, New York 10017
Attn:  Letter of Credit Department

BENEFICIARY:                                      APPLICANT
CIBC [Asia] Ltd.                                  StorMedia Incorporated
16 Collyer Quay No. 04-02                         [Address]
Singapore, 0104                                   [City, State, Zip Code]
Attn:  Mr. Chin Foo Chun
Attn:  Mr. Harry Wong

Currency:                      USD
Amount:                        [Figures and words]
Available by:                  Payment at this office
Expiry Date/Place:             August 22, 1999 at 3:00 p.m. at this office in
                               Los Angeles, California

Ladies/Gentlemen:

We hereby issue our Irrevocable Standby Letter of Credit No. ("Letter of
Credit") in your favor. This Letter of Credit is available by payment with
ourselves only upon the Advising Bank's teletransmission to us of your demand by
tested telex to telex number ____________ or authenticated SWIFT message to
SWIFT number ___________, or signed demand sent by courier service to this
office at the above address stating the following:

"We hereby demand payment of USD ______________ under [Name of Issuing Bank]
Letter of Credit No. ____ which represents and covers sums owed to CIBC [Asia]
Ltd. by StorMedia International, Ltd. and Strates Pte. Ltd." More than one
demand may be made under this Letter of Credit, provided the sum of all demands
made does not exceed USD [amount in figures and words].

________________________________________________________________________________

EXHIBIT TO STANDBY LETTER OF CREDIT APPLICATION (ID-100S)            PAGE 1 OF 2


____________________________________     _______________________________________
        ACCOUNT OFFICER SIGNATURE           APPLICANT'S AUTHORIZED SIGNATURE

<PAGE>   94

        EXHIBIT: STANDBY: STORMEDIA INCORPORATED, A DELAWARE CORPORATION
________________________________________________________________________________

This Letter of Credit sets forth in full the terms of our undertaking, and such
terms shall not be modified, amended or amplified by any document, instrument or
agreement referred to in this Letter of Credit, in which this Letter of Credit
is referred to, or to which this Letter of Credit relates.

SPECIAL INSTRUCTIONS:
The original of this Letter of Credit must be endorsed with the amount of each
drawing on the reverse side.

All banking charges under this Letter of Credit other than the Issuing Bank's,
except as noted herein, are for the account of the Applicant.

An interbank transfer fee of $20 will be deducted from the proceeds if
settlement is to be remitted on an account at another bank.

We hereby agree with you that upon receipt of your demand prepared and delivered
under and in compliance with the terms of this Letter of Credit, we shall
promptly make payment in accordance with the remittance instructions provided by
Canadian Imperial Bank of Commerce, New York Agency in immediately available
U.S. Dollar funds.

This Letter of Credit is subject to the "Uniform Customs and Practice for
Documentary Credits (1993 Revision)", International Chamber of Commerce
Publication No. 500.


________________________________________________________________________________

EXHIBIT TO STANDBY LETTER OF CREDIT APPLICATION (ID-100S)            PAGE 2 OF 2


____________________________________     _______________________________________
        ACCOUNT OFFICER SIGNATURE           APPLICANT'S AUTHORIZED SIGNATURE