Document:

<PAGE>   1

                                                                 EXHIBIT 10.38.5

                                 FIFTH AMENDMENT
                                       TO
                    REVOLVING CREDIT AND TERM LOAN AGREEMENT

        Fifth Amendment dated as of January 14, 2000 to Revolving Credit and
Term Loan Agreement (the "Fifth Amendment"), by and among WESTERN DIGITAL
CORPORATION, a Delaware corporation (the "Borrower") and BANKBOSTON, N.A. and
the other lending institutions listed on Schedule 1 to the Credit Agreement (as
hereinafter defined) (the "Banks"), amending certain provisions of the Revolving
Credit and Term Loan Agreement dated as of November 4, 1998 (as amended and in
effect from time to time, the "Credit Agreement") by and among the Borrower, the
Banks, BankBoston, N.A. as agent for the Banks (in such capacity, the "Agent")
and The CIT Group/Business Credit, Inc. as co-agent for the Banks. Terms not
otherwise defined herein which are defined in the Credit Agreement shall have
the same respective meanings herein as therein.

        WHEREAS, the Borrower and the Banks have agreed to modify certain terms
and conditions of the Credit Agreement as specifically set forth in this Fifth
Amendment;

        NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

        SECTION 1. LIMITATION ON NEW REVOLVING CREDIT LOANS AND LETTERS OF
CREDIT.

        (a) Notwithstanding anything to the contrary contained in the Credit
Agreement and the other Loan Documents, the Borrower hereby agrees that from the
Effective Date (as defined in Section 8 hereof) through and including the
Revolving Credit Loan Maturity Date (the "Limitation Period"), it will not
request to borrow any Revolving Credit Loans, request any Letters of Credit be
issued, extended or renewed or borrow any Revolving Credit Loans or request the
issuance, renewal or extension of any Letters of Credit (with the parties hereto
hereby agreeing that the only Letters of Credit to be outstanding during the
Limitation Period shall be the Letters of Credit which have been issued prior to
the date hereof). The parties hereto hereby acknowledge and agree that during
the Limitation Period the Banks and the Agent shall have no obligation to make
Revolving Credit Loans or issue, extend or renew Letters of Credit.

        (b) The parties hereto hereby acknowledge and agree that after the
termination of the Limitation Period, the Banks shall have no obligation to make
Revolving Credit Loans and the Agent shall have no obligation to issue, extend
or renew Letters of Credit.

        SECTION 2. AMENDMENT TO SECTION 1 OF THE CREDIT AGREEMENT. Section 1.1
of the Credit Agreement is hereby amended as follows:

        (a) the definition of "Revolving Credit Loan Maturity Date" is hereby
amended by deleting the date "November 2, 2001" which appears in such definition
and substituting in place thereof the date "March 31, 2000";

        (b) the definition of "Term Loan Maturity Date" is hereby amended by
deleting the date "November 2, 2001" which appears in such definition and
substituting in place thereof the

<PAGE>   2
                                      -2-

words "The earlier to occur of (a) January 31, 2000 and (b) the date on which
the Borrower incurs the Vendor Indebtedness";

        (c) Section 1.1 of the Credit Agreement is further amended by inserting
the following definitions in the appropriate alphabetical order:

               Vendor. That certain vendor of the Borrower which has been
        previously identified as the "Vendor" to the Banks and the Agent by the
        Borrower.

               Vendor Indebtedness. Indebtedness of the Borrower to the Vendor
        incurred pursuant to the Vendor Loan Agreement in the original principal
        amount of not less than $16,625,000 in the aggregate.

               Vendor Loan Agreement. That certain Loan Agreement dated or to be
        dated on or after January 13, 2000 between the Vendor and the Borrower
        and in form and substance satisfactory to the Agent.

               Vixel. Vixel Corporation, a Delaware corporation.

        SECTION 3. AMENDMENT TO SECTION 2.3 OF THE CREDIT AGREEMENT. Section 2.3
of the Credit Agreement is hereby amended by deleting Section 2.3 in its
entirety and restating it as follows:

                      2.3. REDUCTION OF TOTAL COMMITMENT. The Borrower shall
               have the right at any time and from time to time upon five (5)
               Business Days prior written notice to the Agent to reduce by
               $5,000,000 or a whole multiple of $500,000 in excess thereof or
               terminate entirely the Total Commitment, whereupon the
               Commitments of the Banks shall be reduced pro rata in accordance
               with their respective Commitment Percentages of the amount
               specified in such notice or, as the case may be, terminated,
               provided, however, notwithstanding the foregoing, from January 1,
               2000 through and including the Revolving Credit Loan Maturity
               Date, the Borrower shall only have the right to terminate the
               Total Commitment in its entirety and shall not have the right to
               reduce the Total Commitment by any smaller amount. Promptly after
               receiving any notice of the Borrower delivered pursuant to this
               Section 2.3, the Agent will notify the Banks of the substance
               thereof. Upon the effective date of any such reduction or
               termination, the Borrower shall pay to the Agent for the
               respective accounts of the Banks the full amount of any
               commitment fee then accrued on the amount of such reduction. No
               reduction or termination of the Commitments may be reinstated.

        SECTION 4. AMENDMENT TO SECTION 4 OF THE CREDIT AGREEMENT. Section 4.4.
of the Credit Agreement is hereby amended by deleting Section 4.4 in its
entirety and restating it as follows:

               4.4. OPTIONAL REPAYMENT OF TERM LOAN. The Borrower shall have the
        right at any time to prepay the Term Notes on or before the Term Loan
        Maturity Date, as a whole, or in part, upon not less than five (5)
        Business Days prior written notice to the Agent, without premium or
        penalty (but subject to Section 6.9 hereof), provided, that (a) each
        partial prepayment shall be in the principal amount of $5,000,000 or an
        integral multiple of $1,000,000 in excess thereof, and (b) each partial
        prepayment shall be allocated among the Banks, in proportion, as nearly
        as practicable, to the respective outstanding amount of each

<PAGE>   3
                                      -3-

        Bank's Term Note, with adjustments to the extent practicable to equalize
        any prior prepayments not exactly in proportion. Any prepayment of
        principal on the Term Loan shall include all interest accrued to the
        date of prepayment and shall be applied against the scheduled
        installments of principal due on the Term Loan in the inverse order of
        maturity. No amount repaid with respect to the Term Loan may be
        reborrowed.

        SECTION 5. AMENDMENT TO SECTION 10 OF THE CREDIT AGREEMENT. Section 10
of the Credit Agreement is hereby amended as follows:

        (a) Section 10.1(i) of the Credit Agreement is hereby amended by
deleting the text of Section 10.1(f) in its entirety and restating it as
follows:

               (i) the (i) Indebtedness evidenced by the Subordinated Debt
        Documents; and (ii) Vendor Indebtedness, provided, that as to the Vendor
        Indebtedness, (1) the net proceeds received by the Borrower from such
        Vendor Indebtedness is in the original principal amount of not less than
        the aggregate amount of the Term Loans outstanding on such date,
        together with any and all interest accrued thereon; and (2) the Borrower
        will use the proceeds received from the Vendor Indebtedness to prepay in
        full the outstanding amount of the Term Loans, together with any and all
        interest accured thereon.

        (b) Section 10.2(xii) of the Credit Agreement is hereby amended by
deleting the text of Section 10.2(xii) in its entirety and restating it as
follows:

               (xii) the (i) liens in favor of the Indenture Trustee to the
        extent expressly provided in Section 7.07 of the Subordinated Indenture;
        and (ii) lien solely on the Vixel Stock in favor of the Vendor to secure
        the Vendor Indebtedness permitted by Section 10.1(i)(ii), provided, that
        as to lien on the Vixel Stock to secure the Vendor Indebtedness, (1)
        such lien shall only be permitted to be granted after the aggregate
        amount of the Term Loans of all the Banks have been repaid in full in
        cash; and (2) such security interest covers only the Vixel Stock and no
        other asset of the Borrower or any Subsidiary.

        (c) Section 10.5.2(a)(i) of the Credit Agreement is hereby amended by
deleting the words "enter into a sale and leaseback arrangement in respect of
the real property located in Rochester, Minnesota in an arms-length transaction
for fair and reasonable value" and substituting in place thereof the words
"enter into a sale of the real property (together with the fixtures located
thereon) located in Rochester, Minnesota in an arms-length transaction for fair
and reasonable value so long as immediately prior to the consummation of such
sale (1) the aggregate outstanding amount of the Term Loans, including all
accrued interest thereon, has been repaid in full in cash and (2) the Borrower
has provided to the Agent cash collateral in an amount sufficient to cash
collateralize the Maximum Drawing Amount (together with any Reimbursement
Obligations and any Unpaid Reimbursement Obligations) of all issued and
outstanding Letters of Credit, and the Borrower has executed and delivered to
the Agent a cash collateral agreement in respect of such cash collateral in form
and substance satisfactory to the Agent with appropriate instructions
prohibiting the Borrower's withdrawal of such funds so long as they remain cash
collateral".

        SECTION 6. AMENDMENT TO SECTION 11 OF THE CREDIT AGREEMENT. Section 11.1
of the Credit Agreement is hereby amended by deleting the table contained in
Section 11.1 of the Credit Agreement in its entirety and restating it as
follows:

<PAGE>   4
                                      -4-

<TABLE>
<CAPTION>
                           PERIOD                                 AMOUNT
        -------------------------------------------    ------------------------------
<S>                                                    <C>
        Closing  Date - last day of  Second  Fiscal    $416,000,000
        Quarter, 1999

        First Day of Third Fiscal Quarter, 1999 -      $423,000,000 last day of Third
        Fiscal Quarter, 1999

        First Day of Fourth Fiscal Quarter, 1999 -     $410,000,000 last day of
        Fourth Fiscal Quarter, 1999

        First Day of First Fiscal Quarter, 2000 -      $238,000,000 last day of First
        Fiscal Quarter, 2000

        First Day of Second Fiscal Quarter, 2000 -     $176,000,000 last day of
        Second Fiscal Quarter, 2000

        At any time thereafter                         $155,000,000
</TABLE>

        SECTION 7. LIMITED WAIVER. The Borrower has requested that the Banks
waive compliance with Section 11.1 of the Credit Agreement for the fiscal
quarter ended October 2, 1999. Subject always to compliance by the Borrower with
the terms and provisions of the Credit Agreement and the other Loan Documents
and the terms and conditions contained herein, from and after the effectiveness
of this Fifth Amendment the Banks hereby waive the provisions of Section 11.1 of
the Credit Agreement for the fiscal quarter ended October 2, 1999 and solely
with respect to the determination of compliance for such fiscal quarter ended
October 2, 1999.

        SECTION 8. CONDITIONS TO EFFECTIVENESS. This Fifth Amendment shall not
become effective until the date (the "Effective Date") on which Agent receives
the following:

        (a) a counterpart of this Fifth Amendment, executed by the Borrower, the
Guarantors and the Banks; and

        (c) payment by the Borrower to the Agent for the pro rata accounts of
the Banks an amendment fee of $200,000.

        SECTION 9. REPRESENTATIONS AND WARRANTIES. The Borrower hereby repeats,
on and as of the date hereof, each of the representations and warranties made by
it in Section 8 of the Credit Agreement, and such representations and warranties
remain true as of the date hereof (except to the extent of changes resulting
from transactions contemplated or permitted by the Credit Agreement and the
other Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse, and to the extent
that such representations and warranties relate expressly to an earlier date),
provided, that all references therein to the Credit Agreement shall refer to
such Credit Agreement as amended hereby. In addition, the Borrower hereby
represents and warrants that the execution and delivery by the Borrower and its
Subsidiaries of this Fifth Amendment and the performance by the Borrower and its
Subsidiaries of all of its agreements and obligations under the Credit Agreement
as amended hereby and the other Loan Documents are within the corporate
authority of each the Borrower and its Subsidiaries and has been duly authorized
by all necessary corporate action on the part of the Borrower and its
Subsidiaries.

        SECTION 10. RATIFICATION, ETC. Except as expressly amended hereby, the
Credit Agreement, the Security Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in all respects and
shall continue in full force and effect. The Credit Agreement and this Fifth
Amendment shall be read and construed as a single agreement. All references in
the Credit Agreement or any related agreement or instrument to the Credit
Agreement shall hereafter refer to the Credit Agreement as amended hereby.

<PAGE>   5
                                      -5-

        SECTION 11. NO WAIVER. Except as expressly set forth in Section 7
hereof, nothing contained herein shall constitute a waiver of, impair or
otherwise affect any Obligations, any other obligation of the Borrower or any
rights of the Bank Agents or the Banks consequent thereon.

        SECTION 12. COUNTERPARTS. This Fifth Amendment may be executed in one or
more counterparts, each of which shall be deemed an original but which together
shall constitute one and the same instrument.

        SECTION 13. GOVERNING LAW. THIS FIFTH AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(WITHOUT REFERENCE TO CONFLICT OF LAWS).

<PAGE>   6
                                      -6-

        IN WITNESS WHEREOF, the parties hereto have executed this Fifth
Amendment as a document under seal as of the date first above written.

                                     WESTERN DIGITAL CORPORATION

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

                                     BANKBOSTON, N.A.

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

                                     THE CIT GROUP/BUSINESS CREDIT, INC.

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

                                     HELLER FINANCIAL, INC.

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

                                     FLEET CAPITAL CORPORATION

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

                                     FINOVA CAPITAL CORPORATION

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

<PAGE>   7
                                      -7-

                                     LASALLE BUSINESS CREDIT, INC.

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

                                     FINOVA CAPITAL CORPORATION,
                                     SUCCESSOR BY MERGER TO:
                                     FREMONT FINANCIAL CORPORATION

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

                                     FLEET BUSINESS CREDIT CORPORATION
                                     (F/K/A SANWA BUSINESS CREDIT CORP.)

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

<PAGE>   8
                                      -8-

                            RATIFICATION OF GUARANTY

        The undersigned guarantors hereby acknowledges and consents to the
foregoing Fifth Amendment as of January 14, 2000, and agrees that the Guarantee
dated as of November 4, 1998 from WD UK, the Guaranty dated as of February 12,
1999 from Connex, Inc. and the Guaranty dated as of September 22, 1999 from
SageTree, Inc. in favor of the Agent and each of the Banks remains in full force
and effect, and each Guarantor confirms and ratifies all of its obligations
thereunder.

                                            CONNEX, INC.

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

                                            WESTERN DIGITAL (U.K.) LIMITED

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------

                                            SAGETREE, INC.

                                     By:
                                        ------------------------------------
                                     Title:
                                           ---------------------------------<PAGE>   1
                                                                   EXHIBIT 10.44

October 7, 1999

Mr. Russell R. Stern
25502 Nellie Gail Road
Laguna Hills, CA  92653

Dear Russell,

This letter, when signed by you, constitutes the agreement (the "Agreement")
relative to your resignation from Western Digital Corporation (the "Company").
The terms of this Agreement are as follows:

1.      RESIGNATION DATE. You will resign your position as Co-Chief Operating
        Officer effective Friday, October 8, 1999.

2.      EMPLOYMENT PERIOD. You will continue to be treated as an employee,
        including stock option vesting, until the earlier of September 29, 2000
        or your death (the "Employment Period"). Stock options previously
        granted to you under the Employee Stock Option Plan will continue to
        vest in accordance with their terms, which during the period from
        October 7, 1999 through September 29, 2000 would result in the vesting
        of 89,000 to 96,066 additional exerciseable shares. A schedule setting
        forth these options, their grant dates, exercise prices, and vesting
        schedules is attached as Attachment "A" and incorporated herein by
        reference.

3.      PAYMENT OF COMPENSATION. You will be paid $400,000.00 in wage
        continuation based on your current base salary and not including any
        executive retention program amounts. Vesting on your awards under the
        Company's executive retention programs will cease as of October 7, 1999,
        and no further amounts will be credited or paid thereunder. Twenty-six
        (26) bi-weekly payments of $15,384.62 will begin on October 15, 1999,
        and conclude with a final payment on September 29, 2000. This total
        exceeds the standard formula of 6 months pay (130 days - $200,000.00),
        which is normally available to executives at your level and length of
        service.

4.      STOCK OPTIONS. Any exercise of stock options by you must be in accord
        with the provisions of your stock option agreements and with the
        procedures relating to exercise as may be established by the
        Compensation Committee of the Board of

<PAGE>   2

Mr. Russell R. Stern
October 7, 1999
Page 2

        Directors from time to time. All such procedures, unless they are to
        your benefit, shall be of general application and will not apply
        specifically to you. The Company will act expeditiously and in a
        supportive manner in assisting you to exercise your options. You will
        have up to 3 months following September 29, 2000 to exercise your vested
        options; provided, however, that the Company may cancel any unexpired
        option at any time if you are in violation of any of your covenants
        under Paragraph 11 hereof, without regard to the time limitation
        provided for therein. To the extent the options are non-qualified
        options under the federal income tax laws, you shall recognize
        compensation income in connection with your exercise of those options,
        and you agree to satisfy all applicable withholding taxes associated
        with each such exercise..

5.      BENEFITS. The status of your current benefits is set forth on Attachment
        "B" hereto and hereby made a part hereof. During the Employment Period
        you will continue to receive benefits accorded to employees generally,
        other than vacation accruals, and benefits accorded to you and other
        executives in comparable pay grades ("special benefits"), provided that
        such special benefits continue to be furnished to executives generally
        in comparable pay grades. These include:

        a)     your flex benefit allowance of $306.50 per pay period.

        b)     Employee Stock Purchase Plan (ESPP) will continue and deductions
               will be made from your wage continuation checks through the next
               two purchase dates.

        c)     401(k) participation and Western Digital employer match will
               continue with deductions coming from your wage continuation
               checks.

        d)     Tax preparation assistance of up to $5,000 per fiscal year.

        e)     Supplemental executive medical coverage of up to $5,000 per
               fiscal year.

        f)     Auto allowance of $323.08 per pay period.

        If any benefits (including special benefits) are discontinued and
        adjustments are made to compensation or benefits of employees generally,
        or of executives in comparable pay grades, in lieu of the discontinued
        benefits, and if such discontinuances apply to you under this Agreement,
        then in such instances like adjustments will be made to payments or
        benefits accorded to you with respect to the Employment Period. No
        actions will be taken with respect to the moneys payable or the benefits
        accorded to you that are intended to affect adversely only

<PAGE>   3

Mr. Russell R. Stern
October 7, 1999
Page 3

        you or other terminating employees, unless such actions are taken as a
        result of a material breach by you of any of your obligations under this
        Agreement. Should you take another position prior to the expiration of
        wage continuation as an employee of a company with health insurance
        coverages, Western Digital's health coverages stop at the end of the
        month in which you start to work for the other company. Your Western
        Digital benefits will cease sixty days after the September 29, 2000
        month-end. See the attachment for details. You may be entitled to
        continued basic health insurance coverage under the Company's COBRA
        plan. If you so elect, this continuation will be on terms consistent
        with applicable federal laws and regulations. If you elect and are
        eligible to continue this coverage, you will be charged a monthly
        premium to cover the cost of providing this insurance including a small
        administrative fee. Our benefits administration staff will give you
        complete details in this regard.

6.      CONFIDENTIALITY. You and the Company agree that the terms of this
        arrangement will be held in confidence except to the extent that
        disclosures may be required by government regulations or judicial
        process or to receive tax, legal or financial advice. References which
        may request information about your employment will be referred to the
        Vice President of Human Resources.

7.      VACATION. By October 15, 1999 you will be paid all accrued, unused
        vacation. Although you will continue on the Company payroll through
        September 29, 2000, you will accrue no more vacation subsequent to
        October 8, 1999.

8.      SAVINGS AND PROFIT SHARING PLAN. Any distributions to which you are
        entitled from the Savings and Profit Sharing Plan will be made to you in
        accordance with the terms of that plan after your termination date of
        September 29, 2000.

9.      OUTPLACEMENT SERVICES. The Company will provide executive outplacement
        assistance through Lee Hecht Harrison; Challenger, Gray and Christmas;
        or another firm of your choosing to assist you in finding another
        position. These services may begin anytime prior to September 29, 2000.
        Contact the Vice President of Human Resources or Pam Burdi, Director
        Employee Relations (949) 932-5516 for assistance with these
        arrangements.

10.     INDEMNIFICATION AND ASSISTANCE.

<PAGE>   4

Mr. Russell R. Stern
October 7, 1999
Page 4

        (a)     If you are subjected to any claim or demand involving any action
                or inaction allegedly taken by you during the course of your
                employment or directorship with the Company, you will be
                entitled to all rights of indemnification which may then be
                available to other executive officers or directors of the
                Company, including, without limitation, insurance protection
                under any director and/or officer liability insurance coverage
                maintained by the Company or any subsidiary and any rights to
                indemnification provided by applicable law or the By-laws of the
                Company or any subsidiary, and the Company will, and shall cause
                any subsidiary to, cooperate fully with you in responding to or
                defending against any such claim or demand.

        (b)     You agree to make yourself available to respond to inquiries by
                the Company regarding management, regulatory, and legal
                activities of which you acquired knowledge while employed by the
                Company. You agree to make yourself available, without the
                requirement of being subpoenaed, to confer with counsel at
                reasonable times and locations and upon reasonable notice
                concerning any knowledge you have or may have with respect to
                actual and/or potential disputes arising out of the activities
                of the Company during your period of employment. You further
                agree to submit to deposition and/or testimony in accordance
                with the laws of the forum involved concerning any knowledge you
                have or may have with respect to actual and/or potential
                disputes arising out of the activities of the Company during
                your period of employment.

11.     YOUR COVENANTS. As a condition to, and as consideration for, the
        severance and other benefits you are to receive herein, you agree that
        you will not, at any time during the Employment Period:

        (a)     directly or indirectly, whether for your own account or as an
                employee, director, consultant or advisor, provide services to
                any business or engage in any business which at the time of
                commencement of such services is competitive with the Company's
                or any of its subsidiaries' product lines or business
                activities, unless you obtain the prior written consent of the
                Company's Chief Executive Officer;

        (b)     directly or indirectly solicit any individuals to leave the
                Company's (or any of its subsidiaries') employ for any reason or
                interfere in any other manner

<PAGE>   5

Mr. Russell R. Stern
October 7, 1999
Page 5

                with the employment relationships at the time existing between
                the Company (or any of its subsidiaries) and its current or
                prospective employees;

        (c)     induce or attempt to induce any customer, supplier, distributor,
                licensor, licensee or other business relation of the Company (or
                any of its subsidiaries) to cease doing business with the
                Company (or any of its subsidiaries) or in any way interfere
                with the existing business relationship between any such
                customer, supplier, distributor, licensor, licensee or other
                business relation and the Company (or any of its subsidiaries);
                or

        (d)     disparage, defame or slander the Company (or any of its
                subsidiaries) or any of their officers or directors or any of
                its products or services, to any one, including but not limited
                to any past, present or prospective customers. The foregoing
                sentence is not applicable to comments you may make to your
                immediate family. During the Employment Period the Company's
                Board of Directors and its officers shall refrain from any
                disparagement, defamation or slander of you.

12.     CONFIDENTIAL INFORMATION. When you joined the Company you signed an
        agreement setting forth your obligations to the Company during and after
        your employment. A copy of your agreement is attached hereto as
        Attachment "C" and incorporated herein by reference. You understand and
        agree that in the course of your employment with the Company, you have
        acquired confidential information and trade secrets concerning the
        Company's operations, its future plans and its methods of doing
        business. You understand and agree it would be extremely damaging to the
        Company if you disclosed such information to a competitor or made it
        available to any other person or company. You understand and agree that
        such information has been divulged to you in confidence, and you
        understand and agree that you will keep such information secret and
        confidential unless disclosure is required by court order or otherwise
        by compulsion of law. In view of the nature of your employment and the
        information and trade secrets which you have received during the course
        of your employment, you also agree that the Company would be irreparably
        harmed by any violation, or threatened violation of the agreements in
        this Paragraph and that, therefore, the Company shall be entitled to an
        injunction prohibiting you from any violation or threatened violation of
        such agreements.

<PAGE>   6

Mr. Russell R. Stern
October 7, 1999
Page 6

13.     RELEASE OF CLAIMS. You agree that the consideration provided for in this
        Agreement represents payment in full of all outstanding obligations owed
        to you by the Company or any subsidiary of the Company. You, on behalf
        of yourself and your heirs, agents, representatives, immediate family
        members, executors, successors, and assigns, hereby fully and forever
        release the Company and its agents, directors, employees, attorneys,
        investors, shareholders, administrators, affiliates, divisions,
        subsidiaries, parents, predecessor and successor corporations, and
        assigns from, and agree not to sue or otherwise institute or cause to be
        instituted any legal or administrative proceedings concerning, any
        claim, duty, obligation or cause of action relating to any matters of
        any kind, whether presently known or unknown, suspected or unsuspected,
        that you may possess against the Company arising from any omissions,
        acts or facts that have occurred up until and including the Effective
        Date including, without limitation,

        (a)     any and all claims relating to or arising from your relationship
                with the Company or any subsidiary of the Company and the
                termination of that relationship;

        (b)     any and all claims relating to, or arising from, your right to
                purchase, or actual purchase of shares of stock of the Company
                or any subsidiary of the Company, including, without limitation,
                any claims for fraud, misrepresentation, breach of fiduciary
                duty, breach of duty under applicable state corporate law, and
                securities fraud under any state or federal law;

        (c)     any and all claims for wrongful discharge of employment;
                termination in violation of public policy; discrimination;
                breach of contract, both express and implied; breach of a
                covenant of good faith and fair dealing, both express and
                implied; promissory estoppel; negligent or intentional
                infliction of emotional distress; negligent or intentional
                misrepresentation; negligent or intentional interference with
                contract or prospective economic advantage; unfair business
                practices; defamation; libel; slander; negligence; personal
                injury; invasion of privacy; false imprisonment; and conversion;

        (d)     any and all claims for violation of any federal, state or
                municipal statute, including, but not limited to, Title VII of
                the Civil Rights Act of 1964, the Civil Rights Act of 1991, the
                Age Discrimination in Employment Act of

<PAGE>   7

Mr. Russell R. Stern
October 7, 1999
Page 7

                1967, the Americans with Disabilities Act of 1990, the Fair
                Labor Standards Act, the Employee Retirement Income Security Act
                of 1974, The Worker Adjustment and Retraining Notification Act,
                the Older Workers Benefit Protection Act; the California Fair
                Employment and Housing Act, and the California Labor Code;

        (e)     any and all claims for violation of the federal or any state
                constitution;

        (f)     any and all claims arising out of any other laws and regulations
                relating to employment or employment discrimination; and

        (g)     any and all claims for attorneys' fees and costs.

        You and the Company agree that the release set forth in this Paragraph
        shall be and remain in effect in all respects as a complete general
        release as to the matters released. This release does not extend to any
        obligations incurred under this Agreement.

14.     ACKNOWLEDGMENT OF WAIVER OF CLAIMS UNDER ADEA. You acknowledge that you
        are waiving and releasing any rights you may have under the Age
        Discrimination in Employment Act of 1967 ("ADEA") and that this waiver
        and release is knowing and voluntary. You and the Company agree that
        this waiver and release does not apply to any rights or claims that may
        arise under the ADEA after the Effective Date of this Agreement. You
        acknowledge that the consideration given for this waiver and release
        Agreement is in addition to anything of value to which you were already
        entitled. You further acknowledge that you have been advised by this
        writing that (a) you should consult with an attorney prior to executing
        this Agreement; (b) you have at least twenty-one (21) days within which
        to consider this Agreement; (c) you have seven (7) days following the
        execution of this Agreement by you to revoke the Agreement; and (d) this
        Agreement shall not be effective until the revocation period has
        expired. Any revocation should be in writing and delivered in accordance
        with the notice provisions of Paragraph 21 hereof by close of business
        on the seventh day from the date that you sign this Agreement.

15.     CIVIL CODE SECTION 1542. You represent that you are not aware of any
        claim other than the claims that are released by this Agreement. You
        acknowledge that

<PAGE>   8

Mr. Russell R. Stern
October 7, 1999
Page 8

        you have been advised by legal counsel and are familiar with the
        provisions of California Civil Code Section 1542, which provides as
        follows:

               A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
               DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
               EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
               AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

        You, being aware of said code section, agree to expressly waive any
        rights you may have thereunder, as well as under any other federal or
        state statute or common law principles of similar effect.

16.     REMEDIES IN EVENT OF FUTURE DISPUTE.

               (a) Except as provided in subparagraph (b) below, in the event of
               any future dispute, controversy or claim between you and the
               Company arising from or relating to this Agreement, its breach,
               any matter addressed by this Agreement, and/or your employment
               with the Company through the Termination Date, you and the
               Company will first attempt to resolve the dispute through
               confidential non-binding mediation to be conducted in Orange
               County, California by JAMS-Endispute or such other mediator as
               you and the Company shall mutually agree upon. If the dispute is
               not resolved through mediation, you and the Company will submit
               it to final and binding confidential arbitration to be conducted
               in Orange County, California by JAMS/Endispute in accordance with
               the then existing JAMS/Endispute Arbitration Rules and Procedures
               for Employment Disputes. In the event of such an arbitration
               proceeding, you and the Company shall select a mutually
               acceptable neutral arbitrator from among the JAMS/Endispute panel
               of arbitrators. If you and the Company cannot agree on an
               arbitrator, the Administrator of JAMS/Endispute shall appoint an
               arbitrator. None of you, the Company or the arbitrator shall
               disclose the existence, content, or results of any arbitration
               hereunder without the prior written consent of both of you and
               the Company, except as may be compelled by court order. Except as
               provided herein, the Federal Arbitration Act shall govern the
               interpretation and enforcement of such arbitration and all
               proceedings. The arbitrator shall apply the substantive law (and
               the law of remedies, if applicable) of the State of California,
               or

<PAGE>   9

Mr. Russell R. Stern
October 7, 1999
Page 9

               Federal law, or both, as applicable and the arbitrator is without
               jurisdiction to apply any different substantive law. The
               arbitrator shall have the authority to entertain a motion to
               dismiss and/or a motion for summary judgment by either you or the
               Company and shall apply the standards governing such motions
               under the Federal Rules of Civil Procedure. The arbitrator shall
               render an award and a written, reasoned opinion in support
               thereof. Judgment upon the award may be entered in any court
               having jurisdiction thereof. You and the Company intend this
               arbitration provision to be valid, enforceable, irrevocable and
               construed as broadly as possible. Pending the resolution of any
               dispute between you and the Company, the Company may make any
               remaining unpaid payments due to you pursuant to paragraphs 3 and
               5 hereof into a third party escrow account pending further
               agreement of the parties or the award of an arbitrator pursuant
               to the arbitration provisions of this Paragraph. The arbitrator
               shall be authorized to determine whether the remaining payment
               obligations under paragraphs 3 and 5 of this Agreement shall
               continue notwithstanding any alleged breach of this Agreement or
               are terminated as a result of the alleged breach. In the event an
               arbitrator determines that you have violated the terms of this
               Agreement, then the arbitrator shall be authorized to direct
               payment of the money (including any accrued interest) from the
               escrow account to the Company, order that the Company is not
               required to make any further payments to you under paragraphs 3
               and 5, and award the Company any other appropriate remedies,
               including but not limited to reimbursement by you to the Company
               of the amounts paid to you pursuant to Paragraphs 3 and 5 of this
               Agreement.

        (b)    In the event that a dispute arises concerning compliance with
               this Agreement, either you or the Company will be entitled to
               obtain from a court with jurisdiction over you and the Company
               preliminary and permanent injunctive relief to enjoin or restrict
               the other party from such breach or to enjoin or restrict a third
               party from inducing any such breach, and other appropriate
               relief, including money damages. In seeking any such relief,
               however, the moving party will retain the right to have any
               remaining portion of the controversy resolved by binding
               confidential arbitration in accordance with subparagraph (a)
               above.

<PAGE>   10

Mr. Russell R. Stern
October 7, 1999
Page 10

        (c)    The prevailing party in any such arbitration or court proceeding
               shall be entitled to recover from the losing party his or its
               reasonable costs and expenses incurred in connection with the
               arbitration or court proceeding.

17.     ASSIGNMENT. The rights and obligations of the Company under this
        Agreement shall inure to the benefit of and shall be binding upon the
        present and future subsidiaries of the Company, any and all subsidiaries
        of a subsidiary, all affiliated corporations, and successors and assigns
        of the Company. No assignment of this Agreement by the Company will
        relieve the Company of its obligations. You shall not assign any of your
        rights and/or obligations under this Agreement and any such attempted
        assignment will be void. This Agreement shall be binding upon and inure
        to the benefit of your heirs, executors, administrators, or other legal
        representatives and their legal assigns.

18.     WAIVER. A waiver by either you or the Company of any of the terms or
        conditions of this Agreement in any instance shall not be deemed or
        construed to be a waiver of such term or condition for the future, or of
        any subsequent breach thereof. All remedies, rights, undertakings,
        obligations, and agreements contained in this Agreement shall be
        cumulative, and none of them shall be in limitation of any other remedy,
        right, undertaking, obligation or agreement of either you or the
        Company.

19.     TAX CONSEQUENCES. The Company makes no representations or warranties
        with respect to the tax consequences of the payment of any sums to you
        under the terms of this Agreement. You agree and understand that you are
        responsible for payment, if any, of local, state and/or federal taxes on
        the sums paid hereunder by the Company and any penalties or assessments
        thereon.

20.     COSTS. Except as provided in Paragraph 16 hereof, you and the Company
        shall each bear your own costs, expert fees, attorneys' fees and other
        fees incurred in connection with this Agreement.

21.     NOTICES. All notices required by this Agreement shall by given in
        writing either by personal delivery or by first class mail, return
        receipt requested. Notices shall be addressed as follows:

        To Western Digital:         Western Digital Corporation
                                    8105 Irvine Center Drive

<PAGE>   11

Mr. Russell R. Stern
October 7, 1999
Page 11

                               Irvine, CA 92618
                               Attention:  Vice President, Human Resources

<PAGE>   12

Mr. Russell R. Stern
October 7, 1999
Page 12

        To Mr. Stern:        25502 Nellie Gail Road
                             Laguna Hills, CA 92653

or in each case to such other address as you or the Company shall notify the
other. Notice given by mail shall be deemed given five (5) days following the
date of mailing.

22.     ENTIRE AGREEMENT. This Agreement, including its Attachments, represents
        the entire agreement and understanding between you and the Company
        concerning the subject matter herein, and supersedes and replaces any
        and all prior agreements and understandings.

23.     NO ORAL MODIFICATION. This Agreement may only be amended by a writing
        signed by you and the Chief Executive Officer of the Company or the
        Chief Legal Officer of the Company.

24.     GOVERNING LAW. This Agreement shall be governed by the internal
        substantive laws, but not the choice of law rules, of the State of
        California.

25.     EFFECTIVE DATE. This Agreement is effective eight days after it has been
        signed by both you and the Company (the "Effective Date").

26.     COUNTERPARTS. This Agreement may be executed in counterparts, and each
        counterpart shall have the same force and effect as an original and
        shall constitute an effective, binding agreement on the part of you and
        the Company.

27.     VOLUNTARY EXECUTION OF AGREEMENT. This Agreement is executed by you
        voluntarily and without any duress or undue influence on the part or
        behalf of the Company, with the full intent of releasing all claims. You
        acknowledge that:

        (a)     you have read this Agreement;

        (b)     you have been represented in the preparation, negotiation, and
                execution of this Agreement by legal counsel of your own choice
                or that you have voluntarily declined to seek such counsel;

        (c)     you understand the terms and consequences of this Agreement and
                of the releases it contains; and

<PAGE>   13

Mr. Russell R. Stern
October 7, 1999
Page 13

        (d)     you are fully aware of the legal and binding effect of this
                Agreement.

Please indicate your agreement to the above by signing below.

Very truly yours,

WESTERN DIGITAL CORPORATION

Jack Van Berkel
Vice President
Human Resources

JVB:kl

I have read and agree to all terms and conditions as outlined above.

------------------------------------------------------------------------
Russell R. Stern                                   Date

<PAGE>   14

                                 ATTACHMENT "B"

                    SEPTEMBER 2000 - STATUS OF BENEFITS UPON
                  TERMINATION OF EMPLOYMENT - RUSSELL R. STERN

The following information is to help you understand the status of your benefits
if you are affected by a reduction in work force.

MEDICAL INSURANCE
Medical coverage continues until November 30, 2000

DENTAL INSURANCE
Dental coverage continues until November 30, 2000

VISION INSURANCE
Vision coverage continues until November 30, 2000

COBRA CONTINUATION COVERAGE
Continuation privileges may be available through COBRA for the medical, dental,
vision, and health care reimbursement plans you are enrolled in at the time of
termination. COBRA information and election forms will be mailed to you by the
COBRA administrator for Western Digital (COBRAPRO) within two weeks from your
last date of coverage.

LIFE INSURANCE
Life insurance coverage continues until November 30, 2000. Conversion privileges
to an individual policy are available after your coverage terminates. You must
apply with the insurance carrier within 31 days. Conversion forms are available
at the Benefits Department.

ACCIDENTAL DEATH AND DISMEMBERMENT INSURANCE (AD&D)
Accidental death and dismemberment insurance coverage continues until November
30, 2000 Conversion privileges to an individual policy are available after your
coverage terminates. You must apply with the insurance carrier within 31 days.
Conversion forms are available at the Benefits Department.

DEPENDENT LIFE INSURANCE
Dependent life insurance coverage continues until November 30, 2000. Conversion
privileges to an individual policy are available after your coverage terminates.
You must apply with the insurance carrier within 31 days. Conversion forms are
available at the Benefits Department.

<PAGE>   15

BUSINESS TRAVEL ACCIDENT COVERAGE
Business travel accident coverage will end on your last day actively at work for
Western Digital. Under the terms of the contract, no conversion privileges are
available.

LONG-TERM DISABILITY
Long-term disability coverage will end on your last day actively at work for
Western Digital. Conversion privileges to an individual policy are available by
completing an application and submitting the first quarterly premium within 31
days of our termination of group coverage. To qualify for conversion, you must
have been covered under the current group plan for 12 consecutive months.
Conversion forms are available at the Benefits Department.

SHORT-TERM DISABILITY
Short-term disability coverage will end on your last day actively at work for
Western Digital. Under the terms of the contract, no conversion privileges are
available.

REIMBURSEMENT ACCOUNTS
If contributions continue to be deducted from scheduled payments, Health Care
and Dependent Care Account claims may be reimbursed for ELIGIBLE EXPENSES
INCURRED UP TO THE LAST DAY OF YOUR BENEFITS COVERAGE. Money left over in the
account(s) at the end of the plan year (June 30) is forfeited. You will have a
90 day grace period (through January, 2001) to file a claim for reimbursement.
Send the claims to FlexPro, P. O. Box 5545, Orange, CA 92613. Telephone (949)
835-6752, Fax (949) 953-9404.

MANAGED HEALTH NETWORK (MHN)
The MHN program will continue for you and your dependents until November 30,
2000. The toll free number is 800-327-8399. However, if you elect COBRA
continuation, you may still be eligible to continue MHN benefits.

RETIREMENT SAVINGS (401(k) & PROFIT SHARING PLAN
As a participant in this plan, you will continue to participate in the plan
until September 29, 2000. The company match is effective until September 29,
2000. After that date, you will receive 100% of your employee account, plus 100%
of the profit sharing account, and the vested portion of the employer match
account.

For information regarding rollover or distribution of your account, call T. Rowe
Price at 800-922-9945. If you wish to withdraw your account from the plan,
simply return the termination package that will be sent to you from T. Rowe
Price. You may defer the withdrawal of your account until a future point in
time.

CONTRIBUTIONS CONTINUE: Contributions will continue to be deducted from wage
continuation payments unless you call T. Rowe Price at 800-922-9945 to suspend
your contributions.

<PAGE>   16

SAVINGS 401(k) PLAN LOANS: Bi-weekly loan payments will continue to be deducted
from wage continuation payments. You will choose one of the following options to
be effective after your last wage continuation payment: 1) continue making loan
payments, 2) repay the entire outstanding loan balance, or 3) elect final
distribution upon which any outstanding loan balance will be treated as a
taxable distribution. You must complete a Loan Repayment form indicating your
selection that will be provided in the T. Rowe Price termination package.

EMPLOYEE STOCK PURCHASE PLAN
You will continue to participate in ESPP through the next purchase dates in
January and August, 2000. Deductions for ESPP will be made from your wage
continuation checks. If you have previously purchased shares, then you can keep
or sell them as you wish.

STOCK OPTIONS
If you have received stock options, they will vest through your date of
termination from Western Digital in accordance with the plan provisions. Contact
Stasia Shirley at 949-932-5645 for more information.

VACATION
All earned but unused vacation will be paid by the first wage continuation
payment following your last day of active employment with Western Digital.

     Vacation Buy: The cost of the extra hours you have taken but not paid for
     will be subtracted from your final paycheck.

     Vacation Sell: The remaining amount and any accrued vacation that you
     haven't taken is paid to you. Exception: If you term with a negative
     vacation balance, the value of those hours will be subtracted from your
     final paycheck.

SICK LEAVE
All unused sick leave will be forfeited in accordance with the policy of Western
Digital.

EDUCATIONAL REIMBURSEMENT
If you have received prior educational approval for classes that have started,
but which you will not complete before your termination date, you are eligible
for reimbursement for the classes you are currently attending. Reimbursement
will be made following the company's receipt of proof that the class was
successfully completed based on the policy guidelines.

CREDIT UNION
Membership is lifetime and is not based on continuing employment with Western
Digital.

<PAGE>   17

CALIFORNIA STATE UNEMPLOYMENT BENEFITS
You can file an application for unemployment benefits immediately, however your
eligibility for benefits (as determined by the EDD- Employment Development
Department) will be delayed until after your last Wage Continuation payment
September 29, 2000.

If you have any questions, need to request forms, or need life conversion forms,
contact:

                                 WESTERN DIGITAL
                               BENEFITS DEPARTMENT
                            8105 IRVINE CENTER DRIVE
                                IRVINE, CA 92618
                                  949-932-5700

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