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                                                                   EXHIBIT 10.7



                                 August 31, 2000



Hutchinson Technology Incorporated
40 West Highland Park
Hutchinson, Minnesota 55350

         RE: Master Lease Agreement dated as of December 19, 1996, as amended
             ----------------------------------------------------------------

Gentlemen:

         This will confirm the collateral understanding which has been reached
between us with respect to the above-referenced Master Lease Agreement (the
"LEASE") between General Electric Capital Corporation ("LESSOR") and Hutchinson
Technology Incorporated ("LESSEE"). Capitalized terms used herein without
definition shall have the meaning given them in the Lease.

         Solely with respect to the Equipment Schedules specified on Exhibit No.
1 attached hereto (the "SPECIFIED SCHEDULES"), and solely to the extent the
Lease is incorporated by reference in the Specified Schedules, the parties
desire to waive noncompliance by Lessee with certain covenants under the Lease;
amend the provisions of the Lease; and confirm the exercise by Lessee of its
option to purchase the Equipment pursuant to the Lease.

         The interest of Lessor in certain Equipment Schedules executed pursuant
to the Lease has been assigned to Firstar Bank, N.A. (formerly known as Firstar
Leasing Services Corporation), The Fifth Third Leasing Company, The CIT
Group/Equipment Financing and SELCO Service Corporation (collectively,
"ASSIGNEES"). Assignees join herein to confirm their agreement to the provisions
hereof.

         In consideration of the sum of Ten Dollars ($10.00) in hand paid, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

         1. Effective upon satisfaction of the following specified conditions
precedent (such date being referred to as the "EFFECTIVE DATE"), solely with
respect to the Specified Schedules and the Lease to the extent incorporated by
reference in the Specified Schedules, Lessor and Assignees waive noncompliance
by Lessee with the provisions of Sections XXIV(b) and (c) of the Lease. The
foregoing waiver shall be effective upon satisfaction of the following
conditions precedent:

         (a) Lessee executes and returns to Lessor a copy of this letter
agreement;

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Hutchinson Technology Incorporated
August 31, 2000
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         (b) Lessee executes and delivers to Lessor the Letter of Credit
Agreement and causes to be issued to Lessor and each Assignee an irrevocable
standby letter of credit, referenced in Section 6 hereof; and

         (c) Lessee pays to Lessor and each Assignee the fee referenced in
Section 7 hereof.

         2. Lessee hereby notifies Lessor and Assignees that Lessee
unconditionally and irrevocably elects to purchase, on the FMV Special Purchase
Option Date with respect to each of the Specified Schedules, all (and not less
than all) of the Equipment leased under all such Specified Schedules executed
under the Lease, in accordance with the special purchase option specified in
Section XXIII of the Lease. The parties agree that, solely to the extent the
Lease is incorporated by reference in the Specified Schedules, the provisions of
Section XXIII are hereby amended, as and to the extent required to conform with
the foregoing unconditional and irrevocable exercise by Lessee of such special
purchase option with respect to all Specified Schedules, including, without
limitation, the provisions of Section XXIII(a) regarding the period of time
during which Lessee may give prior written irrevocable notice regarding its
exercise of such special purchase option.

         3. Effective on the Effective Date, solely to the extent the Lease is
incorporated by reference in the Specified Schedules, Sections V(g) and XXIV of
the Lease are deleted.

         4. Effective on the Effective Date, solely with respect to the
Specified Schedules and the Lease to the extent incorporated by reference in the
Specified Schedules, Lessor and Assignees waive compliance by Lessee with the
provisions of Section VI(b) of the Lease, solely to the extent that Lessee is
prohibited by such provisions from discontinuing the use of the Equipment for a
period in excess of six (6) consecutive months.

         5. Lessee represents and warrants that Lessee is not aware of any
claims, counterclaims, setoffs, actions or causes of actions, damages or
liabilities of any kind or nature whatsoever, whether at law or in equity, in
contract or in tort, whether now accrued or hereafter maturing (collectively,
"CLAIMS") against Lessor or any of the Assignees, or their respective direct or
indirect parent corporation or any direct or indirect affiliates of such parent
corporation, or any of their respective directors, officers, employees, agents,
attorneys and legal representatives, or the heirs, administrators, successors or
assigns of any of them (collectively, the "LESSOR PARTIES") that directly or
indirectly arise out of, are based upon or are in any manner connected with any
Prior Related Event (as defined below). As an inducement to Lessor and Assignees
to enter into this letter agreement, Lessee, and its successors and assigns,
hereby knowingly and voluntarily release and discharge all Lessor Parties from
any and all Claims, known to Lessee, that directly or indirectly arise out of,
are based upon or are in any manner connected with any Prior Related Event,
other than obligations of the Lessor Parties under the Lease. As used herein,
the term "PRIOR RELATED EVENT" means any transaction, event, circumstance,
action, failure to act, occurrence of any sort or type, known to Lessee, which
occurred, existed, was taken, was permitted or begun in accordance with,
pursuant to or by virtue

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August 31, 2000
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of any of the terms of the Lease or any documents executed in connection with
the Lease or which was related to or connect in any manner, directly or
indirectly, to the Lease and all Schedules thereto.

         6. On or before the date that is ten (10) business days after the date
of this letter agreement, Lessee shall execute and deliver to Lessor and
Assignees the Letter of Credit Agreement in substantially the form attached
hereto as Exhibit No. 2 and shall cause the issuance to Lessor and each Assignee
of an irrevocable standby letter of credit in compliance with the terms of the
Letter of Credit Agreement.

         7. Concurrently with the execution hereof, Lessee shall pay to Lessor
and each Assignee the fee specified in the separate fee letter between Lessee
and Lessor and each Assignee, respectively.

         8. Except as expressly set forth herein to the extent applicable with
respect to the Lease as incorporated by reference in the Specified Schedules,
the terms and conditions of the Lease remain unmodified and in full force and
effect.

         9. The parties acknowledge and agree that, to the extent the Lease is
incorporated by reference in any Equipment Schedule executed pursuant thereto
other than the Specified Schedules, the terms and conditions of the Lease remain
unmodified and in full force and effect.

         If the foregoing accurately sets forth our understanding with respect
to the subject matter hereof, please sign and return the enclosed copy of this
letter and it will constitute an amendment of the Lease, solely to the extent
the Lease is incorporated by reference in the Specified Schedules, pursuant to
Section XX (f) thereof.

         This letter may be executed in any number of counterparts, and by
different parties hereto on separate counterparts or signature pages, each of
which shall be deemed an original, but all of which constitute one and the same
instrument, and this letter shall be binding on all of the parties hereto, even
though such parties do not sign the same counterpart or signature page.

         WITNESS the following signatures:


                                       GENERAL ELECTRIC CAPITAL
                                       CORPORATION

                                       By:  /s/  Timothy Perusek
                                          --------------------------------------
                                       Name:  Timothy B. Perusek
                                            ------------------------------------
                                       Title: Senior Risk Manager
                                             -----------------------------------


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Hutchinson Technology Incorporated
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FIRSTAR BANK, N.A. (formerly known as Firstar Leasing Services Corporation)

                                       By:  /s/  Robert J. Stark
                                          --------------------------------------
                                       Name:  Robert J. Stark
                                            ------------------------------------
                                       Title:  Vice President
                                             -----------------------------------


                                       THE FIFTH THIRD LEASING COMPANY

                                       By:  /s/  William M. Thurman
                                          --------------------------------------
                                       Name:  William M. Thurman
                                            ------------------------------------
                                       Title:  Vice President
                                             -----------------------------------


                                       SELCO SERVICE CORPORATION

                                       By:  /s/  H. Russell Wilks
                                          --------------------------------------
                                       Name:  H. Russell Wilks
                                            ------------------------------------
                                       Title:  Vice President
                                             -----------------------------------


                                       THE CIT GROUP/EQUIPMENT FINANCING

                                       By:  /s/  Daniel E. A. Nichols
                                          --------------------------------------
                                       Name:  Daniel E. A. Nichols
                                            ------------------------------------
                                       Title:  Assistant Vice President
                                             -----------------------------------


AGREED:

HUTCHINSON TECHNOLOGY INCORPORATED

By:  /s/  Ruth N. Bauer
    ----------------------------------------
Name:  Ruth Bauer
     ---------------------------------------
Title:  Treasurer
      --------------------------------------


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