Document:

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                                                                    EXHIBIT 10.1

                             BRIO TECHNOLOGY, INC.

                            1998 STOCK OPTION PLAN
                            ----------------------

                      (As amended as of August 24, 2000)

     1.   Purposes of the Plan.  The purposes of this Stock Option Plan are to
          --------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.

          Options granted hereunder may be either Incentive Stock Options (as
defined under Section 422 of the Code) or Nonstatutory Stock Options, at the
discretion of the Board and as reflected in the terms of the written option
agreement.

     2.   Definitions.  As used herein, the following definitions shall apply:
          -----------

          (a) "Administrator" shall mean the Board or any of its Committees
               -------------
appointed pursuant to Section 4 of the Plan.

          (b) "Affiliate" shall mean an entity other than a Subsidiary (as
               ---------
defined below) in which the Company owns an equity interest.

          (c) "Applicable Laws" shall have the meaning set forth in Section 4(a)
               ---------------
below.

          (d) "Board" shall mean the Board of Directors of the Company.
               -----

          (e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
               ----

          (f) "Committee" shall mean the Committee appointed by the Board of
               ---------
Directors in accordance with Section 4(a) of the Plan, if one is appointed.

          (g) "Common Stock" shall mean the Common Stock of the Company.
               ------------

          (h) "Company" shall mean Brio Technology, Inc., a Delaware
               -------
corporation.

          (i) "Consultant" means any person, including an advisor, who is
               ----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any Director of the Company whether
compensated for such services or not.

          (j) "Continuous Status as an Employee or Consultant" shall mean the
               ----------------------------------------------
absence of any interruption or termination of service as an Employee or
Consultant.  Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Administrator; provided that such leave is for
                                                --------
a period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.  For purposes of this Plan, a change
in status from an Employee
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to a Consultant or from a Consultant to an Employee will not constitute a
termination of employment.

          (k) "Director" shall mean a member of the Board.
               --------

          (l) "Employee" shall mean any person (including any Named Executive,
               --------
Officer or Director) employed by the Company or any Parent, Subsidiary or
Affiliate of the Company.  The payment by the Company of a director's fee to a
Director shall not be sufficient to constitute "employment" of such Director by
the Company.

          (m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
               ------------
amended.

          (n) "Fair Market Value" means, as of any date, the value of Common
               -----------------
Stock determined as follows:

              (i)   If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
price for such stock as quoted on such system on the date of determination (if
for a given day no sales were reported, the closing bid on that day shall be
used), as such price is reported in The Wall Street Journal or such other source
as the Administrator deems reliable;

              (ii)  If the Common Stock is quoted on the Nasdaq System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the bid and asked prices for the Common Stock or;

              (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (o) "Incentive Stock Option" shall mean an Option intended to qualify
               ----------------------
as an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.

          (p) "Named Executive" shall mean any individual who, on the last day
               ---------------
of the Company's fiscal year, is the chief executive officer of the Company (or
is acting in such capacity) or among the four highest compensated officers of
the Company (other than the chief executive officer).  Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.

          (q) "Nonstatutory Stock Option" shall mean an Option not intended to
               -------------------------
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.

                                      -2-
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          (r) "Officer" shall mean a person who is an officer of the Company
               -------
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

          (s) "Option" shall mean a stock option granted pursuant to the Plan.
               ------

          (t) "Optioned Stock" shall mean the Common Stock subject to an Option.
               --------------

          (u) "Optionee" shall mean an Employee or Consultant who receives an
               --------
Option.

          (v) "Parent" shall mean a "parent corporation," whether now or
               ------
hereafter existing, as defined in Section 424(e) of the Code.

          (w) "Plan" shall mean this 1998 Stock Option Plan.
               ----

          (x) "Rule 16b-3" shall mean Rule 16b-3 promulgated under the Exchange
               ----------
Act as the same may be amended from time to time, or any successor provision.

          (y) "Share" shall mean a share of the Common Stock, as adjusted in
               -----
accordance with Section 14 of the Plan.

          (z) "Subsidiary" shall mean a "subsidiary corporation," whether now or
               ----------
hereafter existing, as defined in Section 424(f) of the Code.

     3.   Stock Subject to the Plan.  Subject to the provisions of Section 14 of
          -------------------------
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 9,862,087 Shares, plus an annual increase on the first day of
each of the Company's fiscal years in 2001, 2002 and 2003 equal to the lesser of
1,000,000 Shares or four percent (4%) of the Shares outstanding on the last day
of the immediately preceding fiscal year.  The Shares may be authorized, but
unissued, or reacquired Common Stock.

     If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares that were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.  Notwithstanding any other provision of the Plan, shares
issued under the Plan and later repurchased by the Company shall not become
available for future grant under the Plan.

     4.   Administration of the Plan.
          --------------------------

          (a) Composition of Administrator.
              ----------------------------

              (i) Multiple Administrative Bodies.  If permitted by Rule 16b-3,
                  ------------------------------
and by the legal requirements relating to the administration of incentive stock
option plans, if any, of applicable securities laws and the Code (collectively,
the "Applicable Laws"), grants under the Plan may (but need not) be made by
     ---------------
different administrative bodies with respect to Directors, Officers who are not
directors and Employees who are neither Directors nor Officers.

                                      -3-
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               (ii)  Administration with respect to Directors and Officers.
                     -----------------------------------------------------
With respect to grants of Options to Employees or Consultants who are also
Officers or Directors of the Company, grants under the Plan shall be made by (A)
the Board, if the Board may make grants under the Plan in compliance with Rule
16b-3 and Section 162(m) of the Code as it applies so as to qualify grants of
Options to Named Executives as performance-based compensation, or (B) a
Committee designated by the Board to make grants under the Plan, which Committee
shall be constituted in such a manner as to permit grants under the Plan to
comply with Rule 16b-3, to qualify grants of Options to Named Executives as
performance-based compensation under Section 162(m) of the Code and otherwise so
as to satisfy the Applicable Laws.

               (iii) Administration with respect to Other Persons.  With respect
                     --------------------------------------------
to grants of Options to Employees or Consultants who are neither Directors nor
Officers of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee designated by the Board, which Committee shall be constituted in
such a manner as to satisfy the Applicable Laws.

               (iv)  General.  If a Committee has been appointed pursuant to
                     -------
subsection (ii) or (iii) of this Section 4(a), such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board.  From
time to time the Board may increase the size of any Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies (however caused) and remove
all members of a Committee and thereafter directly administer the Plan, all to
the extent permitted by the Applicable Laws and, in the case of a Committee
appointed under subsection (ii), to the extent permitted by Rule 16b-3, and to
the extent required under Section 162(m) of the Code to qualify grants of
Options to Named Executives as performance-based compensation.

          (b)  Powers of the Administrator.  Subject to the provisions of the
               ---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:

               (i)   to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;

               (ii)  to select the Employees and Consultants to whom Options may
from time to time be granted hereunder;

               (iii) to determine whether and to what extent Options are
granted hereunder;

               (iv)  to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

               (v)   to approve forms of agreement for use under the Plan;

               (vi)  to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price

                                      -4-

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and any restriction or limitation, or any vesting acceleration or waiver of
forfeiture restrictions regarding any Option and/or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator shall
determine, in its sole discretion);

               (vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted.

          (c)  Effect of Administrator's Decision.  All decisions,
               ----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.

     5.   Eligibility.
          -----------

          (a)  Recipients of Grants.  Nonstatutory Stock Options may be granted
               --------------------
to Employees and Consultants.  Incentive Stock Options may be granted only to
Employees, provided, however, that Employees of an Affiliate shall not be
           --------  -------
eligible to receive Incentive Stock Options.  An Employee or Consultant who has
been granted an Option may, if he or she is otherwise eligible, be granted an
additional Option or Options.

          (b)  Type of Option.  Each Option shall be designated in the written
               --------------
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option.  However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the time the Option with respect to such
Shares is granted.

          (c)  No Employment Rights.  The Plan shall not confer upon any
               --------------------
Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.

     6.   Term of Plan.  The Plan shall become effective upon the earlier to
          ------------
occur of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 20 of the Plan.  It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 16 of the Plan.

     7.   Term of Option.  The term of each Option shall be the term stated in
          --------------
the Option Agreement; provided, however, that in the case of an Incentive Stock
                      --------  -------
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Incentive Stock Option granted to an Optionee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or

                                      -5-
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Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.

     8.  Limitation on Grants to Employees.  Subject to adjustment as provided
         ---------------------------------
in this Plan, the maximum number of Shares which may be subject to options
granted to any one Employee under this Plan for any fiscal year of the Company
shall be 3,200,000.

     9.  Option Exercise Price and Consideration.
         ---------------------------------------

         (a)   Exercise Price.  The per Share exercise price for the Shares to
               --------------
be issued pursuant to exercise of an Option shall be such price as is determined
by the Administrator, but shall be subject to the following:

               (i)   In the case of an Incentive Stock Option

                     (A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant; or

                     (B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.

               (ii)  In the case of a Nonstatutory Stock Option

                     (A) granted to a person who, at the time of the grant of
such Option, is a Named Executive of the Company, the per share Exercise Price
shall be no less than 100% of the Fair Market Value on the date of grant; or

                     (B) granted to any person other than a Named Executive, the
per Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant.

               (iii) Notwithstanding anything to the contrary in subsections
9(a)(i) or 9(a)(ii) above, in the case of an Option granted on or after the
effective date of registration of any class of equity security of the Company
pursuant to Section 12 of the Exchange Act and prior to six months after the
termination of such registration, the per Share exercise price shall be no less
than 100% of the Fair Market Value per Share on the date of grant.

          (b)  Permissible Consideration.  The consideration to be paid for the
               -------------------------
Shares to be issued upon exercise of an Option, including the method of payment,
shall be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash, (2) other Shares that (x) in the case of Shares acquired upon exercise
of an Option either have been owned by the Optionee for more than six months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, or (3) such other consideration and method

                                      -6-
<PAGE>

of payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.

     10.  Exercise of Option.
          ------------------

          (a)  Procedure for Exercise; Rights as a Stockholder.  Any Option
               -----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.  Unless the Administrator provides otherwise, vesting of Options
granted hereunder shall be tolled during any unpaid leave of absence.  An Option
may not be exercised for a fraction of a Share.

          An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company.  Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option.  The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option.  No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 14 of the Plan.

          Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

          (b)  Termination of Status as an Employee or Consultant.  In the event
               --------------------------------------------------
of termination of an Optionee's Continuous Status as an Employee or Consultant,
such Optionee may, but only within thirty (30) days (or such other period of
time, not exceeding three (3) months in the case of an Incentive Stock Option or
six (6) months in the case of a Nonstatutory Stock Option, as is determined by
the Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of grant of the Option) after the date of such
termination (but in no event later than the date of expiration of the term of
such Option as set forth in the Option Agreement), exercise his or her Option to
the extent that he or she was entitled to exercise it at the date of such
termination.  To the extent that the Optionee was not entitled to exercise the
Option at the date of such termination, or if the Optionee does not exercise
such Option (which he or she was entitled to exercise) within the time specified
herein, the Option shall terminate.

          (c)  Disability of Optionee.  Notwithstanding Section 10(b) above, in
               ----------------------
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his or her total and permanent disability (as defined
in Section 22(e)(3) of the Code), he

                                      -7-
<PAGE>

or she may, but only within six (6) months (or such other period of time not
exceeding twelve (12) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) from the date of such termination (but in no event later
than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent he or she was
entitled to exercise it at the date of such termination. To the extent that he
or she was not entitled to exercise the Option at the date of termination, or if
he does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.

          (d)  Death of Optionee.  In the event of the death of an Optionee:
               -----------------

               (i)  during the term of the Option who is at the time of his
death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised, at any time within six (6) months (or such
other period of time, not exceeding twelve (12) months, as is determined by the
Administrator, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) following the date of death (but
in no event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance but only to
the extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or Consultant
three (3) months (or such other period of time as is determined by the
Administrator as provided above) after the date of death, subject to the
limitation set forth in Section 5(b); or

               (ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the termination of Continuous Status as an Employee
or Consultant, the Option may be exercised, at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination.

          (e)  Rule 16b-3.  Options granted to persons subject to Section 16(b)
               ----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

     11.  Withholding Taxes.  As a condition to the exercise of Options granted
          -----------------
hereunder, the Optionee shall make such arrangements as the Administrator may
require for the satisfaction of any federal, state, local or foreign withholding
tax obligations that may arise in connection with the exercise, receipt or
vesting of such Option.  The Company shall not be required to issue any Shares
under the Plan until such obligations are satisfied.

     12.  Stock Withholding to Satisfy Withholding Tax Obligations.  At the
          --------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this

                                      -8-
<PAGE>

paragraph. When an Optionee incurs tax liability in connection with an Option
which tax liability is subject to tax withholding under applicable tax laws, and
the Optionee is obligated to pay the Company an amount required to be withheld
under applicable tax laws, the Optionee may satisfy the withholding tax
obligation by one or some combination of the following methods: (a) by cash
payment, or (b) out of Optionee's current compensation, or (c) if permitted by
the Administrator, in its discretion, by surrendering to the Company Shares that
(i) in the case of Shares previously acquired from the Company, have been owned
by the Optionee for more than six months on the date of surrender, and (ii) have
a fair market value on the date of surrender equal to the amount required to be
withheld, or (d) by electing to have the Company withhold from the Shares to be
issued upon exercise of the Option that number of Shares having a fair market
value equal to the amount required to be withheld. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date"). If the
                                                           --------
Administrator allows the withholding or surrender of Shares to satisfy a
Participant's tax withholding obligations under this Section 12, the
Administrator shall not allow Shares to be withheld in an amount that exceeds
the minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes.

          Any surrender by an Officer or Director of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.

          All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:

          (a) the election must be made on or prior to the applicable Tax Date;

          (b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and

          (c) all elections shall be subject to the consent or disapproval of
the Administrator.

          In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.

     13.  Non-Transferability of Options.  The Option may not be sold, pledged,
          ------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution; provided that the Administrator
                                                --------
may in its discretion grant transferable Nonstatutory Stock Options pursuant to
option agreements specifying (i) the manner in which such Nonstatutory Stock
Options are transferable and (ii) that any such transfer shall be subject to the
Applicable Laws.  The designation of a beneficiary by an Optionee will not
constitute a transfer.  An Option may be exercised, during the lifetime of the
Optionee, only by the Optionee or a transferee permitted by this Section 13.

                                      -9-
<PAGE>

     14.  Adjustments Upon Changes in Capitalization; Corporate Transactions.
          ------------------------------------------------------------------

          (a) Adjustment.  Subject to any required action by the stockholders of
              ----------
the Company, the number of shares of Common Stock covered by each outstanding
Option, the number of shares of Common Stock that have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, the maximum number of shares of Common Stock for which Options may be
granted to any employee under Section 8 of the Plan, and the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration."  Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive.  Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.

          (b) Corporate Transactions.  In the event of the proposed dissolution
              ----------------------
or liquidation of the Company, the Option will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Administrator.  The Administrator may, in the exercise of its sole discretion in
such instances, declare that any Option shall terminate as of a date fixed by
the Administrator and give each Optionee the right to exercise his or her Option
as to all or any part of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable.  In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Administrator
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to some or all of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.  If the Administrator makes an
Option exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that the
Option shall be exercisable for a period of thirty (30) days from the date of
such notice, and the Option will terminate upon the expiration of such period.

     15.  Time of Granting Options.  The date of grant of an Option shall, for
          ------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option or such other date as is determined by the Administrator;
provided however that in the case of any Incentive Stock Option, the grant date
-------- -------
shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company.  Notice of the

                                      -10-
<PAGE>

determination shall be given to each Employee or Consultant to whom an Option is
so granted within a reasonable time after the date of such grant.

     16.  Amendment and Termination of the Plan.
          -------------------------------------

          (a)  Amendment and Termination.  The Board may amend or terminate the
               -------------------------
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the stockholders of the Company in the manner described in Section 20 of the
Plan:

               (i)   any increase in the number of Shares subject to the Plan,
other than an adjustment under Section 14 of the Plan;

               (ii)  any change in the designation of the class of persons
eligible to be granted Options; or

               (iii) any change in the limitation on grants to employees as
described in Section 8 of the Plan or other changes which would require
stockholder approval to qualify options granted hereunder as performance-based
compensation under Section 162(m) of the Code.

          (b)  Stockholder Approval.  If any amendment requiring stockholder
               --------------------
approval under Section 16(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section 12
of the Exchange Act, such stockholder approval shall be solicited as described
in Section 20 of the Plan.

          (c)  Effect of Amendment or Termination.  Any such amendment or
               ----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

     17.  Conditions Upon Issuance of Shares.  Shares shall not be issued
          ----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

          As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

                                      -11-
<PAGE>

     18.  Reservation of Shares.  The Company, during the term of this Plan,
          ---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.  The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

     19.  Option Agreement.  Options shall be evidenced by written option
          ----------------
agreements in such form as the Board shall approve.

     20.  Stockholder Approval.
          --------------------

          (a) Continuance of the Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months before or after the date
the Plan is adopted.  Such stockholder approval shall be obtained in the manner
and to the degree required under applicable federal and state law and the rules
of any stock exchange upon which the Shares are listed.

          (b) In the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the stockholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.

          (c) If any required approval by the stockholders of the Plan itself or
of any amendment thereto is solicited at any time otherwise than in the manner
described in Section 20(b) hereof, then the Company shall, at or prior to the
first annual meeting of stockholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an
officer or director after such registration, do the following:

              (i)  furnish in writing to the holders entitled to vote for the
Plan substantially the same information that would be required (if proxies to be
voted with respect to approval or disapproval of the Plan or amendment were then
being solicited) by the rules and regulations in effect under Section 14(a) of
the Exchange Act at the time such information is furnished; and

              (ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in subsection (i)
hereof not later than the date on which such information is first sent or given
to stockholders.

                                      -12-<PAGE>

                                                                     Exhibit 4.5

                           STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT is made as of the 14th day of November 2000,
by and between Read-Rite Corporation (the "Company"), a corporation organized
under the laws of the State of Delaware, with its principal offices at 44100
Osgood Road, Fremont California 94539, and the purchaser whose name and address
is set forth on the signature page hereof (the "Purchaser").

     IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchaser agree as follows:

     SECTION 1. Authorization of Sale of the Shares. Subject to the terms and
                -----------------------------------
conditions of this Agreement, the Company has authorized the sale of up to
2,700,000 shares of common stock (the "Shares"), par value $0.0001 per share
(the "Common Stock"), of the Company.

     SECTION 2. Agreement to Sell and Purchase the Shares. At the Closing (as
                -----------------------------------------
defined in Section 3), the Company shall sell to the Purchaser, and the
Purchaser shall buy from the Company, upon the terms and conditions hereinafter
set forth, the number of Shares (at the purchase price) shown below:

                                      Price Per
       Number Shares to Be            Share In                   Aggregate
           Purchased                  Dollars                      Price
           ---------                  -------                      -----

           2,700,000                    $7.00                   $18,900,000

     SECTION 3. Delivery of the Shares at the Closing. (a) The completion of the
                -------------------------------------
purchase and sale of the portion of the Shares to be purchased by the Purchaser
(the "Closing") shall occur on the date immediately following execution and
delivery of this Agreement at the offices of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304-1050,
at such time and date to be agreed upon by the Company and the Purchaser (the
"Closing Date").

                (b)  At the Closing, the Company shall deliver to the Purchaser
two stock certificates registered in the name of the Purchaser, or in such
nominee name(s) as designated by the Purchaser in writing, with one certificate
representing 2,160,000 Shares and the other certificate representing 540,000
Shares. The name(s) in which the stock certificates are to be registered are set
forth in the Stock Certificate Questionnaire attached hereto as part of Appendix
I. Prior to the Purchaser's delivery of payment for the Shares, the Company
shall deliver via facsimile a copy of the stock certificates to be issued to the
Purchaser upon the Closing. The Company's obligation to complete the purchase
and sale of the Shares and deliver such stock certificates to the Purchaser at
the Closing shall be subject to the following conditions: (i) receipt by the
Company of same-day funds in the full amount of the purchase price for the
Shares being purchased hereunder; and (ii) the accuracy of the representations
and warranties made by the Purchaser as if made on the day of such Closing and
the fulfillment of those undertakings of the Purchaser to be fulfilled prior to
the Closing. The Purchaser's
<PAGE>

obligation to accept delivery of such stock certificates and to pay for the
Shares evidenced thereby shall be subject only to the following conditions: (A)
the accuracy in all material respects of the representations and warranties made
by the Company herein and the fulfillment in all material respects of those
undertakings of the Company to be fulfilled prior to Closing and (B) the
delivery by Wilson Sonsini Goodrich & Rosati, counsel to the Company, to the
Purchaser of a legal opinion in substantially the form attached hereto as
Exhibit A.

     SECTION 4. Representations and Warranties of the Company. The Company
                ----------------------------------------------
hereby represents and warrants as of the date hereof and as of the Closing to
the Purchaser as follows:

          4.1   Organization and Standing. The Company is a corporation duly
                -------------------------
organized and validly existing under the laws of the State of Delaware and is in
good standing under such laws. The Company has all requisite corporate power to
own and operate its properties and assets, and to carry on its business as
presently conducted. The Company is qualified to do business as a foreign
corporation in the State of California. Such qualification is not presently
required in any other jurisdiction where a failure to so qualify would have a
material adverse effect on the business, financial position or results of
operations of the Company ("Material Adverse Effect").

          4.2   Capitalization. The authorized capital stock of the Company
                --------------
consists of 160,000,000 shares of Common Stock and 4,000,000 shares of Preferred
Stock. Approximately 115,193,182 shares of Common Stock are issued and
outstanding. No shares of Preferred Stock are issued and outstanding. All such
issued and outstanding shares have been duly authorized and validly issued, and
are fully paid and nonassessable. Options to purchase 14,010,043 shares of the
Company's Common Stock are outstanding under all of the Company's stock option
plans, and 2,006,007 shares are available for future grant under these Plans.
The Company has issued 2,598,380 shares of Common Stock under its Employee Stock
Purchase Plan and 901,620 shares are available for future issuance. Except as
disclosed in the Company SEC Documents (as defined below), and with the
exception of certain shares of Common Stock, warrants, and other instruments
convertible or otherwise exchangeable into shares of Common Stock solely in
connection with third-party investment in a new business venture of the Company,
there are no other options, warrants, conversion privileges, or preemptive or
other rights or agreements presently outstanding to purchase or otherwise
acquire any authorized but unissued shares of the capital stock or other
securities of the Company.

          4.3   Authority. The Company has full power and authority to execute
                ---------
and deliver this Agreement, and to consummate the transactions contemplated by
this Agreement. All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the execution and delivery of, and the
consummation of the transactions contemplated by, this Agreement. This
Agreement, upon execution and delivery by the Company and assuming the due and
proper execution and delivery by the Purchaser, constitutes a legal, valid and
binding obligation of the Company, enforceable in accordance with its respective
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors rights generally, and (ii) the effect of rules of law
governing the availability of specific performance and other equitable remedies.

                                      -2-
<PAGE>

          4.4  Valid Issuance of Common Stock. The Common Stock to be sold
               ------------------------------
hereby has been duly authorized and, when issued, delivered and paid for in the
manner set forth in this Agreement, shall be duly authorized, validly issued,
fully paid and nonassessable, and shall be free of restrictions on transfer
other than restrictions on transfer under this Agreement and under applicable
state and federal securities laws. No preemptive rights, anti-dilution rights or
other rights to subscribe for or purchase exist with respect to the issuance and
sale of the Common Stock by the Company pursuant to this Agreement. No
stockholder of the Company has any right (which has not been waived or has not
expired by reason of lapse of time following the notification of the Company's
intent to file the Registration Statement (as defined below)) to request or
require the Company to register the sale of any shares owned by such stockholder
under the Securities Act of 1933, as amended (the "Securities Act"), in the
Registration Statement.

          4.5  Governmental Consents. Other than compliance with the Securities
               ---------------------
Act and other state or federal securities laws, and such filings as may be
required to be made under such laws or with the National Association of
Securities Dealers (the "NASD"), which shall be complied with and made at or
prior to the Closing, no consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement.

          4.6  Conflicts. The execution and delivery of this Agreement shall not
               ---------
conflict with or result in a material breach of the terms, conditions or
provisions of, or constitute a material default under, any material contract,
material covenant or material instrument under which the Company is now
obligated.

          4.7  SEC Documents. The Company has filed each statement, annual,
               -------------
quarterly and other report, registration statement and definitive proxy
statement ("Company SEC Documents") required to be filed (other than preliminary
material) by the Company with the SEC. As of their respective filing dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and none of the Company SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by any subsequently filed Company SEC Document.

          4.8  Changes. Since June 30, 2000, there has not been any event or
               -------
condition that would reasonably likely result in a Material Adverse Effect.

          4.9  Litigation. Other than as disclosed and discussed in the
               ----------
Company's annual filings with the SEC, there is no pending or, to the Company's
knowledge, threatened lawsuit, administrative proceeding, arbitration, patent or
licensing challenge or infringement, labor dispute or governmental investigation
to which the Company is a party or by which any material portion of its assets,
taken as a whole, may be bound, which, if adversely determined, would have a
Material Adverse Effect.

                                      -3-
<PAGE>

    SECTION 5. Representations and Warranties of the Purchaser. The Purchaser
               -----------------------------------------------
hereby represents and warrants as of the date hereof and as of the Closing to
the Company as follows:

          5.1  Organization and Standing. The Purchaser is an independent state
               -------------------------
agency created under and validly existing under the laws of the State of
Wisconsin. The Purchaser has all requisite corporate power to own and operate
its properties and assets, and to carry on its business as presently conducted.

          5.2  Authority. The Purchaser has full power and authority to execute
               ---------
and deliver, and to consummate the transactions contemplated by this Agreement.
All corporate action on the part of the Purchaser, its officers, directors and
stockholders necessary for the execution and delivery of, and the consummation
of the transactions contemplated by, this Agreement. This Agreement, upon
execution and delivery by the Purchaser and assuming the due and proper
execution and delivery by the Company, constitutes a legal, valid and binding
obligation of the Purchaser, enforceable in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors rights generally, and (ii) the effect of rules of law governing the
availability of equitable remedies.

          5.3  Purchase Entirely for Own Account. This Agreement is made with
               ---------------------------------
the Purchaser in reliance upon the Purchaser's representation to the Company,
which by the Purchaser's execution of this Agreement, the Purchaser hereby
confirms, that the Shares shall be acquired for investment for the Purchaser's
own account, not as a nominee or agent, and not with a view to the distribution
of any part thereof, and that the Purchaser has no present intention of selling,
granting any participation in, or otherwise taking an action that would
constitute a distribution of the same.

          5.4  Disclosure of Information. The Purchaser has received all the
               -------------------------
information it considers necessary or appropriate for deciding whether to
purchase the Common Stock. The Purchaser further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Common Stock and the business,
properties, prospects and financial condition of the Company.

          5.5  Investment Experience. The Purchaser acknowledges that it is able
               ---------------------
to fend for itself, can bear the economic risk of its investment, and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment in the Common Stock. The
Purchaser has not been organized for the purpose of acquiring the Common Stock.

          5.6  Accredited Investor. The Purchaser is an "accredited investor"
               -------------------
within the meaning of Rule 501 of Regulation D, promulgated under the Securities
Act.

          5.7  Restricted Securities. The Purchaser understands that the Shares
               ---------------------
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this connection,

                                      -4-
<PAGE>

the Purchaser represents that it is familiar with SEC Rule 144 or Rule 144A, as
presently in effect, and understands the resale limitations imposed thereby and
by the Securities Act.

    SECTION 6. Survival of Representations, Warranties and Agreements.
               ------------------------------------------------------
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein shall survive until the third anniversary of the Closing.

    SECTION 7. Covenants of the Company.
               ------------------------

          7.1  Sale of Common Stock. The Company shall not, from the Closing
               --------------------
Date until after the date which is 90 days after the Closing Date, sell (a)
shares of Common Stock at a price per share less than $7.00 or (b) options,
warrants, convertible securities or any other instruments convertible or
otherwise exchangeable into shares of Common Stock at a price per share less
than $7.00; provided, however, that (i) the Company may issue stock at a price
per share equal to the then current fair market value pursuant to the Company's
stock option plans; (ii) the Company may issue stock at a discount of 15% below
the then current fair market value pursuant to the Employee Stock Purchase Plan;
and (iii) the Company may sell or issue shares of Common Stock at a price less
than $7.00 per share and options, warrants, convertible securities and any other
instruments convertible or otherwise exchangeable into shares of Common Stock at
a price per share less than $7.00, if such transaction is connected with an
investment in the Company's new business venture.

    SECTION 8. Covenants of the Purchaser.
               --------------------------

          8.1  Limitations on Disposition. Without in any way limiting any other
               --------------------------
provision set forth herein, the Purchaser further agrees not to make any
disposition of all or any portion of the Shares unless and until:

               (a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement;

               (b) Such disposition shall be permitted under the provisions of
Rule 144; or

               (c) There is a valid exemption from registration under the
Securities Act and other applicable securities laws and, if requested by the
Company, the Purchaser shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition shall not
require registration.

          8.2  Prospectus Delivery. The Purchaser hereby covenants with the
               -------------------
Company not to make any sale of the Shares under a registration statement
without effectively causing the prospectus delivery requirement under the
Securities Act to be satisfied. The Purchaser acknowledges and agrees that the
Shares are not transferable on the books of the Company pursuant to a resale
under a registration statement unless the certificate submitted to the transfer
agent evidencing the Shares is accompanied by a separate officer's certificate,
(a) which may be in the form of Appendix II hereto, (b) executed by an officer
of, or other authorized person

                                      -5-
<PAGE>

designated by, the Purchaser, and (c) to the effect that (i) the Shares have
been sold in accordance with the registration statement and (ii) the requirement
of delivering a current prospectus has been satisfied. The Purchaser
acknowledges that there may occasionally be times when the Company must suspend
the use of the prospectus forming a part of the registration statement until
such time as an amendment to the registration statement has been filed by the
Company and declared effective by the Securities and Exchange Commission (the
"Commission"), or until such time as the Company has filed an appropriate report
with the Commission pursuant to the Exchange Act. The Purchaser hereby covenants
that it shall not sell any Shares pursuant to such prospectus during the period
commencing at the time at which the Company gives the Purchaser written notice
of the suspension of the use of such prospectus and ending at the time the
Company gives the Purchaser written notice that the Purchaser may thereafter
effect sales pursuant to such prospectus and any amendments thereto. In no event
shall the Company suspend the use of the Prospectus for periods exceeding 45
days during any 12-month period.

     SECTION 9.  Legends. Each certificate or instrument representing Shares
                 -------
delivered at the Closing shall bear legends in substantially the following
forms:

                    (i)  "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
     NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT')
     AND ARE 'RESTRICTED SECURITIES' AS DEFINED IN RULE 144 PROMULGATED UNDER
     THE SECURITIES ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
     OTHERWISE DISTRIBUTED EXCEPT (I) IN CONJUNCTION WITH AN EFFECTIVE
     REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR (II)
     IN COMPLIANCE WITH RULE 144, OR (III) PURSUANT TO AN OPINION OF COUNSEL
     SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH REGISTRATION OR
     COMPLIANCE IS NOT REQUIRED AS TO SUCH SALE, OFFER OR DISTRIBUTION."

                    (ii) Any other legends required by California law or other
     applicable blue sky or state securities laws.

The Company need not register a transfer of any Shares, and may also instruct
its transfer agent not to register a transfer of any Shares, unless the
conditions specified in the foregoing legends are satisfied to the extent
applicable.

     SECTION 10. Registration of the Shares; Compliance with the Securities Act.
                 --------------------------------------------------------------

          10.1   Registration Procedures and Expenses. The Company shall:
                 ------------------------------------

                 (a)  within 30 business days after the Closing Date, prepare
                      and file with the Commission a registration statement on
                      Form S-3 (the "Registration Statement") relating to the
                      sale of the Shares by the Purchaser on the Nasdaq National
                      Market or the facilities of any

                                      -6-
<PAGE>

                      national securities exchange on which the Common Stock is
                      then traded or in privately-negotiated transactions;

                 (b)  use its reasonable best efforts, subject to receipt of
                      necessary information from the Purchaser, to cause the
                      staff of the Commission to notify the Company of the
                      staff's willingness to grant acceleration of the effective
                      date of the Registration Statement within 60 days after
                      the Registration Statement is filed by the Company;

                 (c)  promptly notify the Purchaser upon the Registration
                      Statement being declared effective by the Commission;

                 (d)  provide to the Purchaser any information necessary to
                      permit sale of the Shares under Rule 144 or Rule 144A of
                      the Securities Act.

                 (e)  prepare and file with the Commission such amendments and
                      supplements to the Registration Statement and the
                      prospectus used in connection therewith as may be
                      necessary to keep the Registration Statement effective
                      until the date on which the Shares may be resold in any
                      three-month period by the Purchaser without registration
                      and without any restrictions by reason of Rule 144(k)
                      under the Securities Act or any other rule of similar
                      effect;

                 (f)  promptly furnish to the Purchaser with respect to the
                      Shares registered under the Registration Statement (and to
                      each underwriter, if any, of such Shares) such number of
                      copies of prospectuses and such other documents as the
                      Purchaser may reasonably request, in order to facilitate
                      the public sale or other disposition of all or any of the
                      Shares by the Purchaser; provided, however, that the
                                               --------  -------
                      obligation of the Company to deliver copies of
                      prospectuses to the Purchaser shall be subject to the
                      receipt by the Company of reasonable assurances from the
                      Purchaser that the Purchaser shall comply with the
                      applicable provisions of the Securities Act and of such
                      other securities or blue sky laws as may be applicable in
                      connection with any use of such prospectuses;

                 (g)  file documents required of the Company for normal blue sky
                      clearance in all states requiring blue sky clearance;
                      provided, however, that the Company shall not be required
                      --------  -------
                      to qualify to do business or consent to service of process
                      in any jurisdiction in which it is not now so qualified or
                      has not so consented; and

                 (h)  bear all expenses in connection with the procedures in
                      paragraphs (a) through (g) of this Section 10.1 and the
                      registration of the Shares pursuant to the Registration
                      Statement, other than fees and expenses, if any, of
                      counsel or other advisers to the Purchaser or

                                      -7-
<PAGE>

                    underwriting discounts, brokerage fees and commissions
                    incurred by the Purchaser, if any.

          10.2 Transfer of Shares After Registration. The Purchaser agrees that
               -------------------------------------
it shall not effect any disposition of the Shares or its right to purchase the
Shares that would constitute a sale within the meaning of the Securities Act,
except as contemplated in the Registration Statement referred to in Section 10.1
or as otherwise permitted by law, and that it shall promptly notify the Company
of any changes in the information set forth in the Registration Statement
regarding the Purchaser or its plan of distribution.

          10.3 Indemnification. In the event any securities are included in a
               ---------------
registration statement under this Section 10:

               (a)  To the extent permitted by law, the Company shall indemnify
and hold harmless the Purchaser and each person, if any, who controls the
Purchaser within the meaning of the Securities Act or the Exchange Act, against
any losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act or the Exchange Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
Registration Statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) in
connection with the sale or purchase of the Shares, any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
or the Exchange Act or any state securities law; and the Company shall pay to
the Purchaser or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 10.3(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by the Purchaser or controlling person.

               (b)  To the extent permitted by law, the Purchaser shall
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, its attorneys,
its underwriters, and any controlling person of any such underwriter, against
any losses, claims, damages, or liabilities (joint or several) to which any of
the foregoing persons may become subject, under the Securities Act, or the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereto) arise out of or are
based upon any Violation, in each case to the extent (and only to the extent)
that such Violation occurs in reliance upon and in conformity with written
information furnished by the Purchaser expressly for use in connection with such
registration; and the Purchaser shall

                                      -8-
<PAGE>

pay, as incurred, any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 10.3(b), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 10.3(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Purchaser, which consent shall not be unreasonably withheld;
provided, that, in no event shall any indemnity under this subsection 10.3(b)
exceed the gross proceeds from the offering received by the Purchaser.

          (c)  Promptly after receipt by an indemnified party under this Section
10.3 of notice of the commencement of any action (including any governmental
action), such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under this Section 10.3, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
10.3, but the omission so to deliver written notice to the indemnifying party
shall not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10.3.

          (d)  If the indemnification provided for in this Section 10.3 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations; provided that in no event shall any contribution by the
                --------
Purchaser under this subsection 10.3(d) exceed the amount of the gross proceeds
received by the Purchaser from the offering. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.

          (e)  The obligations of the Company and the Purchaser under this
Section 10.3 shall survive the completion of any offering of securities in a
registration statement under this Section 10 or otherwise.

                                      -9-
<PAGE>

          10.4 Termination of Registration Obligations. The obligations of the
               ---------------------------------------
Company set forth in Section 10.1 shall cease and terminate as to the Shares on
the date on which all Shares (i) are eligible for sale during any three-month
period without restriction under Rule 144, (ii) have been effectively registered
under the Securities Act and sold or otherwise disposed of by the Purchaser in
accordance with the intended method of disposition set forth in the Registration
Statement or (iii) the Company receives an opinion of counsel satisfactory in
form and substance to the Company to the effect that such conditions are not
necessary in order for a transfer of Shares to comply with the Securities Act.

          10.5 Information Available. So long as the Registration Statement is
               ---------------------
effective covering the resale of Shares owned by the Purchaser, the Company
shall furnish to the Purchaser:

               (a)  as soon as practicable after the Company has made such
                    information available to the public through submission to
                    the SEC (but in the case of the Company's Annual Report to
                    Stockholders, within 120 days after the end of each fiscal
                    year of the Company), one copy of (i) its Annual Report to
                    Stockholders, (ii) if not included in substance in the
                    Annual Report to Stockholders, its Annual Report on Form 10-
                    K, (iii) its Quarterly Reports on Form 10-Q, (iv) its
                    Current Reports on Form 8-K, and (v) a full copy of the
                    particular Registration Statement covering the Shares (the
                    foregoing, in each case, excluding exhibits); and

               (b)  upon the written request of the Purchaser, a reasonable
                    number of copies of the prospectuses to supply to any other
                    party requiring such prospectuses in connection with the
                    Purchaser's prospectus delivery requirements under the
                    Securities Act;

and the Company, upon the reasonable request of the Purchaser, shall meet with
the Purchaser or a representative thereof at the Company's headquarters to
discuss information relevant for disclosure in the Registration Statement
covering the Shares, subject to appropriate confidentiality limitations as the
Company may require.

   SECTION 11. Brokers. Each of the parties hereto hereby represents that, on
               -------
the basis of any actions and agreements by it, there are no brokers or finders
entitled to compensation in connection with the sale of the Shares to the
Purchaser.

   SECTION 12. Notices. All notices, requests, consents and other communications
               -------
hereunder shall be in writing, shall be mailed by first-class registered or
certified airmail, confirmed facsimile or nationally recognized overnight
express courier postage prepaid, and shall be deemed given when so mailed and
shall be delivered as addressed as follows:

               (a)  if to the Company, to:

                                      -10-
<PAGE>

                    Read-Rite Corporation
                    44100 Osgood Road
                    Fremont, California 94539
                    Attention: John T. Kurtzweil
                    Facsimile: (510) 683-7102

               with a copy to:

                    Wilson Sonsini Goodrich & Rosati
                    650 Page Mill Road
                    Palo Alto, California 94304-1050
                    Attention: Larry Sonsini, Esq.
                    Facsimile: (650) 493-6811

               or to such other person at such other place as the Company shall
               designate to the Purchaser in writing; and

               (b)  if to the Purchaser, at its address as set forth at the end
                    of this Agreement, or at such other address or addresses as
                    may have been furnished to the Company in writing.

   SECTION 13. Changes. This Agreement may not be modified or amended except
               -------
pursuant to an instrument in writing signed by the Company and the Purchaser.

   SECTION 14. Headings. The headings of the various sections of this Agreement
               --------
have been inserted for convenience of reference only and shall not be deemed to
be part of this Agreement.

   SECTION 15. Severability. In case any provision contained in this Agreement
               ------------
should be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.

   SECTION 16. Governing Law. This Agreement shall be governed by and construed
               -------------
in accordance with the laws of the State of California.

   SECTION 17. No Conflicts of Interest. The Company represents, warrants and
               ------------------------
covenants that, to the knowledge of the Company, no trustee, officer or employee
of the of the Purchaser will receive, directly or indirectly, any personal
interest in the Company or its property of anything of substantial economic
value for his or her private benefit from the Company, or anyone acting its
behalf, in connection with the investment made pursuant to this Agreement.

   SECTION 18. Counterparts. This Agreement may be executed in two or more
               ------------
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument, and shall become effective
when one or more counterparts have been signed by each party hereto and
delivered to the other parties.

                                      -11-
<PAGE>

          IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement or caused this Agreement to be executed by its duly authorized
representative as of the day and year first above written.

                              READ-RITE CORPORATION

                              By____________________________________
                                 Name:
                                 Title:

Print or Type:
                              Name of the Purchaser
                                (Individual or Institution):

                              _____________________________________
                              Name of Individual representing
                                the Purchaser (if an Institution):

                              _____________________________________
                              Title of Individual representing
                                the Purchaser (if an Institution):

                              _____________________________________
Signature by:
                              Individual Purchaser or Individual
                                representing the Purchaser:

                              _____________________________________
                              Address: __________________________________
                              Telephone:  _______________________________
                              Facsimile:  _______________________________

                                      -12-
<PAGE>

                                                                      Appendix I
                                                               (page one of two)

READ-RITE CORPORATION

STOCK CERTIFICATE QUESTIONNAIRE
-------------------------------

     Pursuant to Section 3 of the Agreement, please provide us with the
following information:

1. The exact name in which your Shares are to be
   registered (this is the name that shall appear
   on your stock certificate(s)); you may use a
   nominee name if appropriate:                          ______________________

2. The relationship between the Purchaser of the
   Shares and the Registered Holder listed in
   response to item 1 above:                             ______________________

3. The mailing address of the Registered Holder
   listed in response to item 1 above:                   ______________________

                                                         ______________________

                                                         ______________________

                                                         ______________________

4. The Social Security Number or Tax
   Identification Number of the Registered Holder
   listed in response to item 1 above:                   ______________________

                                      -13-
<PAGE>

                                                                      Appendix I
                                                               (page two of two)

                             READ-RITE CORPORATION

                     REGISTRATION STATEMENT QUESTIONNAIRE
                     ------------------------------------

     In connection with the preparation of the Registration Statement, please
provide us with the following information:

     1.   Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state your or your organization's name exactly as it should
appear in the Registration Statement:

     ___________________________________________________________________________

     2.   Please provide the number of shares that you shall beneficially own
immediately after Closing, including those Shares purchased by you pursuant to
the Agreement and those shares purchased by you or your affiliates through other
transactions:

     _______________________________________________________________________

     3.   Have you or your organization had any position, office or other
material relationship within the past three years with the Company or its
affiliates?

               _____ Yes         _____ No

     If yes, please indicate the nature of any such relationships below:

     _________________________________________________________________

     _________________________________________________________________

     _________________________________________________________________

                                      -14-
<PAGE>

                                                                     APPENDIX II
Attention:

                  PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
                  ------------------------------------------
                     PURSUANT TO A REGISTERATION STATEMENT
                     -------------------------------------

     The undersigned, [an officer of, or other person duly authorized by]

_____________________________________________________________
     [fill in official name of individual or institution]

hereby certifies that he/she [said institution] is the Purchaser of

the shares evidenced by the attached certificate, and as such,

sold such shares on ______________ in accordance with
                       [date]

Registration Statement number ________________ and the requirement of delivering
a
               [fill in the number of or otherwise identify Registration
Statement]

current prospectus by the Company has been complied with in connection with such
sale.

Print or Type:

     Name of the Purchaser
     (Individual or
     Institution):       ______________________

     Name of Individual
     representing the
     Purchaser (if an
     Institution)        ______________________

     Title of Individual
     representing the
     Purchaser (if an
     Institution):       ______________________

Signature by:

     Individual Purchaser
     or Individual
     representing the Purchaser:   ______________________

                                      -15-
<PAGE>

                                                                       EXHIBIT A

                                Form of Opinion
                                      of
                       Wilson Sonsini Goodrich & Rosati

                                      -16-

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