Document:

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                                                                     EXHIBIT 4.2

                             Read-Rite Corporation

                                      and

                 Norwest Bank Minnesota, National Association
                                    Trustee

                         Supplemental Trust Indenture

                          Dated as of March __, 2000

                          Supplementing that certain

                                   Indenture

                          Dated as of March __, 2000

                   Authorizing the Issuance and Delivery of

                         Subordinated Debt Securities

                  10% Convertible Notes due September 1, 2004
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                               TABLE OF CONTENTS

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<S>                                                                        <C>
ARTICLE ONE ISSUANCE OF NOTES.............................................    2

     Section 101   Issuance of Notes; Principal Amount; Maturity..........    2
     Section 102   Interest on the Notes; Payment of Interest.............    2

ARTICLE TWO CERTAIN DEFINITIONS...........................................    3

     Section 201   Certain Definitions....................................    3

ARTICLE THREE CERTAIN COVENANTS...........................................    5

     Section 301   Registration and Listing...............................    6

ARTICLE FOUR REDEMPTION OF NOTES..........................................    6

     Section 401   Right of Redemption....................................    6
     Section 402   Conversion Arrangement on Call for Redemption..........    6

ARTICLE FIVE CONVERSION OF NOTES..........................................    7

     Section 501   Conversion Privilege and Conversion Rate...............    7
     Section 502   Adjustment of Conversion Rate..........................    7
     Section 503   Automatic Conversion...................................   12

ARTICLE SIX REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A
     CHANGE OF CONTROL....................................................   14

     Section 601   Right to Require Repurchase............................   14
     Section 602   Conditions to the Company's Election to Pay the
                   Repurchase Price in Common Stock.......................   15
     Section 603   Notices; Method of Exercising Repurchase Right, Etc....   16
     Section 604   Certain Definitions....................................   18
     Section 605   Consolidation, Merger, etc.............................   20

ARTICLE SEVEN EVENT OF DEFAULT............................................   20

     Section 701   Event of Default.......................................   20

ARTICLE EIGHT SUBORDINATION...............................................   21

ARTICLE NINE MISCELLANEOUS................................................   21

     Section 901   Consent of Holders Required............................   21
     Section 902   Applicability of Certain Indenture Provisions..........   21
     Section 903   Reference to and Effect on the Indenture...............   21
     Section 904   Waiver of Certain Covenants............................   22
     Section 905   Supplemental Indenture May be Executed In
                   Counterparts...........................................   22
     Section 906   Effect of Headings.....................................   22
     Section 907   Separability...........................................   22
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     This Supplemental Trust Indenture, dated as of March __, 2000 (the
"Supplemental Indenture"), between Read-Rite Corporation, a corporation duly
organized and existing under the laws of the State of Delaware (the "Company"),
and Norwest Bank Minnesota, National Association, a national banking association
organized and existing under the laws of the United States of America, as
Trustee (the "Trustee"), supplementing that certain Indenture, dated as of March
__, 2000, between the Company and the Trustee (such Indenture, as supplemented
by this Supplemental Indenture for this series of Securities, being referred to
herein as the "Indenture").

                                   Recitals

     A.   The Company has duly authorized the execution and delivery of the
Indenture to provide for the issuance from time to time of its unsecured
debentures, notes, or other evidences of indebtedness to be issued in one or
more series as provided for in the Indenture heretofore executed and delivered

     B.   The Indenture heretofore executed and delivered provides that the
Securities of each series shall be in substantially the form set forth in the
Indenture heretofore executed and delivered, or in such other form as may be
established by or pursuant to a Board Resolution or in one or more supplemental
indentures thereto, in each case with such appropriate insertions, omissions,
substitutions, and other variations as are required or permitted by the
Indenture, and may have such letters, numbers, or other marks of identification
and such legends or endorsements placed thereon as may be required to comply
with the rules of any securities exchange or as may, consistently herewith, be
determined to be required by the officers executing such securities, as
evidenced by their execution thereof.

     C.   The Company and the Trustee have agreed that the Company shall issue
and deliver, and the Trustee shall authenticate, Securities denominated "10%
Convertible Subordinated Notes due September 1, 2004" (the "Notes") pursuant to
the terms of this Supplemental Indenture and substantially in the form set forth
below, in each case with such appropriate insertions, omissions, substitutions,
and other variations as are required or permitted by the Indenture heretofore
executed and delivered and this Supplemental Indenture, and with such letters,
numbers, or other marks of identification and such legends or endorsements
placed thereon as may be required to comply with the rules of any securities
exchange or as may, consistently herewith, be determined by the officers
executing such Securities, as evidenced by their execution of such Securities.
<PAGE>

                                  ARTICLE ONE
                               ISSUANCE OF NOTES.

Section 101  Issuance of Notes; Principal Amount; Maturity.
             ---------------------------------------------

       (a)   On March __, 2000, the Company shall issue and deliver to the
Trustee, and the Trustee shall authenticate, Notes substantially in the form set
forth in Exhibit A, in each case with such appropriate insertions, omissions,
         ---------
substitutions and other variations as are required or permitted by the Indenture
and this Supplemental Indenture, and with such letters, numbers, or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of such Notes.

       (b)   There is hereby authorized a series of Securities designated "10%
Convertible Subordinated Notes due September 1, 2004" limited in aggregate
principal amount of $__________.  The Notes shall mature on September 1, 2004,
which shall be the Stated Maturity of the Notes.

Section 102  Interest on the Notes; Payment of Interest.
             ------------------------------------------

       (a)   The Notes shall bear interest at the rate of 10% per annum from and
including March __, 2000 until the principal amount thereof is due and at a rate
of 10% per annum on any overdue principal and premium, if any, and, to the
extent permitted by law, on any overdue interest.

       (b)   The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date shall, as provided in such Indenture, be paid, in
cash or, at the Company's election, in Common Stock to the Person in whose name
a Note is registered at the close of business on the Regular Record Date for
such interest, which shall be the February 15 or August 15 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
The Company may elect to pay the Additional Interest by delivery of shares of
Common Stock pursuant to this Section 201 if and only if the following
conditions shall have been satisfied:

             (1)  The shares of Common Stock deliverable in payment of the
interest shall have a fair market value as of the Interest Payment Date of not
less than the interest as determined by Section 102 hereof. For purposes of this
Section 102, the fair market value of shares of Common Stock shall be determined
by the Company and shall be equal to 90% of the average of the Closing Price
Per Share for the five consecutive Trading Days immediately preceding the second
Trading Day prior to the Interest Payment Date;

             (2)  Interest shall be paid only in cash in the event any shares of
Common Stock to be issued for the payment of interest in the Notes hereunder (i)
require registration under any federal securities law before such shares may be
freely transferrable without being subject to any transfer restrictions under
the Securities Act upon issuance and if such registration is not completed or
does not become effective prior to the Interest Payment Date, and/or (ii)
require registration with or approval of any governmental authority under any
state law or any other federal law before such

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shares may be validly issued or delivered upon issuance and if such registration
is not completed or does not become effective or such approval is not obtained
prior to the Interest Payment Date;

          (3)  The Common Stock is, or shall have been, approved for quotation
on the Nasdaq National Market or listing on the New York Stock Exchange, in
either case, prior to the Interest Payment Date; and

          (4)  All shares of Common Stock which may be issued with respect to
the payment of interest on the Notes will be issued out of the Company's
authorized but unissued Common Stock and, will upon issue, be duly and validly
issued and fully paid and non-assessable and free of any preemptive rights.

     If all of the conditions set forth in this Section 102(b) are not satisfied
in accordance with the terms thereof, the interest required to be paid or duly
provided for by the Company pursuant to this Section shall be paid by the
Company only in cash.

     (c)  Payment of the principal of (and premium, if any) and any interest on
the Notes shall be made at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York (which shall
initially be [Norwest Bank Minnesota, National Association], an [Affiliate of
the Trustee]) or at the Corporate Trust Office of the Trustee in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
                                                --------  -------
option of the Company payment of interest may be made by check mailed to the
address of the Person entitled thereto as such address appears in the Security
Register.

     The Company hereby initially designates the Trustee as Paying Agent,
Security Registrar, custodian and conversion agent and the Corporate Trust
Office and the office of [Norwest Bank Minnesota, National Association], an
[Affiliate of the Trustee] located at ____________________ __________________)
as the offices or agencies where the Notes may be surrendered for transfer or
exchange or for presentation for payment or for conversion, redemption or
repurchase and where notices and demands to or upon the Company in respect of
the Notes or this Supplemental Indenture may be received.

                                  ARTICLE TWO
                             CERTAIN DEFINITIONS.

Section 201  Certain Definitions.
             -------------------

     The terms defined in this Section 201 (except as herein otherwise expressly
provided or unless the context of this Supplemental Indenture otherwise
requires) for all purposes of this Supplemental Indenture and of any indenture
supplemental hereto have the respective meanings specified in this Section 201.
All other terms used in this Supplemental Indenture that are defined in the
Indenture or the Trust Indenture Act, either directly or by reference therein
(except as herein otherwise expressly provided or unless the context of this
Supplemental Indenture otherwise requires), have the respective meanings
assigned to such terms in the Indenture or the Trust

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Indenture Act, as the case may be, as in force at the date of this Supplemental
Indenture as originally executed.

     "Automatic Conversion" shall have the meaning specified in Section 503 of
this Supplemental Indenture.

     "Automatic Conversion Date," when used with respect to any Note subject to
Automatic Conversion, means the date fixed for such Automatic Conversion by or
pursuant to this Supplemental Indenture.

     "Automatic Conversion Notice" shall have the meaning specified in Section
503 of this Supplemental Indenture.

     "Change of Control" has the meaning specified in Section 604 of this
Supplemental Indenture.

     "Closing Price Per Share" means, with respect to the Common Stock of the
Company, for any day, the reported last sales price regular way per share or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case (i) on the New York
Stock Exchange as reported in The Wall Street Journal (or other similar
newspaper) for New York Stock Exchange Composite Transactions or, if the Common
Stock is not listed or admitted to trading on such Exchange, on the principal
(as determined by the Company's Board of Directors) national securities exchange
on which the Common Stock is listed or admitted to trading or (ii) if not listed
or admitted to trading on any national securities exchange, on the Nasdaq
National Market, or, if the Common Stock is not listed or admitted to trading on
any national securities exchange or quoted on the Nasdaq National Market, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from time to time
by the Company for that purpose.  If no such prices are available, the Closing
Price Per Share shall be the fair value of a share as determined by the Board of
Directors of the Company.

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     "Conversion Price" shall equal $1,000 divided by the Conversion Rate.

     "Conversion Rate" has the meaning specified in Section 501 of this
Supplemental Indenture.

     "Redemption Date", when used with respect to any Note to be redeemed, means
the date fixed for such redemption by or pursuant to this Supplemental
Indenture.

     "Redemption Price", when used with respect to any Note to be redeemed,
means the price at which it is to be redeemed pursuant to this Supplemental
Indenture.

     "Repurchase Date" has the meaning specified in Section 601 of this
Supplemental Indenture.

     "Repurchase Price" has the meaning specified in Section 601 of this
Supplemental Indenture.

     "Rights" shall mean "Rights" as such term is defined in the Rights
Agreement.

     "Rights Agreement" means that certain Preferred Shares Rights Agreements,
dated as of March 3, 1997, between the Company and Chase Mellon Shareholder
Service, L.L.C., as amended from time to time.

     "Trading Days" means (i) if the Common Stock is listed or admitted for
trading on any national securities exchange, days on which such national
securities exchange is open for business or (ii) if the Common Stock is quoted
on the Nasdaq National Market or any similar system of automated dissemination
of quotations of securities prices, days on which trades may be made on such
system or (iii) if the Common Stock is not listed or admitted to trading on any
national securities exchange or quoted on the Nasdaq National Market or similar
system, days on which the Common Stock is traded regular way in the over-the-
counter market and for which a closing bid and a closing asked price for the
Common Stock are available.

     The definitions of other terms are specified in Article Five and Article
Six.

                                 ARTICLE THREE
                              CERTAIN COVENANTS.

     The following covenant shall be applicable to the Company for so long as
any of the Notes are outstanding.

Section 301  Registration and Listing.
             ------------------------

     The Company (i) will effect all registrations with, and obtain all
approvals by, all governmental authorities that may be necessary under any
United States Federal or state law (including the Securities Act, the Exchange
Act and state securities and Blue Sky laws) before the shares of Common Stock
issuable upon conversion of Notes may be lawfully issued and delivered, and
thereafter publicly traded, and qualified or listed as contemplated by clause
(ii); and (ii) will list the shares of Common Stock required to be issued and
delivered upon conversion of the Notes prior

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to such issuance or delivery on the Nasdaq National Market or such other
exchange or automated quotation as the Common Stock is then listed at such date
of conversion.

                                 ARTICLE FOUR
                              REDEMPTION OF NOTES

Section 401  Right of Redemption.
             -------------------

     The Notes may be redeemed in accordance with the provisions of the form of
Security set forth herein.

Section 402  Conversion Arrangement on Call for Redemption.
             ---------------------------------------------

     In connection with any redemption of Notes, the Company may arrange for the
purchase and conversion of any Notes by an agreement with one or more nationally
recognized investment bankers to purchase such Notes by paying to the Trustee in
trust for the Holders, on or before the date fixed for redemption, an amount not
less than the applicable Redemption Price, together with interest accrued to
(but excluding) the date fixed for redemption, of such Notes.  Notwithstanding
anything to the contrary contained herein, the obligation of the Company to pay
the Redemption Price of such Notes, together with interest accrued to (but
excluding) the Redemption Date, shall be deemed to be satisfied and discharged
to the extent such amount is so paid by such purchasers.  If such an agreement
is entered into, a copy of which will be filed with the Trustee prior to the
Redemption Date, any Notes not duly surrendered for conversion by the Holders
thereof may, at the option of the Company, be deemed, to the fullest extent
permitted by law, acquired by such purchasers from such Holders and
(notwithstanding anything to the contrary contained herein) surrendered by such
purchasers for conversion, all as of immediately prior to the close of business
on the Redemption Date (and the right to convert any such Notes shall be
extended through such time), subject to payment of the above amount as
aforesaid.  At the direction of the Company, the Trustee shall hold and dispose
of any such amount paid to it in the same manner as it would monies deposited
with it by the Company for the redemption of Notes.  Without the Trustee's prior
written consent, no arrangement between the Company and such purchasers for the
purchase and conversion of any Notes shall increase or otherwise affect any of
the powers, duties, responsibilities or obligations of the Trustee as set forth
in this Indenture, and the Company agrees to indemnify the Trustee from, and
hold it harmless against, any loss, liability or expense arising out of or in
connection with any such arrangement for the purchase and conversion of any
Notes between the Company and such purchasers to which the Trustee has not
consented in writing, including the costs and expenses, including reasonable
legal fees, incurred by the Trustee in the defense of any claim or liability
arising out of or in connection with the exercise or performance of any of its
powers, duties, responsibilities or obligations under this Indenture.

                                 ARTICLE FIVE
                              CONVERSION OF NOTES

Section 501  Conversion Privilege and Conversion Rate.
             ----------------------------------------

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       Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Note may be converted into fully paid and
nonassessable shares (calculated as to each conversion to the nearest 1/100 of a
share) of Common Stock of the Company at the Conversion Rate, determined as
hereinafter provided, in effect at the time of conversion.  Such conversion
right shall commence immediately and expire at the close of business on
September 1, 2004, subject, in the case of the conversion of any Global
Security, to any applicable book-entry procedures of the Depositary therefor.
In case a Note is called for redemption at the election of the Company or the
Holder thereof exercises his right to require the Company to repurchase the
Note, such conversion right in respect of the Note shall expire at the close of
business on the Business Day next preceding the Redemption Date or the
Repurchase Date (as defined in Article Six), as the case may be, unless the
Company defaults in making the payment due upon redemption or repurchase, as the
case may be (in each case subject as aforesaid to any applicable book-entry
procedures).

       The rate at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Rate") shall be initially ________
shares of Common Stock for each $1,000 principal amount of Notes. The Conversion
Rate shall be adjusted in certain instances as provided in this Article Five.

Section 502  Adjustment of Conversion Rate.
             -----------------------------

       The Conversion Rate shall be subject to adjustment from time to time as
follows:

       (1)   In case the Company shall pay or make a dividend or other
distribution on Common Stock payable in shares of Common Stock, the Conversion
Rate in effect at the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such dividend or other
distribution shall be increased by dividing such Conversion Rate by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such increase to become
effective immediately after the opening of business on the day following the
date fixed for such determination. If, after any such date fixed for
determination, any dividend or distribution is not in fact paid, the Conversion
Rate shall be immediately readjusted, effective as of the date the Board of
Directors determines not to pay such dividend or distribution, to the Conversion
Rate that would have been in effect if such determination date had not been
fixed. For the purposes of this paragraph (1), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company but shall include shares issuable in respect of scrip certificates
issued in lieu of fractions of shares of Common Stock. The Company will not pay
any dividend or make any distribution on shares of Common Stock held in the
treasury of the Company.

       (2)   In case the Company shall issue rights, options or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the current market price per
share (determined as provided in paragraph (8) of this Section 502) of the
Common Stock on the date fixed for the determination of stockholders entitled to
receive such rights, options or warrants (other than any rights, options or
warrants that by their terms

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<PAGE>

will also be issued to any Holder upon conversion of a Note into shares of
Common Stock without any action required by the Company or any other Person),
the Conversion Rate in effect at the opening of business on the day following
the date fixed for such determination shall be increased by dividing such
Conversion Rate by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such current market price
and the denominator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the number
of shares of Common Stock so offered for subscription or purchase, such increase
to become effective immediately after the opening of business on the day
following the date fixed for such determination. If, after any such date fixed
for determination, any such rights, options or warrants are not in fact issued,
or are not exercised prior to the expiration thereof, the Conversion Rate shall
be immediately readjusted, effective as of the date such rights, options or
warrants expire, or the date the Board of Directors determines not to issue such
rights, options or warrants, to the Conversion Rate that would have been in
effect if the unexercised rights, options or warrants had never been granted or
such determination date had not been fixed, as the case may be. For the purposes
of this paragraph (2), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not issue any rights,
options or warrants in respect of shares of Common Stock held in the treasury of
the Company.

     (3)  In case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, such increase or reduction, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.

     (4)  In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares of any class
of capital stock, or other property (including securities, but excluding (i) any
rights, options or warrants referred to in paragraph (2) of this Section, (ii)
any dividend or distribution paid exclusively in cash, (iii) any dividend or
distribution referred to in paragraph (1) of this Section) the Conversion Rate
shall be adjusted so that the same shall equal the rate determined by dividing
the Conversion Rate in effect immediately prior to the close of business on the
date fixed for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (8) of this Section 502) of
the Common Stock on the date fixed for such determination less the then fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a Board Resolution filed with the Trustee) of the
portion of the assets, shares or evidences of indebtedness so distributed
applicable

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<PAGE>

to one share of Common Stock and the denominator shall be such current market
price per share of the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such distribution. If,
after any such date fixed for determination, any such distribution is not in
fact made, the Conversion Rate shall be immediately readjusted, effective as of
the date the Board of Directors determines not to make such distribution, to the
Conversion Rate that would have been in effect if such determination date had
not been fixed.

     (5)  In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed as part
of a distribution referred to in paragraph (4) of this Section) in an aggregate
amount that, combined together with (I) the aggregate amount of any other cash
distributions to all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution and in respect
of which no adjustment pursuant to this paragraph (5) has been made and (II) the
aggregate of any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) of consideration payable in respect of any tender offer by the
Company or any of its subsidiaries for all or any portion of the Common Stock
concluded within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to paragraph (6) of
this Section 502 has been made (the "combined cash and tender amount") exceeds
12.5% of the product of the current market price per share (determined as
provided in paragraph (8) of this Section 502) of the Common Stock on the date
for the determination of holders of shares of Common Stock entitled to receive
such distribution times the number of shares of Common Stock outstanding on such
date (the "aggregate current market price"), then, and in each such case,
immediately after the close of business on such date for determination, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Conversion Rate in effect immediately prior to the
close of business on the date fixed for determination of the stockholders
entitled to receive such distribution by a fraction (i) the numerator of which
shall be equal to the current market price per share (determined as provided in
paragraph (8) of this Section 502) of the Common Stock on the date fixed for
such determination less an amount equal to the quotient of (x) the excess of
such combined cash and tender amount over such aggregate current market price
divided by (y) the number of shares of Common Stock outstanding on such date for
determination and (ii) the denominator of which shall be equal to the current
market price per share (determined as provided in paragraph (8) of this Section
502) of the Common Stock on such date for determination.

     (6)  In case a tender offer made by the Company or any Subsidiary for all
or any portion of the Common Stock shall expire and such tender offer (as
amended upon the expiration thereof) shall require the payment to stockholders
(based on the acceptance (up to any maximum specified in the terms of the tender
offer) of Purchased Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) that
combined together with (I) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration of such
tender offer, of consideration payable in respect of any other tender offer by
the Company or any Subsidiary for all

                                       9
<PAGE>

or any portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender offer and in respect of which no adjustment pursuant
to this paragraph (6) has been made and (II) the aggregate amount of any cash
distributions to all holders of the Company's Common Stock within 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to paragraph (5) of this Section has been made (the
"combined tender and cash amount") exceeds 12.5% of the product of the current
market price per share of the Common Stock (determined as provided in paragraph
(8) of this Section 502) as of the last time (the "Expiration Time") tenders
could have been made pursuant to such tender offer (as it may be amended) times
the number of shares of Common Stock outstanding (including any tendered shares)
as of the Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Conversion Rate immediately prior to close of
business on the date of the Expiration Time by a fraction (i) the numerator of
which shall be equal to (A) the product of (I) the current market price per
share of the Common Stock (determined as provided in paragraph (8) of this
Section 502) on the date of the Expiration Time multiplied by (II) the number of
shares of Common Stock outstanding (including any tendered shares) on the
Expiration Time less (B) the combined tender and cash amount, and (ii) the
denominator of which shall be equal to the product of (A) the current market
price per share of the Common Stock (determined as provided in paragraph (8) of
this Section 502) as of the Expiration Time multiplied by (B) the number of
shares of Common Stock outstanding (including any tendered shares) as of the
Expiration Time less the number of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted up to any such maximum,
being referred to as the "Purchased Shares").

     (7)  The reclassification of Common Stock into securities including other
than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 1409 of the Indenture applies) shall be deemed to
involve (a) a distribution of such securities other than Common Stock to all
holders of Common Stock (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of stockholders entitled
to receive such distribution" and "the date fixed for such determination" within
the meaning of paragraph (4) of this Section), and (b) a subdivision or
combination, as the case may be, of the number of shares of Common Stock
outstanding immediately prior to such reclassification into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (3) of this Section 502).

     (8)  For the purpose of any computation under paragraphs (2), (4), (5) or
(6) of this Section 502, the current market price per share of Common Stock on
any date shall be calculated by the Company and be deemed to be the average of
the daily Closing Prices Per Share for the five consecutive Trading Days
selected by the Company commencing not more than 10 Trading Days before, and
ending not later than, the earlier of the day in question and the day before the
"ex" date with respect to the issuance or distribution requiring such
computation. For purposes of this paragraph, the term " ex date", when used with
respect to any issuance or distribution, means the

                                       10
<PAGE>

first date on which the Common Stock trades regular way in the applicable
securities market or on the applicable securities exchange without the right to
receive such issuance or distribution.

     (9)   No adjustment in the Conversion Rate shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(9)) would require an increase or decrease of at least one percent in such rate;
provided, however, that any adjustments which by reason of this paragraph (9)
--------  -------
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Article shall be made to
the nearest cent or to the nearest one-hundredth of a share, as the case may be.

     (10)  The Company may make such increases in the Conversion Rate, for the
remaining term of the Notes or any shorter term, in addition to those required
by paragraphs (1), (2), (3), (4), (5) and (6) of this Section 502, as it
considers to be advisable in order to avoid or diminish any income tax to any
holders of shares of Common Stock resulting from any dividend or distribution of
stock or issuance of rights or warrants to purchase or subscribe for stock or
from any event treated as such for income tax purposes. The Company shall have
the power to resolve any ambiguity or correct any error in this paragraph (10)
and its actions in so doing shall, absent manifest error, be final and
conclusive.

     (11)  Notwithstanding the foregoing provisions of this Section, no
adjustment of the Conversion Rate shall be required to be made (a) upon the
issuance of shares of Common Stock pursuant to any present or future plan for
the reinvestment of dividends or (b) because of a tender or exchange offer of
the character described in Rule 13e-4(h)(5) under the Exchange Act or any
successor rule thereto.

     (12)  To the extent permitted by applicable law, the Company from time to
time may increase the Conversion Rate by any amount for any period of time if
the period is at least twenty (20) days, the increase is irrevocable during such
period, and the Board of Directors shall have made a determination that such
increase would be in the best interests of the Company, which determination
shall be conclusive; provided, however, that no such increase shall be taken
                     --------  -------
into account for purposes of determining whether (i) the Closing Price Per Share
of the Common Stock exceeds the Conversion Price by 105% in connection with an
event which would otherwise be a Change of Control pursuant to Section 604(4) or
(ii) the Closing Price Per Share of the Common Stock exceeds the Conversion
Price by 200% in determining whether the Company can trigger an Automatic
Conversion pursuant to Section 503. Whenever the Conversion Rate is increased
pursuant to the preceding sentence, the Company shall give notice of the
increase to the Holders in the manner provided in Section 106 of the Indenture
at least fifteen (15) days prior to the date the increased Conversion Rate takes
effect, and such notice shall state the increased Conversion Rate and the period
during which it will be in effect.

     (13)  Each share of Common Stock issued upon conversion of the Notes
pursuant to this Article V shall be entitled to receive the appropriate number
of Rights, and the certificates representing the Common Stock issued upon such
conversion shall bear such legends, in each case as provided by and subject to
the terms of the Rights Plan (without giving effect to the proviso contained in
Section 22 thereof) as in effect at the time of such conversion (whether or not
such

                                       11
<PAGE>

Rights have separated from the Common Stock at the time if conversion). In the
event that the Company implements any new stockholders's rights plan, as
amended, supplemented or modified from time to time (a "New Rights Plan"), such
New Rights Plan shall provide that upon conversion of the Notes the Holders will
receive, in addition to the Common Stock issuable upon such conversion, the
rights (whether or not such rights have separated from Common Stock at the time
of the conversion) issuable pursuant to the New Rights Plan. Any distribution of
Rights pursuant to the Rights Plan or any distribution of rights pursuant to the
New Rights Plan in accordance with the requirements set forth in this paragraph
(13) will not constitute a distribution of rights or warrants for the purposes
of paragraph (4) of this Section 502.

Section 503  Automatic Conversion.
             --------------------

       (a)   The Company may elect to automatically convert the Notes (an
"Automatic Conversion") at any time prior to Maturity if the average of Closing
Price Per Share of the Company's Common Stock has exceeded 200% of the
Conversion Price for at least 20 Trading Days during a 30-day Trading Day period
ending five Trading Days prior to the Automatic Conversion Date.

       (b)   In the event that the Automatic Conversion Date of the Automatic
Conversion occurs on or prior to March 5, 2002, the Company will pay Additional
Interest (as defined below) in cash or, at the Company's election, in Common
Stock to the Holders.  In the event that the Company elects to pay Additional
Interest on the Notes in Common Stock upon an Automatic Conversion, the shares
of Common Stock will be valued at 90% of the average of the Closing Price Per
Share for the five Trading Days immediately preceding the second Trading Day
preceding the Automatic Conversion Date.  In the event of an Automatic
Conversion on or prior to March 5, 2002, each Holder of the Notes will receive
$200 per each $1,000 principal amount of Notes, less any interest actually paid
or provided for with respect to such Notes in accordance with the provisions of
Section 102(b) prior to the Automatic Conversion Date (the "Additional
Interest").

             (1)  The shares of Common Stock deliverable in payment of the
Additional Interest shall have a fair market value as of the Automatic
Conversion Date of not less than the Additional Interest as determined by this
Section 503. For purposes of this Section 503, the fair market value of shares
of Common Stock shall be determined by the Company and shall be equal to 90% of
the average of the Closing Price Per Share for the five consecutive Trading Days
immediately preceding the second Trading Day prior to the Automatic Conversion
Date;

             (2)  Additional Interest shall be paid only in cash in the event
any shares of Common Stock to be issued for the payment of Additional Interest
in the Notes hereunder (i) require registration under any federal securities law
before such shares may be freely transferrable without being subject to any
transfer restrictions under the Securities Act upon an Automatic Conversion and
if such registration is not completed or does not become effective prior to the
Automatic Conversion Date, and/or (ii) require registration with or approval of
any governmental authority under any state law or any other federal law before
such shares may be validly issued or delivered upon an Automatic Conversion and
if such registration is not completed or does not become effective or such
approval is not obtained prior to the Automatic Conversion Date;

                                       12
<PAGE>

          (3)   The Common Stock is, or shall have been, approved for quotation
on the Nasdaq National Market or listing on the New York Stock Exchange, in
either case, prior to the Automatic Conversion Date; and

          (4)  All shares of Common Stock which may be issued with respect to
the payment of interest on the Notes will be issued out of the Company's
authorized but unissued Common Stock and, will upon issue, be duly and validly
issued and fully paid and non-assessable and free of any preemptive rights.

     If all of the conditions set forth in this Section 503(b) are not satisfied
in accordance with the terms thereof, the interest required to be paid or duly
provided for by the Company pursuant to this Section shall be paid by the
Company only in cash.

     (c)  Unless the Company shall have theretofore called for redemption all of
the Outstanding Notes, the Company or, at the request and expense of the
Company, the Trustee, shall give to all Holders of Notes, in the manner provided
in Section 106 of the Indenture, notice (the "Automatic Conversion Notice") of
the Automatic Conversion not more than 30 days but not less than 15 days prior
to the Automatic Conversion Date.  The Company shall also deliver a copy of such
notice of an Automatic Conversion to the Trustee.

     Each Automatic Conversion Notice shall state:

          (i)    the Automatic Conversion Date,

          (ii)   whether the Additional Interest, if any, shall be paid by the
                 Company in cash or by delivery of shares of Common Stock,

          (iii)  the place or places where such Notes are to be surrendered for
                 conversion and accrued Additional Interest, if any, and

          (iv)   the Conversion Rate then in effect.

     If any of the foregoing provisions or other provisions of this Section are
inconsistent with applicable law, such law shall govern.

     (d)  In the event of an Automatic Conversion, the Company shall issue and
deliver a certificate or certificates for the number of full shares of Common
Stock issuable upon conversion of the Notes and the Additional Interest, if any,
due on such Notes along with any cash in respect of any fractional shares of
Common Stock otherwise issuable upon conversion or in the event that the Company
elects to pay Additional Interest, if any, in Common Stock instead of cash, for
payment to the Holder as promptly after the Automatic Conversion Date as
practicable in accordance with the provisions of Article Fourteen of the
Indenture.

                                       13
<PAGE>

     (e)  All Notes subject to the Automatic Conversion shall be delivered to
the Trustee to be canceled at the direction of the Trustee, which shall dispose
of the same as provided in Section 309 of the Indenture.

                                  ARTICLE SIX
                   REPURCHASE OF NOTES AT THE OPTION OF THE
                        HOLDER UPON A CHANGE OF CONTROL

Section 601  Right to Require Repurchase.
             ---------------------------

     In the event that a Change in Control (as hereinafter defined) shall occur,
then each Holder shall have the right, at the Holder s option, but subject to
the provisions of Section 602, to require the Company to repurchase, and upon
the exercise of such right the Company shall repurchase, all of such Holder s
Notes not theretofore called for redemption, or any portion of the principal
amount thereof that is equal to $1,000 or any integral multiple of $1,000 in
excess thereof (provided that no single Note may be repurchased in part unless
                --------
the portion of the principal amount of such Note to be Outstanding after such
repurchase is equal to $1,000 or integral multiples of $1,000 in excess
thereof), on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined in Section 603) at a purchase price equal to 105%
of the principal amount of the Notes to be repurchased plus interest accrued to,
but excluding, the Repurchase Date (the "Repurchase Price"); provided, however,
                                                             --------  -------
that installments of interest on Notes whose Stated Maturity is on or prior to
the Repurchase Date shall be payable to the Holders of such Notes, or one or
more Predecessor Notes, registered as such on the relevant Record Date according
to their terms and the provisions of Section 307 of the Indenture. Such right to
require the repurchase of the Notes shall not continue after a discharge of the
Company from its obligations with respect to the Notes in accordance with
Article Four of the Indenture, unless a Change in Control shall have occurred
prior to such discharge. At the option of the Company, the Repurchase Price may
be paid in cash or, subject to the fulfillment by the Company of the conditions
set forth Section 602, by delivery of shares of Common Stock having a fair
market value equal to the Repurchase Price. Whenever in this Supplemental
Indenture or the Indenture (including, without limitation, in the Form of Note,
Section 101 of this Supplemental Indenture, and Sections 501(1) and 508 of the
Indenture) there is a reference, in any context, to the principal of any Note as
of any time, such reference shall be deemed to include reference to the
Repurchase Price payable in respect of such Note to the extent that such
Repurchase Price is, was or would be so payable at such time, and express
mention of the Repurchase Price in any provision of this Supplemental Indenture
shall not be construed as excluding the Repurchase Price in those provisions of
this Supplemental Indenture or Indenture when such express mention is not made;
provided, however, that for the purposes of Article Fifteen of the Indenture
--------  -------
such reference shall be deemed to include reference to the Repurchase Price only
to the extent the Repurchase Price is payable in cash.

Section 602  Conditions to the Company's Election to Pay the Repurchase Price in
             -------------------------------------------------------------------
Common Stock.
------------

     The Company may elect to pay the Repurchase Price by delivery of shares of
Common Stock pursuant to Section 601 if and only if the following conditions
shall have been satisfied:

                                       14
<PAGE>

       (1)   The shares of Common Stock deliverable in payment of the Repurchase
Price shall have a fair market value as of the Repurchase Date of not less than
the Repurchase Price. For purposes of Section 601 and this Section 602, the fair
market value of shares of Common Stock shall be determined by the Company and
shall be equal to 95% of the average of the Closing Prices Per Share for the
five consecutive Trading Days immediately preceding the second Trading Day prior
to the Repurchase Date;

       (2)   The Repurchase Price shall be paid only in cash in the event any
shares of Common Stock to be issued upon repurchase of Notes hereunder (i)
require registration under any federal securities law before such shares may be
freely transferrable without being subject to any transfer restrictions under
the Securities Act upon repurchase and if such registration is not completed or
does not become effective prior to the Repurchase Date, and/or (ii) require
registration with or approval of any governmental authority under any state law
or any other federal law before such shares may be validly issued or delivered
upon repurchase and if such registration is not completed or does not become
effective or such approval is not obtained prior to the Repurchase Date;

       (3)   Payment of the Repurchase Price may not be made in Common Stock
unless such stock is, or shall have been, approved for listing on the New York
Stock Exchange or quotation on the Nasdaq National Market, in either case, prior
to the Repurchase Date; and

       (4)   All shares of Common Stock which may be issued upon repurchase of
Notes will be issued out of the Company's authorized but unissued Common Stock
and, will upon issue, be duly and validly issued and fully paid and non-
assessable and free of any preemptive rights.

       If all of the conditions set forth in this Section 602 are not satisfied
in accordance with the terms thereof, the Repurchase Price shall be paid by the
Company only in cash.

Section 603  Notices; Method of Exercising Repurchase Right, Etc.
             ---------------------------------------------------

       (1)   Unless the Company shall have theretofore called for redemption all
of the Outstanding Notes, on or before the 30th day after the occurrence of a
Change in Control, the Company or, at the request and expense of the Company on
or before the 15th day after such occurrence, the Trustee, shall give to all
Holders of Notes, in the manner provided in Section 106 of the Indenture, notice
(the "Company Notice") of the occurrence of the Change in Control and of the
repurchase right set forth herein arising as a result thereof. The Company shall
also deliver a copy of such notice of a repurchase right to the Trustee.

       Each notice of a repurchase right shall state:

             (i)   the Repurchase Date,

             (ii)  the date by which the repurchase right must be exercised,

             (iii) the Repurchase Price, and whether the Repurchase Price shall
be paid by the Company in cash or by delivery of shares of Common Stock,

                                       15
<PAGE>

             (iv)  a description of the procedure which a Holder must follow to
exercise a repurchase right, and the place or places where such Notes, are to be
surrendered for payment of the Repurchase Price and accrued interest, if any,

             (v)   that on the Repurchase Date the Repurchase Price, and accrued
interest, if any, will become due and payable upon each such Note designated by
the Holder to be repurchased, and that interest thereon shall cease to accrue on
and after said date,

             (vi)  the Conversion Rate then in effect, the date on which the
right to convert the principal amount of the Notes to be repurchased will
terminate and the place or places where such Notes may be surrendered for
conversion, and

             (vii) the place or places that the Note certificate with the
Election of Holder to Require Repurchase as specified in the form of Note shall
be delivered.

       No failure of the Company to give the foregoing notices or defect therein
shall limit any Holder s right to exercise a repurchase right or affect the
validity of the proceedings for the repurchase of Notes.

       If any of the foregoing provisions or other provisions of this Article
Six are inconsistent with applicable law, such law shall govern.

       (2)   To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the 30th day after the date of the Company Notice (i)
written notice of the Holder's exercise of such right, which notice shall set
forth the name of the Holder, the principal amount of the Notes to be
repurchased (and, if any Note is to repurchased in part, the serial number
thereof, the portion of the principal amount thereof to be repurchased and the
name of the Person in which the portion thereof to remain Outstanding after such
repurchase is to be registered) and a statement that an election to exercise the
repurchase right is being made thereby, and, in the event that the Repurchase
Price shall be paid in shares of Common Stock, the name or names (with
addresses) in which the certificate or certificates for shares of Common Stock
shall be issued, and (ii) the Notes with respect to which the repurchase right
is being exercised. Such written notice shall be irrevocable, except that the
right of the Holder to convert the Notes with respect to which the repurchase
right is being exercised shall continue until the close of business on the
Business Day prior to the Repurchase Date.

       (3)   In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid to the Trustee
the Repurchase Price in cash or shares of Common Stock, as provided above, for
payment to the Holder on the Repurchase Date or, if shares of Common Stock are
to be paid, as promptly after the Repurchase Date as practicable, together with
accrued and unpaid interest to the Repurchase Date payable with respect to the
Notes as to which the repurchase right has been exercised; provided, however,
                                                           --------  -------
that installments of interest that mature on or prior to the Repurchase Date
shall be payable in cash to the Holders of such Notes, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Regular Record Date.

                                       16
<PAGE>

       (4)  If any Note (or portion thereof) surrendered for repurchase shall
not be so paid on the Repurchase Date, the principal amount of such Note (or
portion thereof, as the case may be) shall, until paid, bear interest to the
extent permitted by applicable law from the Repurchase Date at the rate of 10%
per annum, and each Note shall remain convertible into Common Stock until the
principal such Note (or portion thereof, as the case may be) shall have been
paid or duly provided for.

       (5)  Any Note which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such Note
without service charge, a new Note or Notes, containing identical terms and
conditions, each in an authorized denomination in aggregate principal amount
equal to and in exchange for the unrepurchased portion of the principal of the
Note so surrendered.

       (6)  Any issuance of shares of Common Stock in respect of the Repurchase
Price shall be deemed to have been effected immediately prior to the close of
business on the Repurchase Date and the Person or Persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such repurchase shall be deemed to have become on the Repurchase Date the
holder or holders of record of the shares represented thereby; provided,
                                                               --------
however, that any surrender for repurchase on a date when the stock transfer
-------
books of the Company shall be closed shall constitute the Person or Persons in
whose name or names the certificate or certificates for such shares are to be
issued as the record holder or holders thereof for all purposes at the opening
of business on the next succeeding day on which such stock transfer books are
open. No payment or adjustment shall be made for dividends or distributions on
any Common Stock issued upon repurchase of any Note declared prior to the
Repurchase Date.

       (7)  No fractions of shares shall be issued upon repurchase of Notes. If
more than one Note shall be repurchased from the same Holder and the Repurchase
Price shall be payable in shares of Common Stock, the number of full shares
which shall be issuable upon such repurchase shall be computed on the basis of
the aggregate principal amount of the Notes so repurchased. Instead of any
fractional share of Common Stock which would otherwise be issuable on the
repurchase of any Note or Notes, the Company will deliver to the applicable
Holder a check for the current market value of such fractional share. The
current market value of a fraction of a share is determined by multiplying the
current market price of a full share by the fraction, and rounding the result to
the nearest cent. For purposes of this Section, the current market price of a
share of Common Stock is the Closing Price Per Share of the Common Stock on the
Trading Day immediately preceding the Repurchase Date.

       (8)  Any issuance and delivery of certificates for shares of Common Stock
on repurchase of Notes shall be made without charge to the Holder of Notes being
repurchased for such certificates or for any tax or duty in respect of the
issuance or delivery of such certificates or the Notes represented thereby;
provided, however, that the Company shall not be required to pay any tax or
--------  -------

                                       17
<PAGE>

duty which may be payable in respect of (i) income of the Holder or (ii) any
transfer involved in the issuance or delivery of certificates for shares of
Common Stock in a name other than that of the Holder of the Notes being
repurchased, and no such issuance or delivery shall be made unless and until the
Person requesting such issuance or delivery has paid to the Company the amount
of any such tax or duty or has established, to the satisfaction of the Company,
that such tax or duty has been paid.

       (9)  All Notes delivered for repurchase shall be delivered to the Trustee
to be canceled at the direction of the Trustee, which shall dispose of the same
as provided in Section 309 of the Indenture.

Section 604  Certain Definitions.
             -------------------

       For purposes of this Article Six,

       (1)  the term "beneficial owner" shall be determined in accordance with
Rule 13d-3, as in effect on the date of the original execution of this
Supplemental Indenture, promulgated by the Commission pursuant to the Exchange
Act;

       (2)  a "Change in Control" shall be deemed to have occurred at the time,
after the original issuance of the Notes, of:

              (i)  the acquisition by any Person (including any syndicate or
group deemed to be a "person" under Section 13(d)(3) of the Exchange Act) of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of capital
stock of the Company entitling such person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company entitled to vote
generally in the elections of directors (any shares of voting stock of which
such person or group is the beneficial owner that are not then outstanding being
deemed outstanding for purposes of calculating such percentage), other than any
such acquisition by the Company, any Subsidiary of the Company or any employee
benefit plan of the Company existing on the date of this Supplemental Indenture;
or

              (ii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company,
or any sale or transfer of all or substantially all of the assets (other than to
a wholly-owned subsidiary of the Company) of the Company to any other Person
(other than (a) any such transaction pursuant to which the holders of 50% or
more of the total voting power of all shares of capital stock of the Company
entitled to vote generally in elections of directors immediately prior to such
transaction have, directly or indirectly, at least 50% or more of the total
voting power of all shares of capital stock of the continuing or surviving
corporation entitled to vote generally in elections of directors of the
continuing or surviving corporation immediately after such transaction and (b) a
merger (x) which does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of capital stock of the Company or (y)
which is effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of outstanding
shares of Common Stock into solely shares of common stock); provided, however,
                                                            --------  -------
that a Change in Control shall not be

                                       18
<PAGE>

deemed to have occurred if either (a) the Closing Price Per Share of the Common
Stock for any five Trading Days within the period of 10 consecutive Trading Days
ending immediately after the later of the Change in Control or the public
announcement of the Change in Control (in the case of a Change in Control under
clause 604(2)(i) above) or the period of 10 consecutive Trading Days ending
immediately before the Change in Control (in the case of a Change in Control
under clause 604(2)(ii) above) shall equal or exceed 105% of the Conversion
Price of the Notes in effect on each such Trading Day, or (b) all of the
consideration (excluding cash payments for fractional shares and cash payments
made pursuant to dissenters' appraisal rights) in a merger or consolidation
constituting the Change in Control described in clause 604(2)(i) and/or clause
(2)(ii) above consists of shares of common stock traded on a national securities
exchange or quoted on the Nasdaq National Market (or will be so traded or quoted
immediately following the Change in Control) and as a result of such transaction
or transactions the Notes become convertible solely into such common stock.

       (3)   for purposes of Section 604(2)(i), the term "person" shall include
any syndicate or group which would be deemed to be a "person" under Section
13(d)(3) of the Exchange Act, as in effect on the date of the original execution
of this Supplemental Indenture.

Section 605  Consolidation, Merger, etc.
             --------------------------

       In the case of any consolidation, conveyance, sale, transfer or lease of
all or substantially all of the assets of the Company to which Section 1409
applies, in which the Common Stock of the Company is changed or exchanged as a
result into the right to receive shares of stock and other securities or
property or assets (including cash) which includes shares of Common Stock of the
Company or common stock of another Person that are, or upon issuance will be,
traded on a United States national securities exchange or approved for trading
on an established automated over-the-counter trading market in the United States
and such shares constitute at the time such change or exchange becomes effective
in excess of 50% of the aggregate fair market value of such shares of stock and
other securities, property and assets (including cash) (as determined by the
Company, which determination shall be conclusive and binding), then the Person
formed by such consolidation or resulting from such merger or combination or
which acquires the properties or assets (including cash) of the Company, as the
case may be, shall execute and deliver to the Trustee a supplemental indenture
(which shall comply with the Trust Indenture Act as in force at the date of
execution of such supplemental indenture) modifying the provisions of this
Supplemental Indenture relating to the right of Holders to cause the Company to
repurchase the Notes following a Change in Control, including without limitation
the applicable provisions of this Article Six and the definitions of the Common
Stock and Change in Control, as appropriate, and such other related definitions
set forth herein as determined in good faith by the Company (which determination
shall be conclusive and binding), to make such provisions apply in the event of
a subsequent Change of Control to the common stock and the issuer thereof if
different from the Company and Common Stock of the Company (in lieu of the
Company and the Common Stock of the Company).

                                       19
<PAGE>

                                 ARTICLE SEVEN
                               EVENT OF DEFAULT

Section 701  Event of Default.
             ----------------

     In addition to the Events of Default set forth in Section 501 of the
Indenture, the following will be an Event of Default under the Supplemental
Indenture:  any indebtedness under any bond, debenture, note or other evidence
of indebtedness for money borrowed by the Company in a principal amount then
outstanding in excess of $25,000,000 is not paid at final maturity thereof
(either at its stated maturity or upon acceleration thereof), and such
indebtedness is not discharged, or such acceleration is not rescinded or
annulled, within a period of 30 days after there has been given, by registered
or certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the Outstanding
Notes a written notice specifying such default or breach and requiring it to be
remedied and stating that such notice is a "Notice of Default" hereunder.

                                 ARTICLE EIGHT
                                 SUBORDINATION

Section 801  Payment of Common Stock for Interest.
             ------------------------------------

     For purposes of Article Fifteen of the Indenture only, the issuance and
delivery of Common Stock for the payment of interest pursuant to Section 102 of
this Supplemental Indenture (including any cash paid for any fractional shares
with respect to any payment of interest in Common Stock) shall not be deemed to
constitute a payment or distribution on account of the principal of or any
premium or interest on Securities or on account of the purchase, redemption or
other acquisition of Securities.

                                 ARTICLE NINE
                                 MISCELLANEOUS

Section 901  Consent of Holders Required.
             ---------------------------

     In addition to those modifications or amendments requiring the consent of
the Holder of each Outstanding Note effected thereby as specified in Section 902
of the Indenture, there can be no modification or amendment that would change
the obligation of the Company to repurchase any Note upon the happening of a
Change in Control in a manner adverse to the Holder of Notes without the consent
of the Holder of each outstanding Note effected thereby.

Section 902  Applicability of Certain Indenture Provisions.
             ---------------------------------------------

                                       20
<PAGE>

     Each of the defeasance and covenant defeasance provisions of Article
Thirteen of the Indenture shall apply to the Notes; provided, however, that the
                                                    --------  -------
Company will not be able to defease the right of the Holders to convert the
Notes pursuant to Article Fourteen of the Indenture.

Section 903  Reference to and Effect on the Indenture.
             ----------------------------------------

     This Supplemental Indenture shall be construed as supplemental to the
Indenture and all the terms and conditions of this Supplemental Indenture shall
be deemed to be part of the terms and conditions of the Indenture. Except as set
forth herein, the Indenture heretofore executed and delivered is hereby
ratified, approved and confirmed. The provisions of this Supplemental Indenture
shall for the purposes of this series of Securities supersede the provisions of
the Indenture heretofore executed and delivered to the extent such Indenture
heretofore executed and delivered is inconsistent herewith. This Supplemental
Indenture is subject to the provisions of the Trust Indenture Act, and shall, to
the extent applicable, be governed by such provisions.

Section 904  Waiver of Certain Covenants.
             ---------------------------

     The Company may omit in any particular instance to comply with any term,
provision, or condition set forth in Article Three hereof if the Holders of a
majority in principal amount of the outstanding Notes shall, by Act of such
Holders, either waive such compliance in such instance or generally waive
compliance with such term, provision or condition, but no such waiver shall
extend to or affect such term, provision, or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the obligations
of the Company and the duties of the Trustee in respect of any such term,
provision, or condition shall remain in full force and effect.

Section 905  Supplemental Indenture May be Executed In Counterparts.
             ------------------------------------------------------

     This instrument may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.

Section 906  Effect of Headings.
             ------------------

     The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.

Section 907  Separability
             ------------

     In case any one or more of the provisions contained in this Supplemental
Indenture or in the Notes shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not effect any other provisions of this Supplemental Indenture or of the
Notes, but this Supplemental Indenture and the Notes shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.

                                       21
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed all as of the day and year first above written.

                                        READ-RITE CORPORATION

                                        By:____________________________________
                                           Name:
                                           Title:

                                        NORWEST BANK MINNESOTA, NATIONAL
                                        ASSOCIATION, as Trustee

                                        By:____________________________________
                                        Name:
                                        Title:

                                       22
<PAGE>

                                   Exhibit A

                          [Form of Face of Security]

[IF SUCH SECURITY IS A GLOBAL SECURITY, insert --] THIS SECURITY IS A GLOBAL
SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS SECURITY MAY
NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER
OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY
PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]

                             READ-RITE CORPORATION

            10% Convertible Subordinated Note due September 1, 2004

No. _________                                                     $_____________

                                                              CUSIP: ___________

     Read-Rite Corporation, a corporation duly organized and existing under the
laws of Delaware (herein called the "Company," which term includes any successor
Person under the Indenture hereinafter referred to), for value received, hereby
promises to pay to ________________, or registered assigns, the principal sum of
___________________ Dollars on September 1, 2004 and to pay interest thereon
from March __, 2000 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on March 1 and
September 1 in each year, commencing September 1, 2000, at the rate of 10% per
annum, until the principal hereof is paid or made available for payment, and at
a rate of 10% per annum on any overdue principal and premium, if any, and, to
the extent permitted by law, on any overdue interest. The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid in cash, or at the Company election, in
Common Stock in accordance with the provisions of the Supplemental Indenture, to
the Person in whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on the Regular Record Date for such
interest, which shall be the February 15 or August 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date.  Any such
interest not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not less than 10 days prior to
such Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities of this series may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.

                                       23
<PAGE>

     Payment of the principal of (and premium, if any) and any interest on this
Security will be made at office or agency of the company maintained for that
purpose in the Borough of Manhattan, The City of New York, or at the option of
the Holder, the Corporate Trust Office of the Trustee in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts; provided, however, that at the option of
                                     --------  -------
the Company payment of interest may be made by check mailed to the address of
the Person entitled thereto as such address shall appear in the Security
Register.

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

     Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

     IN WITNESS WHEREOF, the Company has caused this instrument to be signed
manually or by facsimile by their duly authorized officers and by its corporate
seal to be affixed or imported thereon.

                                             READ-RITE CORPORATION

                                             By:________________________________
                                                Title:

Attest:

__________________________________

     The Trustee's certificates of authentication shall be in substantially the
following form:

     This is one of the Securities of the series designated herein referred to
in the within-mentioned Indenture.

Dated:                                       NORWEST BANK MINNESOTA,
                                             NATIONAL ASSOCIATION,
                                             As Trustee

                                             By:________________________________
                                                Authorized Officer

                                       24
<PAGE>

                          Form of Reverse of Security

     This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"),  issued and to be issued in one or
more series under an Indenture, dated as of March __, 2000 (herein called the
"Indenture," which term shall have the meaning assigned to it in such
instrument), between the Company and Norwest Bank Minnesota, National
Association, as Trustee (herein called the "Trustee," which term includes any
successor trustee under the Indenture), and reference is hereby made to the
Indenture and all indentures supplemental thereto for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee, the holders of Senior Debt and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the face hereof, limited in aggregate principal amount to $_________, and is
issued pursuant to a Supplemental Trust Indenture supplementing the Indenture,
dated as of March __, 2000, from the Company to Trustee relating to the issuance
of the "10% Convertible Notes due September 1, 2004" of this series (the
"Supplemental Indenture").

     The Securities will not be subject to redemption prior to March 5, 2002 and
will be redeemable on and after such date at the option of the Company, in whole
or in part, upon not less than 20 nor more than 60 days notice to the Holders,
at the Redemption Prices (expressed as percentages of the principal amount) set
forth below.

     The Redemption Price (expressed as a percentage of principal amount) is as
follows:

<TABLE>
<CAPTION>
   Year                                                                   Redemption Price
   ----                                                                   ----------------
   <S>                                                                    <C>
   Beginning on March 5, 2002 and ending on February 28, 2003...........        105.0%
   Beginning on March 1, 2003 and ending on August 31, 2004.............        102.5
</TABLE>

and 100% at September 1, 2004, in each case together with accrued and unpaid
interest to, but excluding, the Redemption Date; provided, however, that
                                                 --------  -------
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.

     In the event of redemption of this Security in part only, a new Security or
Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.

     If a Change in Control occurs, the Holder of this Security, at the Holder's
option, shall have the right, in accordance with the provisions of the
Indenture, to require the Company to repurchase this Security (or any portion of
the principal amount hereof that is $1,000 or any integral multiple of $1,000 in
excess thereof, provided that the portion of the principal amount of this
                --------
Security to be Outstanding after such repurchase is at least equal to $1,000)
for cash at a Repurchase Price equal to 105% of the principal amount thereof
plus interest accrued to, but excluding, the Repurchase Date.  At the option of
the Company, the Repurchase Price may be paid in cash or, subject to the
conditions

                                       25
<PAGE>

provided in the Indenture, by delivery of shares of Common Stock having a fair
market value equal to the Repurchase Price. For purposes of this paragraph, the
fair market value of shares of Common Stock shall be determined by the Company
and shall be equal to 95% of the average of the Closing Prices Per Share for the
five consecutive Trading Days immediately preceding the second Trading Day prior
to the Repurchase Date. Whenever in this Security there is a reference, in any
context, to the principal of any Security as of any time, such reference shall
be deemed to include reference to the Repurchase Price payable in respect of
such Security to the extent that such Repurchase Price is, was or would be so
payable at such time, and express mention of the Repurchase Price in any
provision of this Security shall not be construed as excluding the Repurchase
Price so payable in those provisions of this Security when such express mention
is not made; provided, however, that, for the purposes of the succeeding
             --------  -------
paragraph, such reference shall be deemed to include reference to the Repurchase
Price only to the extent the Repurchase Price is payable in cash.

     The indebtedness evidenced by this Security is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Debt of the Company, and this Security
is issued subject to such provisions of the Indenture with respect thereto.
Each Holder of this Security, by accepting the same, (a) agrees to and shall be
bound by such provisions, (b) authorizes and directs the Trustee on his or her
behalf to take such action as may be necessary or appropriate to effectuate the
subordination so provided and (c) appoints the Trustee as his or her attorney-
in-fact for any and all such purposes.

     The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Security or certain restrictive covenants and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture, except that the Company will not be able
to defease the right of the Holders to convert this Security pursuant to Article
Fourteen of the Indenture.

     The Company may elect in accordance with the provisions of Section 503 of
the Supplemental Indenture to automatically convert the Security at any time
prior to Maturity if the Closing Price Per Share of the Company's Common Stock
has exceeded 200% of the Conversion Price for at least 20 Trading Days during
the 30 Trading Day period ending five Trading Days prior to the notice of
automatic conversion. In the event that the Automatic Conversion (as defined in
the Supplemental Indenture) occurs on or prior to March 5, 2002, the Company
will pay Additional Interest (as defined in the Supplemental Indenture) in cash,
or at the Company's election, in Common Stock to Holders of the Notes.

     Subject to the provisions of the Indenture, the Holder of this Security is
entitled, at its option, at any time on or before September 1, 2004 (except
that, in case this Security or any portion hereof shall be called for redemption
or submitted for repurchase, such right shall terminate with respect to this
Security or portion hereof, as the case may be, so called for redemption or
submitted for repurchase, as the case may be, at the close of business on the
first Business Day next preceding the date fixed for redemption or repurchase,
as the case may be, as provided in the Indenture unless the Company defaults in
making the payment due upon redemption or repurchase, as the case may be), to
convert the principal amount of this Security (or any portion hereof which is
$1,000 or an integral

                                       26
<PAGE>

multiple thereof) into fully paid and non-assessable shares of the Common Stock
of the Company, as said shares shall be constituted at the date of conversion,
at the Conversion Rate of _______ shares of Common Stock for each $1,000
principal amount of Securities, or at the adjusted Conversion Rate in effect at
the date of conversion determined as provided in the Indenture, upon surrender
of this Security, together with the conversion notice hereon duly executed, to
the office or agency of the Company maintained for that purpose in the Borough
of Manhattan, The City of New York, or at the option of the Holder, the
Corporate Trust Office of the Trustee accompanied (if so required by the
Company) by instruments of transfer, in form satisfactory to the Company and to
the Trustee, duly executed by the Holder or by its duly authorized attorney in
writing. Such surrender shall, if made during any period beginning at the close
of business on a Regular Record Date and ending at the opening of business on
the Interest Payment Date next following such Regular Record Date (unless this
Security or the portion being converted shall have been called for redemption on
a Redemption Date during the period beginning at the close of business on a
Regular Record Date and ending at the opening of business on the first Business
Day after the next succeeding Interest Payment Date, or if such Interest Payment
Date is not a Business Day, the second such Business Day), also be accompanied
by payment in funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of this Security
then being converted. Subject to the aforesaid requirement for payment and, in
the case of a conversion after the Regular Record Date next preceding any
Interest Payment Date and on or before such Interest Payment Date, to the right
of the Holder of this Security (or any Predecessor Security) of record at such
Regular Record Date to receive an installment of interest (with certain
exceptions provided in the Indenture), no adjustment is to be made on conversion
for interest accrued hereon or for dividends on shares of Common Stock issued on
conversion. The Company is not required to issue fractional shares upon any such
conversion, but shall make adjustment therefor as provided in the Indenture. The
Conversion Rate is subject to adjustment as provided in the Indenture. In
addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party or the sale of substantially all of the
assets of the Company, the Indenture shall be amended, without the consent of
any Holders of Securities, so that this Security, if then outstanding, will be
convertible thereafter, during the period this Security shall be convertible as
specified above, only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or sale by a holder of the
number of shares of Common Stock into which this Security might have been
converted immediately prior to such consolidation, merger or sale (assuming such
holder of Common Stock failed to exercise any rights of election and received
per share the kind and amount received per share by a plurality of non-electing
shares). In the event of conversion of this Security in part only, a new
Security or Securities for the unconverted portion hereof shall be issued in the
name of the Holder hereof upon the cancellation hereof.

     If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.

     The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the

                                       27
<PAGE>

Trustee with the consent of the Holders of more than 50% in principal amount of
the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Securities of each series at the time
Outstanding, on behalf of the Holders of all Securities of such series, to waive
compliance by the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.

     As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of any payment of principal hereof or any premium or interest hereon
on or after the respective due dates expressed herein.

     No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Security at the times, place and rate, and in the coin or currency,
herein prescribed.

     As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of and any premium and
interest on this Security are payable, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by, the Holder hereof or its attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

     The Securities of this series are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.  As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.

                                       28
<PAGE>

     No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

     Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.

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

                                       29
<PAGE>

                                 Abbreviations

     The following abbreviations, when used in the inscription of the face of
this Security, shall be construed as though they were written out in full
according to applicable laws or regulations:

<TABLE>
     <S>           <C>                                 <C>
     TEN COM  -    as tenants in common                UNIF GIFT MIN ACT - ________________
     TEN ENT  -    as tenants by the entireties
                   (Cust)
     JT TEN   -    as joint tenants with right of      Custodian ____________ under Uniform
                   survivorship and not as                             (Minor)
                   tenants in common                   Gifts to Minors Act ________________
</TABLE>

         Additional abbreviations may also be used though not in the above list.

                               Conversion Notice

     To Read-Rite Corporation:

     The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security, or portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock of the
Company in accordance with the terms of the Indenture referred to in this
Security, and directs that the shares issuable and deliverable upon the
conversion, together with any check in payment for fractional shares and any
Securities representing any unconverted principal amount hereof, be issued and
delivered to the registered holder hereof unless a different name has been
indicated below. If this Notice is being delivered on a date after the close of
business on a Regular Record Date and prior to the opening of business on the
related Interest Payment Date (unless this Security or the portion thereof being
converted has been called for redemption on a Redemption Date after the close of
business on a Regular Record Date and prior to the opening of business on the
first Business Day after the next succeeding Interest Payment Date, or if such
Interest Payment Date is not a Business Day, the next such Business Day), this
Notice is accompanied by payment, in funds acceptable to the Company, of an
amount equal to the interest payable on such Interest Payment Date of the
principal of this Security to be converted. If shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect hereto. Any amount required to be paid by
the undersigned on account of interest accompanies this Security.

                                       30
<PAGE>

     Principal Amount to be Converted
(in an integral multiple of $1,000, if less
                   than all)
                $____________

Dated: ____________                          ___________________________________

                                             ___________________________________
                                             Signature(s) must be guaranteed by
                                             a qualified guarantor institution
                                             if shares of Common Stock are to be
                                             delivered, or Securities to be
                                             issued, other than to and in the
                                             name of the registered owner.

                                             ___________________________________
                                             Signature Guaranty

     Fill in for registration of shares of Common Stock and Security if to be
issued otherwise than to the registered Holder.

_____________________________________        ___________________________________
(Name)                                       Social Security or Other Taxpayer
                                             Identification Number

_____________________________________

_____________________________________
(Address)

                                       31
<PAGE>

                   ELECTION OF HOLDER TO REQUIRE REPURCHASE

     (4)  Pursuant to Section 601 of the Supplemental Indenture, the undersigned
hereby elects to have this Security repurchased by the Company.

     (5)  The undersigned hereby directs the Trustee or the Company to pay it or
__________________ an amount in cash or, at the Company s election, Common Stock
valued as set forth in the Indenture, equal to 100% of the principal amount to
be repurchased (as set forth below), plus interest accrued to, but excluding,
the Repurchase Date, as provided in the Supplemental Indenture.

Dated: ______________________________      _____________________________________

                                           _____________________________________
                                           Signature(s)

                                           _____________________________________
                                           Signature(s) must be guaranteed by an
                                           Eligible Guarantor Institution with
                                           membership in an approved signature
                                           guarantee program pursuant to Rule
                                           17Ad-15 under the Securities Exchange
                                           Act of 1943.

                                           _____________________________________
                                           Signature Guaranteed

Principal amount to be repurchased
(an integral multiple of $1,000):________________________

Remaining principal amount following such repurchase
(not less than $1,000):__________________________________

NOTICE: The signature to the foregoing Election must correspond to the Name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.

                                       32<PAGE>

                                                                     EXHIBIT 4.7

                           FORM OF ESCROW AGREEMENT

          Escrow Agreement dated as of February __, 2000 by and among Read-Rite
Corporation, a Delaware corporation (the "Company"), Norwest Bank Minnesota,
National Association, as Escrow Agent (the "Escrow Agent") the parties set forth
on the signature pages hereto (the "Holders") and FleetBoston Robertson Stephens
Inc., as agent for the Holders ("Agent").

                                  WITNESSETH

     WHEREAS, pursuant to that certain Indenture and Supplemental Indenture,
both dated March 1, 2000, between the Company and Norwest Bank Minnesota,
National Association (the "Trustee"), the Company is issuing up to $50,000,000
aggregate principal amount of 10% Convertible Subordinated Notes due September
1, 2004 (the "Additional Exchange Notes") for cash (the "Offering"). In
connection with the Offering, the Company has agreed for the benefit of the
purchasers of the Additional Exchange Notes to enter this Escrow Agreement.

     WHEREAS, under the Revolving Credit Agreement the Banks have the right to
block the March 1, 2000 interest payment on the Existing Notes (as defined
below) under section 1504 of the Existing Notes Indenture (as defined below).

     WHEREAS, the Banks have exercised this blockage right pursuant to Section
1504 of the Existing Notes Indenture which has prevented the Company from paying
the March 1, 2000 interest payments on the Existing Notes.

     WHEREAS, pursuant to the terms of the Offering, FleetBoston Robertson
Stephens Inc. ("Robertson Stephens"), as placement agent on behalf of the
Holders, will deposit in escrow (the "Escrow"), to be held by the Escrow
Agent subject to the release conditions set forth herein, cash received from
the Holders with respect to such Holder's purchase of Additional Exchange
Notes.

     WHEREAS, this Escrow Agreement shall govern the terms upon which the Escrow
Agent will receive, hold, and release the Escrow Property (as defined) from the
Escrow and the duties of the Escrow Agent.

     NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth, the Company, the Holders, and the Escrow Agent
agree as follows:

     1.   Definitions.  The following definitions shall apply under this Escrow
          -----------
Agreement. Other capitalized terms shall have the meanings given to them in the
text.

     "Banks" means the financial institutions which are currently parties to the
Revolving Credit Agreement.

     "Exchange Offer" means the Company's offer to exchange an aggregate
principal amount of up to $172,500,000 of the Company's 10% Convertible
Subordinated Notes due September 1, 2004 for an aggregate principal amount of up
to $345,000,000 of the Company's Existing Notes.

     "Existing Notes" means the 6 1/2% Convertible Subordinated Notes due
September 1, 2004, issued under the Existing Notes Indenture.

     "Existing Notes Indenture" means the Indenture and Supplemental Trust
Indenture, each dated August 15, 1997, between the Company and State Street Bank
and Trust Company of California, N.A.,
<PAGE>

under which the Existing Notes were issued.

     "Majority Banks" means Banks owed at least 51% of the then aggregate unpaid
principal amount outstanding under the Revolving Credit Agreement.

     "Proceeds" means the funds received by the Company upon the compliance with
Section 6 of This Agreement.

     "Revolving Credit Agreement" means that certain Credit Agreement, dated as
of October 2, 1997, by and among the Company, the financial institutions named
on the signature pages thereof, Canadian Imperial Bank of Commerce, New York
Agency, as agent for the Banks and issuer of Letters of Credit, as amended by
the First Amendment to Credit Agreement dated February 5, 1998, the Second
Amendment to Credit Agreement dated as of August 10, 1998, the Waiver and Third
Amendment to Credit Agreement dated as of September 27,1999, the Waiver and
Fourth Amendment to Credit Agreement dated as of December 29, 1999 and the
Waiver, Forbearance and Fifth Amendment to Credit Agreement dated January 28,
2000, as amended, amended and restated, supplemented or otherwise modified from
time to time.

     2.   Appointment of Escrow Agent.  The Company and the Holders
          ---------------------------
do hereby appoint and designate the Escrow Agent for the purposes set forth
herein, and the Escrow Agent does hereby accept such appointment under the terms
and conditions set forth herein.

     3.   Establishment of Escrow.  Simultaneously with the execution of
          -----------------------
this Escrow Agreement: (i) the Company shall deposit $__________ aggregate
principal amount of Additional Exchange Notes evidenced by a global security
("Global Security") in the name of Cede & Co., as nominee for the Depository
Trust Company, with the Escrow Agent and (ii) Robertson Stephens, the initial
placement agent with respect to the Additional Exchange Notes, shall deposit
pursuant to a wire transfer the cash received from each Holder (collectively,
the "Escrow Property") with respect to the aggregate principal amount of the
Notes to be purchased by such Holders with the Escrow Agent. The Escrow Agent
shall hold the Escrow Property subject to the terms and conditions hereof.

     4.   Investment of Escrow Funds.  The Escrow Property shall be recorded in
          --------------------------
an escrow account by the Escrow Agent. The Escrow Agent shall be permitted, and
is hereby authorized to deposit, transfer, hold and invest Escrow Property, if
any, consisting of cash, in the Wells Fargo Fund, a money market fund available
through the Escrow Agent, or in a demand deposit account, during the period of
the Escrow in accordance with such instructions and directions as may from time
to time be provided to the Escrow Agent in writing and signed by the Company and
the Trustee. Any interest received by the Escrow Agent with respect to the
Escrow Property, including reinvested interest, shall become part of the Escrow
Property. The Escrow Agent shall have the right to liquidate any investments
held in order to provide funds necessary to make required distributions under
this Escrow Agreement. The Escrow Agent in its capacity as escrow agent
hereunder shall not have any liability for any loss sustained as a result of the
liquidation of any investment prior to its maturity of for the failure of the
parties to give the Escrow Agent instructions to invest or reinvest the Escrow
Funds or any earnings thereon.

     5.   Company Has No Rights in Escrow Property.  The Company expressly
          ----------------------------------------
acknowledges and agrees that prior to the release of the Escrow Property upon
satisfaction of the conditions in Section 6, the Company shall have no interest
or rights in the cash proceeds of the Escrow Property. In the event of the
investment of funds, if any, in the

                                       2
<PAGE>

Escrow Account, the Company shall have no interest or rights in such investments
or investment securities.

     6.   Release Conditions.  Upon the occurrence last to occur of paragraphs
          ------------------
(a) and (b) of this Section 6, the Company shall execute the written
instructions, substantially in the form attached hereto as Exhibit A,
                                                           ---------
instructing the Escrow Agent to release the cash portion of Escrow Property to
the Company and the Global Security portion of the Escrow Property to the
Trustee, as the custodian for Cede & Co., as nominee for the Depository Trust
Company.

          (a)  Lifting of the Blockage Notice.  The blockage notice sent to the
               ------------------------------
Existing Notes Trustee under the Existing Notes Indenture that prohibited the
Company from making the March 1, 2000 interest payment on the Existing Notes
shall have been rescinded by the Agent, acting for Majority Banks, by delivery
of written notice to the Existing Notes Trustee rescinding said blockage notice
in order to allow the Company to pay the holders of Existing Notes that did not
tender their Existing Notes in the Exchange Offer the interest due on March 1,
2000, on or before March 30, 2000.

          (b)  Payment of Proceeds to the Banks.  The Agent, acting for Majority
               --------------------------------
Banks, and the Company shall have agreed as to the amount of the Proceeds to be
paid to the Banks by the Company.

     7.   Escrow Conditions Not Met.  If the two conditions in Section 6 have
          -------------------------
not been satisfied by the time set forth therein, the Escrow Agent shall send
notice to the Holders at their address as set forth on Exhibit C that the
                                                       ---------
Company has failed to meet the conditions entitling the Company to receive the
cash portion of the Escrow Property and the Escrow Agent shall return the
Additional Exchange Notes to the Company and the cash portion of the Escrow
Property to the Holders in the amounts set forth on Exhibit C.
                                                    ---------

     8.   Notices.  All notices and communications hereunder shall be in writing
          -------
and shall be deemed to be duly given if delivered by hand or by air delivery to
the address, with respect to the Holders, as set forth on Exhibit C, and
                                                              ---------
with respect to the other parties to this Escrow Agreement as follows:

     If to the Escrow Agent, to:

     Norwest Bank Minnesota, National Association
     Corporate Trust Department
     N9303-120
     Sixth Street & Marquette Avenue
     Minneapolis, Minnesota  55479
     Attention: Rogene Pendleton
     Phone:  (612) 667-2245
     Fax:  (612) 667-9825

     If to the Company, to:

     Read-Rite Corporation
     345 Los Coches Street
     Milpitas, California  95035
     Attention: Cyril J. Yansouni
     Phone: (408) 262-6700
     Fax:  (408) 956-3205

                                       3
<PAGE>

     With a copy to:

     Wilson Sonsini Goodrich & Rosati, Professional Corporation
     650 Page Mill Road
     Palo Alto, California 94304
     Attention: John A. Fore, Esq.
     Phone: (650) 493-9300
     Fax: (650) 493-6811

or at such other address as any of the above may have furnished to the other
parties in writing and any such notice or communication given in the manner
specified in this Paragraph 8 shall be deemed to have been given on the date
received.  In the event that the Escrow Agent, in its sole discretion, shall
determine that an emergency exists, the Escrow Agent may use or accept such
other means of notice or communication as the Escrow Agent deems advisable,
including facsimile.

     9.   Reliance.  The Escrow Agent may act upon any instrument or other
          --------
writing believed by it in good faith to be genuine and to be signed or presented
by the proper person or persons and shall not be liable in connection with the
performance by it of its duties pursuant to the provisions hereof, except for
its own willful misconduct or gross negligence.

     10.  Escrow Agent Duties.  The duties and responsibilities of the Escrow
          -------------------
Agent hereunder shall be determined solely by the express provisions of this
Escrow Agreement, and no other or further duties or responsibilities shall be
implied. The Escrow Agent shall not have any liability under, nor duty to
inquire into the terms and provisions of any agreement or instructions, other
than outlined in this Escrow Agreement.

     11.  Termination of Escrow.  The escrow provided for in this Escrow
          ---------------------
Agreement shall expire on the earlier of :  (i) the date on which the Escrow
Property are released from the Escrow or (ii) the close of business on March 30,
2000, at which time the Escrow Property shall be returned in accordance with
Section 7.

     12.  Representations and Warranties By the Company.  The Company hereby
          ---------------------------------------------
represents and warrants that:

          (a)  The execution, delivery and performance by the Company of this
Escrow Agreement are within the Company's corporate powers, have been duly
authorized by all necessary corporate action, and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the Certificate of Incorporation of the Company or of any material agreement,
judgment, injunction, order, decree or other instrument binding upon the
Company.

          (b)  This Escrow Agreement has been duly executed and delivered by the
Company and assuming the due authorization and valid execution and delivery of
this Agreement by the Subscriber and the Escrow Agent and enforceability of this
Escrow Agreement against the Escrow Agent and the Subscriber in accordance with
its terms, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.

          (c)  No litigation, investigation or proceeding before any arbitrator
or governmental authority is pending or, to the knowledge of the Company, is
threatened by or against the Company with respect to this Escrow Agreement or
any of the transactions contemplated hereby.

                                       4
<PAGE>

     13.  Fees and Expenses.  The Escrow Agent shall be entitled to compensation
          -----------------
for its services as stated in the fee schedule attached hereto as Exhibit B,
                                                                  ---------
which compensation shall be paid by the Company. The fee agreed upon for the
services rendered hereunder is intended as full compensation for the Escrow
Agent's services as contemplated by this Escrow Agreement; provided, however,
                                                           --------  -------
that in the event that the conditions for the disbursement of property under
this Escrow Agreement are not fulfilled, or the Escrow Agent renders any
material service not contemplated in this Escrow Agreement or there is any
assignment of interest in the subject matter of this Escrow Agreement, or any
material modification hereof, then the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all costs and
expenses related thereto.

     14.  Indemnification of Escrow Agent.  The Company and each Holder both
          -------------------------------
jointly and severally hereby indemnifies and holds harmless the Escrow Agent
from and against, any and all loss, liability, cost, damage and expense,
including, without limitation, reasonable counsel fees, which the Escrow Agent
may suffer or incur by reason of any action, claim or proceeding brought against
the Escrow Agent arising out of or relating in any way to this Escrow Agreement
or any transaction to which this Escrow Agreement relates unless such action,
claim or proceeding is the result of the willful misconduct of the Escrow Agent.
The Escrow Agent may consult counsel in respect of any question arising under
the Indentures and the Escrow Agent shall not be liable for any action taken or
omitted in good faith upon advice of such counsel; provided that in no event
shall any Holder be liable to the Escrow Agent for any amount in excess of
their applicable portion of cash proceeds deposited by said Holder with the
Escrow Agent.

     15.  Refrain from Action.  In the event that the Escrow Agent shall be
          -------------------
uncertain as to its duties or rights hereunder or shall receive instructions,
claims or demands from any party hereto which, in its opinion, conflict with any
of the provisions of this Escrow Agreement, it shall be entitled to refrain from
taking any action and its sole obligation shall be to keep safely all property
held in escrow until it shall be directed otherwise in writing by all of the
other parties hereto or by a final order or judgment of a court of competent
jurisdiction.

     16.  Acceptance of Appointment.  Norwest Bank Minnesota, National
          -------------------------
Association hereby agrees to act as Escrow Agent under this Escrow Agreement.
The Escrow Agent shall have no duty to enforce any provision hereof requiring
performance by any other party hereunder.

     17.  Successor Escrow Agent.  Any company into which the Escrow Agent may
          ----------------------
be merged or converted or with which it may be consolidated or any company
resulting from any merger, conversion or consolidation to which it shall be a
party or any company to which the Escrow Agent may sell or transfer all or
substantially all of its escrow/custody business, provided such company shall be
eligible to serve as the Escrow Agent hereunder, shall be the successor
hereunder to the Escrow Agent without the execution or filing of any paper or
any further act.

     18.  Counterparts. This Escrow Agreement may be executed in two or more
          ------------
counterparts, all of which taken together shall constitute one instrument.

     19.  Resignation.  The Escrow Agent may resign upon 30-days advance written
          -----------
notice to the parties hereto. If a successor escrow agent is not appointed
within the 30-day period following such notice, the Escrow Agent may petition
any court of competent jurisdiction to name a successor escrow agent.

                                       5
<PAGE>

     20.  Governing Law.
          -------------

          THIS AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS
OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANY,
ESCROW AGENT AND THE HOLDERS IN CONNECTION WITH THIS AGREEMENT, AND WHETHER
ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS
PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK.

     21.  Amendments.  This Escrow Agreement may be amended or modified, and any
          ----------
of the terms, covenants, representations, warranties, or conditions hereof may
be waived, only by a written instrument executed by the Company, the Escrow
Agent and a majority of the Holders hereto, or in the case of a waiver, by the
party waiving compliance. Any waiver by any party of any condition, or of the
breach of any provision, term, covenant, representation, or warranty contained
in the Escrow Agreement, in any one or more instances, shall not be deemed to
be nor construed as further or continuing waiver of any such conditions, or of
the breach of any other provision, term, covenant, representation, or warranty
of this Escrow Agreement.

                                       6
<PAGE>

     22.  Assignability.  This Escrow Agreement shall not be assigned by
          -------------
operation of law or otherwise, except as otherwise specifically provided in
writing by the parties hereto; provided that the Company may assign its rights
and obligations hereunder to any of its subsidiaries, or affiliates or any
successor in interest to the business of the Company.

     23.  Section Headings.  The section headings in this Escrow Agreement are
          ----------------
for reference purposes only and shall not affect the meaning or interpretation
of this Escrow Agreement.

     24.  Severability.  In the event that any part of this Escrow Agreement is
          ------------
declared by any court or other judicial or administrative body to be null, void,
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Escrow Agreement shall remain
in full force and effect.

     IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
on the date and year first above written.

                                             READ-RITE CORPORATION

                                             By:________________________________
                                             Name:______________________________
                                             Title:_____________________________

                                             NORWEST BANK MINNESOTA, NATIONAL
                                             ASSOCIATION, as Escrow Agent

                                             By:________________________________
                                             Name:______________________________
                                             Title:_____________________________

                                             FLEETBOSTON ROBERTSON STEPHENS
                                             INC., as Agent for the Holders

                                             By:________________________________
                                             Name:______________________________
                                             Title:_____________________________

                                             HOLDERS

                                             By:________________________________
                                             Name:______________________________
                                             Title:_____________________________

                                             By:________________________________
                                             Name:______________________________
                                             Title:_____________________________

                                       7
<PAGE>

                                   EXHIBIT A

                                                          Date: ________________

Norwest Bank Minnesota, National Association, as Escrow Agent
Corporate Trust Department
N9303-120
Sixth Street & Marquette Avenue
Minneapolis, MN  55479
Attention:  Rogene Pendleton

               Re:  Written Instructions

Dear Ms. Pendleton:

          Reference is made to (i) the Escrow Agreement (the "Escrow
Agreement"), dated as of March __, 2000, by and among Read-Rite Corporation (the
"Company"), and Norwest Bank Minnesota, National Association, as Escrow Agent
and the Subscribers listed on the signature pages thereto.  Capitalized terms
used by not defined herein shall have the meaning given them in the Escrow
Agreement.

          In accordance with Section 6 of the Escrow Agreement, the undersigned
hereby jointly instruct the Escrow Agent to release the Escrow Property to the
Company and release the Additional Exchange Notes to Norwest Bank Minnesota,
National Association, the trustee under the Indenture and the Additional
Exchange Notes, as custodian for the Depository Trust Company.

                                        READ-RITE CORPORATION

                                        By:_____________________________________
                                        Name:___________________________________
                                        Title:__________________________________

<PAGE>

                                   EXHIBIT B

                                      FEES

ACCEPTANCE FEE:                                                       $1,500.00
For initial services including examination of the Escrow Agreement
and all supporting documents this is a one-time fee payable upon the
opening of the account.

ADMINISTRATION FEE:                                                   $1,500.00*
An annual charge or any portion of a 12-month period thereof. This
fee is payable upon the opening of the account and annually thereafter.
This charge is not prorated for the first year.

*Assumes use of Norwest Funds for funds on deposit.

TRANSACTION FEE:

Wire transfer of funds                                                $   25.00
Other transfer of funds (i.e. Checks, internal account transfers)     $   15.00
Asset transactions (purchases/sales/calls/deposit/withdrawals, etc.)  $   20.00

No charge for Norwest Funds transactions other than those disclosed in the Fund
Prospectus.

TAX REPORTING FEES:

$5.00 per individual 1099 reported to the Internal Revenue Service (optional -as
required)

EXTRAORDINARY SERVICES:

For any services other than those covered by the aforementioned, a special per
hour charge will be made to commensurate with the character of the service, time
required and responsibility involved. Such services include but are not limited
to excessive administrative time, attendance at closings, specialized reports
and record-keeping, unusual certifications, etc.

FEE SCHEDULE IS SUBJECT TO ANNUAL REVIEW AND ADJUSTMENT.

<PAGE>

                                   EXHIBIT C

Holder (with address):   Principal Amount of Exchange Notes      Purchase Price
---------------------    ----------------------------------      --------------

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