exv10w7w1



 






Exhibit 10.7.1




KOMAG INCORPORATED




TARGET INCENTIVE PLAN




 









 





TABLE OF CONTENTS




	 	 	 	 
	 	 	Page
	SECTION 1 BACKGROUND, PURPOSE AND DURATION
	 	 	1
	 
	1.1 Effective Date
	 	 	1
	1.2 Purpose of the Plan
	 	 	1
	 
	SECTION 2 DEFINITIONS
	 	 	1
	 
	2.1 “Affiliate”
	 	 	1
	2.2 “Award”
	 	 	1
	2.3 “Base Pay”
	 	 	1
	2.4 “Board”
	 	 	1
	2.5 “Bonus Pool”
	 	 	1
	2.6 “Committee”
	 	 	1
	2.7 “Company”
	 	 	2
	2.8 “Corporate Operating Income”
	 	 	2
	2.9 “Disability”
	 	 	2
	2.10 “Individual Modifier”
	 	 	2
	2.11 “Manager”
	 	 	2
	2.12 “Participant”
	 	 	2
	2.13 “Payout Percentage”
	 	 	2
	2.14 “Performance Period”
	 	 	2
	2.15 “Plan”
	 	 	3
	2.16 “Target Percentage”
	 	 	3
	2.17 “Termination of Service”
	 	 	3
	 
	SECTION 3 DETERMINATION OF AWARDS
	 	 	3
	 
	3.1 Selection of Participants
	 	 	3
	3.2 Determination of Target Awards
	 	 	3
	3.3 Employment Status Affect on Award
	 	 	5
	3.4 Discretion to Modify Awards
	 	 	5
	3.5 Discretion to Determine Criteria
	 	 	5
	 
	SECTION 4 PAYMENT OF AWARDS
	 	 	5
	 
	4.1 Funding of Plan
	 	 	5
	4.2 Timing of Payment
	 	 	6
	4.3 Form of Payment
	 	 	6
	 
	SECTION 5 ADMINISTRATION
	 	 	6
	 
	5.1 Committee
	 	 	6
	5.2 Committee Authority
	 	 	6
	5.3 Decisions Binding
	 	 	7
	5.4 Delegation by the Committee
	 	 	7






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TABLE OF CONTENTS

(Continued)




	 	 	 	 
	 	 	Page
	SECTION 6 GENERAL PROVISIONS
	 	 	7
	 
	6.1 Tax Withholding
	 	 	7
	6.2 No Effect on Employment or Service
	 	 	7
	6.3 Participation
	 	 	7
	6.4 Successors
	 	 	7
	6.5 Nontransferability of Awards
	 	 	8
	 
	SECTION 7 AMENDMENT, TERMINATION AND DURATION
	 	 	8
	 
	7.1 Amendment, Suspension or Termination
	 	 	8
	7.2 Duration of the Plan
	 	 	8
	 
	SECTION 8 LEGAL CONSTRUCTION
	 	 	8
	 
	8.1 Gender and Number
	 	 	8
	8.2 Severability
	 	 	8
	8.3 Requirements of Law
	 	 	9
	8.4 Bonus Plan
	 	 	9
	8.5 Governing Law
	 	 	9
	8.6 Captions
	 	 	9






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KOMAG, INC.

TARGET INCENTIVE PLAN




SECTION 1

BACKGROUND, PURPOSE AND DURATION




1.1 Effective Date




     The Compensation Committee of the Board adopted the Plan effective as of January 24, 2006.
The Plan is to be effective beginning with the company’s 2006 fiscal year.



1.2 Purpose of the Plan




     The Plan is intended to align each management employee of the Company towards a single
financial target which will result in a competitive cash bonus payment for each such employee as a
reward for each employee’s personal contributions to the Company’s consolidated financial
performance.



SECTION 2

DEFINITIONS




     The following words and phrases shall have the following meanings unless a different meaning
is plainly required by the context:



     2.1 “Affiliate”



     means any corporation or other entity (including, but not limited to, partnerships
and joint ventures) controlled by the Company.



     2.2 “Award”



     means the actual award (if any) payable to a Participant as determined pursuant to
Section 3.



     2.3 “Base Pay”



     means base straight time gross earnings earned by the Participant for the
Performance Period but exclusive of overtime, premium pay, stock compensation, relocation payments,
or any other bonus or incentive awards or payments.



     2.4 “Board”



     means the Board of Directors of the Company.



     2.5 “Bonus Pool”



     means the pool of funds available for distribution to Participants. Subject to
the terms of the Plan, the Committee establishes the Bonus Pool for each Performance
Period.



 









 





     2.6 “Committee”



     means the committee appointed by the Board to administer the Plan. Until
otherwise determined by the Board, the Compensation Committee of the Board shall constitute the
Committee.



     2.7 “Company”



     means Komag Incorporated, a Delaware corporation, or any successor thereto.



     2.8 “Corporate Operating Income”



     means the net sales of the Company during the Performance Period,
less (A)(i) the cost of goods sold, (ii) research and development expenses, (iii) selling, general
and administrative expenses. The Committee will determine annually any adjustments , plus (or
minus), to Corporate Operating Income including, but not limited to, any gains (or losses) with
respect to the disposal of assets, non-cash employee stock compensation expense, restructuring,
impairment, and foreign currency adjustments.



     2.9 “Disability”



     means a permanent and total disability determined in accordance with uniform and
nondiscriminatory standards adopted by the Committee from time to time.



     2.10 “Individual Modifier”



     means the Participant’s actual individual performance as measured
against certain objectives, as established for a Participant by his or her Manager, as well as the
demonstration of key job attributes and competencies in achieving those objectives. The Committee
will determine a Participant’s Individual Modifier in its sole discretion.



     2.11 “Manager”



     means a Participant’s manager or the person whom the Participant reports for the
Performance Period. For these purposes, the Company’s Chief Executive Officer (“CEO”) reports to
the Committee.



     2.12 “Participant”



     means as to any Performance Period, an employee of the Company or any Affiliate
who has been selected by the Committee for participation in the Plan for that Performance Period.



     2.13 “Payout Percentage”



     means the percentage of actual Corporate Operating Income versus the
target Corporate Operating Income for Performance Period as determined by the Committee in its sole
discretion. The Committee will determine the target Corporate Operating Income for a Performance
Period.



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     2.14 “Performance Period”



     means the period of time for the measurement of the performance criteria
that must be met to receive an Award, as determined by the Committee in its sole discretion. A
Performance Period may be divided into one or more shorter periods if, for example, but not by way
of limitation, the Committee desires to measure some performance criteria over twelve (12) months
and other criteria over three (3) months. Multiple, overlapping Performance Periods (of different
durations) may be in effect at any one time.



     2.15 “Plan”



     means the Komag Incorporated Target Incentive Plan, as set forth in this instrument and
as hereafter amended from time to time.



     2.16 “Target Percentage”



     means a Participant’s incentive target as a percentage of Base Pay as
determined by the Committee in its sole discretion.



     2.17 “Termination of Service”



     means a cessation of the employee-employer relationship between a
Participant and the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, retirement, or the
disaffiliation of an Affiliate, but excluding any such termination where there is a simultaneous
reemployment by the Company or an Affiliate.



SECTION 3

DETERMINATION OF AWARDS




3.1 Selection of Participants




     The Committee, in its sole discretion, shall select the employees of the Company or its
Affiliates who shall be Participants for any Performance Period. Participation in the Plan is in
the sole discretion of the Committee, on a Performance Period by Performance Period basis.
Accordingly, an employee who is a Participant for a given Performance Period in no way is
guaranteed or assured of being selected for participation in any subsequent Performance Period or
Periods. Unless and until the Committee provides otherwise, all exempt employees in grade E06 and
above who are employed by the Company on the date Awards are paid and are in good standing with the
Company (i.e., not on a performance management plan) will be Participants for any Performance
Period.



3.2 Determination of Target Awards




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     (a) At the end of the Performance Period, the Committee will review Corporate Operating Income
compared to the target Operating Income to determine the Payout Percentage. The sum of the
Participants’ target Awards will determine the aggregate Bonus Pool from which Awards will be made
as set forth in Section 4.1 in its sole discretion. The total amount of all Awards may not exceed
the total Bonus Pool.



     (b) The Committee will determine the terms pursuant to which a Participant will receive an
Award hereunder for any Performance Period in its sole discretion. Unless the Committee provides
otherwise, the following terms will apply in order to receive an Award.



     Subject to the provisions of Section 3, Participants are eligible to receive an Award for a
Performance Period covering the Company’s fiscal year (an “Annual Performance Period”) equal to a
Participant’s Base Pay for the Performance Period multiplied by the Payout Percentage multiplied by
the Participant’s Individual Modifier multiplied by the Participant’s Target Percentage (the
“Annual Award”). The Annual Award for a Participant who receives an Interim Award (discussed
below) will be reduced by the amount of such Interim Award.



     In the event the Payout Percentage for an annual Performance Period is less than 60%, no
Annual Award shall be paid to any Participants under this Plan. If the Payout Percentage for the
annual Performance Period is equal to or greater than 60% but less than 80%, then Annual Awards
will not be provided pursuant to the formula in the preceding paragraph, but will instead be
allocated on a discretionary basis to certain top performers of the Company as determined by the
Committee in its sole discretion.



     During an Annual Performance Period, the Committee may determine that it will pay some portion
of the Annual Award at the time or times it determines in its sole discretion prior to the
completion of the Annual Performance Period (an “Interim Award”). The Committee will determine the
financial target necessary to receive an Interim Award, the Participants eligible to receive an
Interim Award, and the level of an Interim Award compared to the Annual Award.



     Final Annual Award recommendations may be modified by a Participant’s Manager to reflect the
bonus pool allocated to such Participant’s department within the Company. A Manager must submit a
final Annual Award recommendation for each Participant under such Manager’s supervision based on
his or her Individual Modifier within the limit of the total bonus pool. A Manager may petition
the CEO, or, if applicable, the Committee, for extra funds in the event the bonus pool allocated to
such Manager’s department is insufficient to reward the extraordinary performance of a Participant.



     (c) If a Participant transfers or is assigned to a different position during the Performance
Period, which would result in the application of a different Target Percentage, the Participant’s
Target Percentage will be pro-rated based on the number of full months a particular Target
Percentage applied to such Participant. If a Target Percentage applies to a Participant for a
partial month, the higher Target Percentage will apply for the entire month.



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   If a Participant enters the Plan from the Company’s Bonus Plan after the beginning of the
Performance Period, his or her Award will be pro-rated based on the number of full months such
Participant became eligible to receive an Award under the Plan. If a Participant becomes eligible
to receive an Award under this Plan for a partial month, he or she will be credited for the entire
month.




	 	3.3	 	Employment Status Affect on Award





          Except as provided below, if a Participant’s Termination of Service occurs prior to the
payment of an Award, no Award shall be made to such Participant. In the event of a Participant’s
leave of absence from the Company during the Performance Period, or upon an involuntary termination
of the Participant due to death, Disability or the elimination of the Participant’s position, the
Participant shall receive a prorated Award for the period of employment during the Performance
Period.




          If following a Participant’s Termination of Service for any reason it is determined by the
Company that the Participant acted in a manner which is or was detrimental to the business of the
Company within the six-months period following the Participant’s termination date, the Participant
may be required to refund any Awards paid to such Participant during the six-month period prior to
such termination.





	 	3.4	 	Discretion to Modify Awards





          Notwithstanding any contrary provision of the Plan, the Committee
may, in its sole discretion and at any time, (a) increase, reduce or eliminate a Participant’s
actual Award, and/or (b) increase, reduce or eliminate the amount allocated to the bonus pool. The
Committee may determine the amount of any reduction on the basis of such factors as it deems
relevant, and shall not be required to establish any allocation or weighting with respect to the
factors it considers.





	 	3.5	 	Discretion to Determine Criteria





          Notwithstanding any contrary provision of the Plan, the
Committee shall, in its sole discretion, determine the performance requirements applicable to any
Award. The requirements may be on the basis of any factors the Committee determines relevant, and
may be on an individual, divisional, business unit or Company-wide basis. Failure to meet the
requirements will result in a failure to earn the Award, except as provided in Section 3.4.




SECTION 4

PAYMENT OF AWARDS





	 	4.1	 	Funding of Plan





          At the beginning of the Performance Period, the CEO will recommend to the Committee the
measures and goals to be used in determining the amount of money to be reserved for the payment of
Awards under the Plan.




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     Each Award shall be paid solely from the general assets of the Company. Nothing in this Plan
shall be construed to create a trust or to establish or evidence any Participant’s claim of any
right other than as an unsecured general creditor with respect to any payment to which he or she
may be entitled.



4.2 Timing of Payment




     Payment of an Award shall be made as soon as practicable as determined by the Committee after
the end of the Performance Period during which the Award was earned. Unless otherwise determined
by the Committee, a Participant must be employed by the Company or any Affiliate on the date an
Award is actually paid to receive such Award.



4.3 Form of Payment




     Each Award shall be paid in cash (or its equivalent) in a single lump sum.



SECTION 5

ADMINISTRATION




5.1 Committee




     The Plan shall be administered under the authority and subject to the approval of the
Committee. The Committee shall approve the total of all Awards made under the Plan. The Vice
President of Human Resources of the Company (or such other person as designated by the Committee)
shall be responsible for the preparation and coordination of all pertinent Performance Period and
Award information.



5.2 Committee Authority




     It shall be the duty of the Committee to administer the Plan in accordance with the Plan’s
provisions. The Committee shall have all powers and discretion necessary or appropriate to
administer the Plan and to control its operation, including, but not limited to, the power to (a)
prescribe the terms and conditions of Awards, (b) interpret the Plan and the Awards, (c) adopt
rules for the administration, interpretation and application of the Plan as are consistent
therewith, and (d) interpret, amend or revoke any such rules.



5.3 Decisions Binding




     All determinations and decisions made by the Committee and any delegate of the Committee
pursuant to the provisions of the Plan shall be final, conclusive, and binding on all persons, and
shall be given the maximum deference permitted by law.



5.4 Delegation by the Committee



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     The Committee, in its sole discretion and on such terms and conditions as it may provide, may
delegate all or part of its authority and powers under the Plan to one or more directors and/or
officers of the Company.



SECTION 6

GENERAL PROVISIONS




6.1 Tax Withholding




     The Company shall withhold all applicable taxes from any Award, including any federal, state
and local taxes (including, but not limited to, the Participant’s FICA and SDI obligations).



6.2 No Effect on Employment or Service




     Nothing in the Plan shall interfere with or limit in any way the right of the Company to
terminate any Participant’s employment or service at any time, with or without cause. For purposes
of the Plan, transfer of employment of a Participant between the Company and any one of its
Affiliates (or between Affiliates) shall not be deemed a Termination of Service. Employment with
the Company and its Affiliates is on an at-will basis only. The Company expressly reserves the
right, which may be exercised at any time and without regard to when during a Performance Period
such exercise occurs, to terminate any individual’s employment with or without cause, and to treat
him or her without regard to the effect that such treatment might have upon him or her as a
Participant.



6.3 Participation




     No employee of the Company or any Affiliate shall have the right to be selected
to receive an Award under this Plan, or, having been so selected, to be selected to receive a
future Award.



6.4 Successors




     All obligations of the Company under the Plan, with respect to awards granted hereunder, shall
be binding on any successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all
of the business or assets of the Company.



6.5 Nontransferability of Awards




     No Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will, or by the laws of descent and distribution. All
rights with respect to an Award granted to a Participant shall be available during his or her
lifetime only to the Participant.



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SECTION 7

AMENDMENT, TERMINATION AND DURATION




7.1 Amendment, Suspension or Termination




     The Company may amend or terminate the Plan, or any part thereof, at any time and for any
reason.



7.2 Duration of the Plan




     The Plan shall commence on the date herein, and subject to Section 7.1 (regarding the
Company’s right to amend or terminate the Plan), shall remain in effect thereafter.



SECTION 8

LEGAL CONSTRUCTION




8.1 Gender and Number




     Except where otherwise indicated by the context, any masculine term used herein also shall
include the feminine; the plural shall include the singular and the singular shall include the
plural.



8.2 Severability




     In the event any provision of the Plan shall be held illegal or invalid for any reason, the
illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been included.



8.3 Requirements of Law




     The granting of awards under the Plan shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national securities exchanges as
may be required.



8.4 Bonus Plan




     This Plan is intended to be a “bonus program” as defined under U.S. Department of Labor
regulation section 2510.3-2(c) and shall be construed and administered by the Company in accordance
with such intention.



8.5 Governing Law




     The Plan and all awards shall be construed in accordance with and governed by the laws of the
State of California, but without regard to its conflict of law provisions.



8.6 Captions



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     Captions are provided herein for convenience only, and shall not serve as a basis for
interpretation or construction of the Plan.




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