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EXHIBIT 10.3




EXECUTIVE RETENTION AGREEMENT




     On May 14, 2002, the United States Bankruptcy Court for the Northern District of California
entered an order confirming the “Debtor’s Further Modified First Amended Plan of Reorganization,
Dated May 7, 2002” (the “Plan”), which provides for a reorganization (the “Reorganization”) of
Komag, Inc., a Delaware corporation (the “Company”). The Plan became effective by its terms on June
30, 2002. This Agreement was originally entered into as of July 17, 2002 and is currently being
reinstated as of May 4, 2005 (the “Effective Date”) by and between the Company and William Hammack
(“Executive”). The purpose of this Agreement is to provide Executive with an incentive to remain
employed as a key executive of the Company following the Reorganization.



     1. Duties and Scope of Employment. 



          (a) Positions and Duties. As of the Effective Date, Executive will continue to serve
as Vice President, Human Resources of the Company. Executive will render such business and
professional services in the performance of his duties, consistent with Executive’s position within
the Company, as shall reasonably be assigned to him by the Company’s Board of Directors (the
“Board”). The period of Executive’s employment under this Agreement is referred to herein as the
“Employment Term.”



          (b) Obligations.
During the Employment Term, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and
time to the Company. For the duration of the Employment Term, Executive agrees not to actively
engage in any other employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board.



          (c) Conflicting Employment. Executive agrees that, while employed by the Company, he
will not engage in any other employment, occupation, consulting or other business activity directly
related to the business in which the Company is now involved or becomes involved during the term of
Executive’s employment, nor will Executive engage in any other activities that conflict with
Executive’s obligations to the Company.



     2. Term. Executive’s employment with the Company commenced on March 14, 2005, and
shall continue, unless otherwise terminated earlier pursuant to the terms of this Agreement,
through July 16, 2005. After July 16, 2005, the parties agree that Executive’s employment with the
Company will be “at-will” employment and may be terminated at any time with or without cause or
notice.



     3. Compensation.



          (a) Base Salary. During the Employment Term, the Company will pay Executive as
compensation for his services a base salary at the annualized rate of $187,554 (the “Base Salary”).
The Base Salary will be paid periodically in accordance with the Company’s normal payroll practices
and may be subject to annual adjustments by the Company after comparison of market data with
similarly-situated companies.



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          (b) Retention Bonus Plan. Following Executive’s employment date, Executive will be
eligible to participate in the Company’s Retention Bonus Plan.



     4. Employee Benefits. During the Employment Term, Executive will continue to be
entitled to participate in the employee benefit plans currently and hereafter maintained by the
Company of general applicability to other senior executives of the Company, including, without
limitation, the Company’s group medical, dental, vision, disability, life insurance, vacation and
flexible-spending account plans and programs. The Company reserves the right to cancel or change
the benefit plans and programs it offers to its employees at any time.



     5. Severance.



          (a) Involuntary Termination. If Executive’s employment with the Company terminates
other than voluntarily or for “Cause” (as defined herein), and Executive signs and does not revoke
a standard release of claims with the Company, then Executive shall be entitled to receive a
lump-sum severance payment (the “Severance Payment”) equal to (A) x (B), where (A) = 2.99 and (B) =
the sum of (i) Executive’s annualized Base Salary rate, as then in effect, (ii) all of Executive’s
expected bonus payments to be made during the year in which the termination occurs, if any, and
(iii) the annualized value of Executive’s benefits package with the Company as determined by the
Company in its reasonable discretion. The Severance Payment shall be made in a single lump sum
within thirty (30) days of termination. Notwithstanding the foregoing, the Company shall not be
obligated to make any payments pursuant to this Section 5(a) unless and until Executive has
delivered to the Company an executed release of all claims he or she has or may have against the
Company, in form and substance satisfactory to the Company.



          (b) Voluntary Termination; Termination for Cause. If Executive’s employment with the
Company terminates voluntarily by Executive or for Cause by the Company, then (i) all vesting of
any options to purchase shares of the Company’s common stock held by Executive will terminate
immediately and all payments of compensation by the Company to Executive hereunder will terminate
immediately (except as to amounts already earned), and (ii) Executive will only be eligible for
severance or other benefits in accordance with the Company’s established plans or policies as then
in effect.



     6. Change of Control Benefits. In the event of a “Change of Control” (as defined
herein) followed by Executive’s termination other than voluntarily or for “Cause” within six (6)
months of the consummation of a Change of Control Transaction, Executive shall be entitled to
receive the Severance Payment within thirty (30) days of such termination. For the purpose of this
Section 6, Executive shall be deemed to have been terminated other than for “Cause” if Executive is
not provided with an offer of comparable employment with the Company or successor entity following
the Change of Control with comparable duties, position and responsibilities relative to the
Executive’s duties, position and responsibilities in effect immediately prior to such Change of
Control. Notwithstanding the foregoing, if Executive receives the Severance Payment pursuant to
this Section, he shall not be entitled to receive an additional Severance Payment pursuant to
Section 5 hereof.



     7. Non-Solicitation. For a period of twelve (12) months following Executive’s
termination of employment, Executive shall not, directly or



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indirectly, without the prior written consent of Parent, solicit, encourage or take any other
action which is intended to induce or encourage any employee or customer of Parent or its
subsidiaries to terminate his or her employment with or customer relationship to Parent or its
subsidiaries.




     8. Definitions.



          (a) Cause. For purposes of this Agreement, “Cause” is defined as (i) an act of
dishonesty made by Executive in connection with Executive’s responsibilities as an employee, (ii)
Executive’s conviction of, or plea of nolo contendere to, a felony, (iii) Executive’s gross
misconduct, or (iv) Executive’s continued substantial violations of his employment duties after
Executive has received a written demand for performance from the Company which specifically sets
forth the factual basis for the Company’s belief that Executive has not substantially performed his
duties.



          (b) Change of Control. For purposes of this Agreement, “Change of Control” of the
Company is defined as: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50%
or more of the total voting power represented by the Company’s then outstanding voting securities;
or (ii) the date of the consummation of a merger or consolidation of the Company with any other
corporation that has been approved by the stockholders of the Company, other than a merger or
consolidation which would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company; or (iii) the date of the consummation of the sale or
disposition by the Company of all or substantially all the Company’s assets.



     9. Assignment. This Agreement will be binding upon and inure to the benefit of (a) the
heirs, executors and legal representatives of Executive upon Executive’s death and (b) any
successor of the Company. Any such successor of the Company will be deemed substituted for the
Company under the terms of this Agreement for all purposes. For this purpose, “successor” means any
person, firm, corporation or other business entity which at any time, whether by purchase, merger
or otherwise, directly or indirectly acquires all or substantially all of the assets or business of
the Company. None of the rights of Executive to receive any form of compensation payable pursuant
to this Agreement may be assigned or transferred except by will or the laws of descent and
distribution. Any other attempted assignment, transfer, conveyance or other disposition of
Executive’s right to compensation or other benefits will be null and void.



     10. Notices. All notices, requests, demands and other communications called for
hereunder shall be in writing and shall be deemed given (i) on the date of delivery if delivered
personally, (ii) one (1) day after being sent by a well established commercial overnight service,
or (iii) four (4) days after being mailed by registered or certified mail, return receipt
requested, prepaid and addressed to the parties or their successors at the following addresses, or
at such other addresses as the parties may later designate in writing:



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If to the Company:

Komag, Inc.

1710 Automation Parkway

San Jose, California 95131

Attn: Chief Financial Officer



If to Executive:

William Hammack



     11. Severability. In the event that any provision hereof becomes or is declared by a
court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue
in full force and effect without said provision.



     12. Arbitration.



          (a) General. In consideration of Executive’s service to the Company, its promise to
arbitrate all employment related disputes and Executive’s receipt of the compensation, pay raises
and other benefits paid to Executive by the Company, at present and in the future, Executive agrees
that any and all controversies, claims, or disputes with anyone (including the Company and any
employee, officer, director, shareholder or benefit plan of the Company in their capacity as such
or otherwise) arising out of, relating to, or resulting from Executive’s service to the Company
under this Agreement or otherwise or the termination of Executive’s service with the Company,
including any breach of this Agreement, shall be subject to binding arbitration under the
Arbitration Rules set forth in California Code of Civil Procedure Section 1280 through 1294.2,
including Section 1283.05 (the “RULES”) and pursuant to California law. Disputes which Executive
agrees to arbitrate, and thereby agrees to waive any right to a trial by jury, include any
statutory claims under state or federal law, including, but not limited to, claims under Title VII
of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age
Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the California
Fair Employment and Housing Act, the California Labor Code, claims of harassment, discrimination or
wrongful termination and any statutory claims. Executive further understands that this Agreement to
arbitrate also applies to any disputes that the Company may have with Executive.



          (b) Procedure. Executive agrees that any arbitration will be administered by the
American Arbitration Association (“AAA”) and that a neutral arbitrator will be selected in a manner
consistent with its National Rules for the Resolution of Employment Disputes. The arbitration
proceedings will allow for discovery according to the rules set forth in the National Rules for the
Resolution of Employment Disputes or California Code of Civil Procedure. Executive agrees that the
arbitrator shall have the power to decide any motions brought by any party to the arbitration,
including motions for summary judgment and/or adjudication and motions to dismiss and demurrers,
prior to any arbitration hearing. Executive agrees that the arbitrator shall issue a written
decision on the merits. Executive also agrees that the arbitrator shall have the power to award any
remedies, including attorneys’ fees and costs, available under applicable law. Executive
understands the Company will pay for any administrative or hearing fees charged by the arbitrator
or AAA except that Executive shall pay the first $200.00 of any filing fees associated with any
arbitration Executive initiates. Executive agrees that the arbitrator shall administer and conduct
any arbitration in a manner consistent with the Rules



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and that to the extent that the AAA’s National Rules for the Resolution of Employment Disputes
conflict with the Rules, the Rules shall take precedence.




          (c) Remedy. Except as provided by the Rules, arbitration shall be the sole, exclusive
and final remedy for any dispute between Executive and the Company. Accordingly, except as provided
for by the Rules, neither Executive nor the Company will be permitted to pursue court action
regarding claims that are subject to arbitration. Notwithstanding, the arbitrator will not have the
authority to disregard or refuse to enforce any lawful Company policy, and the arbitrator shall not
order or require the Company to adopt a policy not otherwise required by law which the Company has
not adopted.



          (d) Availability of Injunctive Relief. In addition to the right under the Rules to
petition the court for provisional relief, Executive agrees that any party may also petition the
court for injunctive relief where either party alleges or claims a violation of this Agreement or
the Confidentiality Agreement or any other agreement regarding trade secrets, confidential
information, nonsolicitation or Labor Code Section 2870. In the event either party seeks injunctive
relief, the prevailing party shall be entitled to recover reasonable costs and attorneys fees.



          (e) Administrative Relief. Executive understands that this Agreement does not prohibit
Executive from pursuing an administrative claim with a local, state or federal administrative body
such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission
or the workers’ compensation board. This Agreement does, however, preclude Executive from pursuing
court action regarding any such claim.



          (f) Voluntary Nature of Agreement. Executive acknowledges and agrees that Executive is
executing this Agreement voluntarily and without any duress or undue influence by the Company or
anyone else. Executive further acknowledges and agrees that Executive has carefully read this
Agreement and that Executive has asked any questions needed for Executive to understand the terms,
consequences and binding effect of this Agreement and fully understand it, including that Executive
is waiving Executive’s right to a jury trial. Finally, Executive agrees that Executive has been
provided an opportunity to seek the advice of an attorney of Executive’s choice before signing this
Agreement.



     13. Existing Agreements. This Agreement does not supersede and replace any prior
severance or retention plans or agreements that Executive may have entered into with the Company
prior to the Effective Date (the “Existing Agreements”).



     14. Integration. This Agreement, together with any Existing Agreements, represents the
entire agreement and understanding between the parties as to the subject matter herein and
supersedes all prior or contemporaneous agreements whether written or oral. No waiver, alteration,
or modification of any of the provisions of this Agreement will be binding unless in writing and
signed by duly authorized representatives of the parties hereto.



     15. Tax Withholding. All payments made pursuant to this Agreement will be subject to
withholding of applicable taxes.



     16. Governing Law. This Agreement will be governed by the laws of the State of
California (with the exception of its conflict of laws provisions).



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     17. Acknowledgment. Executive acknowledges that he has had the opportunity to discuss
this matter with and obtain advice from his private attorney, has had sufficient time to, and
has carefully read and fully understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.



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     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the
Company by their duly authorized officers, as of the day and year first above written.



COMPANY:



	 	 	 	 	 	 	 
	KOMAG, INC.	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	 	 	Date:	 	 
	

	 	 
	 	 	 	 
	Title: Chief Executive Officer	 	 	 	 
	 
	 	 	 	 	 	 
	EXECUTIVE:	 	 	 	 
	 
	 	 	 	Date:	 	 
	 	 	 	 	 
	William Hammack

	 	 	 







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