exv10w2



 






EXHIBIT 10.2




KOMAG, INCORPORATED




2005 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
	 	Committee	 	 	1	 
	2.6
	 	Company	 	 	1	 
	2.7
	 	Corporate Operating Income	 	 	1	 
	2.8
	 	Disability	 	 	2	 
	2.9
	 	Individual Modifier	 	 	2	 
	2.10
	 	Manager	 	 	2	 
	2.11
	 	Participant	 	 	2	 
	2.12
	 	Payout Percentage	 	 	2	 
	2.13
	 	Performance Period	 	 	2	 
	2.14
	 	Plan	 	 	2	 
	2.15
	 	Target Percentage	 	 	2	 
	2.16
	 	Termination of Service	 	 	2	 
	 
	 	 	 	 	 	 
	SECTION 3
	 	DETERMINATION OF AWARDS	 	 	3	 
	 
	 	 	 	 	 	 
	3.1
	 	Determination of Target Awards	 	 	3	 
	3.2
	 	Employment Status Affect on Award	 	 	4	 
	 
	 	 	 	 	 	 
	SECTION 4
	 	PAYMENT OF AWARDS	 	 	4	 
	 
	 	 	 	 	 	 
	4.1
	 	Funding of Plan	 	 	4	 
	4.2
	 	Timing of Payment	 	 	4	 
	4.3
	 	Form of Payment	 	 	4	 
	 
	 	 	 	 	 	 
	SECTION 5
	 	ADMINISTRATION	 	 	4	 
	 
	 	 	 	 	 	 
	5.1
	 	Committee	 	 	4	 
	5.2
	 	Committee Authority	 	 	5	 
	5.3
	 	Decisions Binding	 	 	5	 
	5.4
	 	Delegation by the Committee	 	 	5	 
	 
	 	 	 	 	 	 
	SECTION 6
	 	GENERAL PROVISIONS	 	 	5	 
	 
	 	 	 	 	 	 
	6.1
	 	Tax Withholding	 	 	5	 
	6.2
	 	No Effect on Employment or Service	 	 	5	 






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TABLE OF
CONTENTS
(Continued)




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	6.3
	 	Successors	 	 	6	 
	6.4
	 	Nontransferability of Awards	 	 	6	 
	 
	 	 	 	 	 	 
	SECTION 7
	 	AMENDMENT, TERMINATION AND DURATION	 	 	6	 
	 
	 	 	 	 	 	 
	7.1
	 	Amendment, Suspension or Termination	 	 	6	 
	7.2
	 	Duration of the Plan	 	 	6	 
	 
	 	 	 	 	 	 
	SECTION 8
	 	LEGAL CONSTRUCTION	 	 	6	 
	 
	 	 	 	 	 	 
	8.1
	 	Gender and Number	 	 	6	 
	8.2
	 	Severability	 	 	7	 
	8.3
	 	Requirements of Law	 	 	7	 
	8.4
	 	Governing Law	 	 	7	 
	8.5
	 	Captions	 	 	7	 







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KOMAG, INCORPORATED

2005 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 31, 2005.



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 “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.




2.6 “Company” means Komag Incorporated, a Delaware corporation, or any successor thereto.




2.7 “Corporate Operating Income” means the annual 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.




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




2.9 “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. Eighty percent
(80%) of the Individual Modifier will be based on the achievement of a Participant’s performance
objectives for a Performance Period and twenty percent (20%) of the Individual Modifier will be
based on the demonstration of key attributes and competencies in achieving those objectives as
determined by a Participant’s Manager. The Individual Modifier may range between 0% and 150%.




2.10 “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.




2.11 “Participant” means as to any Performance Period, 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).




2.12 “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 no
event may the Payout Percentage exceed 149%. The target Corporate Operating Income for the
Performance Period will be approved annually by the Company’s Board of Directors.




2.13 “Performance Period” means the Company’s annual fiscal periods commencing after
December 31, 2004 during which the measurement of the Corporate Operating Income targets and
Individual Modifiers must be met as set forth herein to receive an Award.




2.14 “Plan” means the Komag, Incorporated 2005 Target Incentive Plan, as set forth in this
instrument and as hereafter amended from time to time.




2.15 “Target Percentage” means a Participant’s incentive target as a percentage of Base Pay
as follows: CEO (80%), officers (40% — 50%, as determined by the Committee), other Participants
(15% - 25%, as determined by the Committee).




2.16 “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.




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SECTION 3

DETERMINATION OF AWARDS




3.1 Determination of Target Awards




     At the end of the Performance Period, the Corporate Operating Income will be reviewed and used
to determine the aggregate bonus pool from which Awards will be made as set forth in Section 4.1.
The total amount of all Awards may not exceed the total bonus pool.



     Subject to the provisions of Section 3, Participants are eligible to receive an Award for the
Performance Period equal to such 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 a Mid-Year Award (discussed below) will be reduced by the amount of such Mid-Year Award.



     In the event the Payout Percentage is less than 60%, no Annual Award shall be paid to any
Participants under this Plan. If the Payout Percentage for the 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.



     During the Performance Period, the Committee will determine whether to pay a portion of the
Annual Award (the “Mid-Year Award”). The Committee will determine the financial target necessary
to receive the Mid-Year Award, the Participants eligible to receive a Mid-Year Award, and the level
of the Mid-Year 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 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.



     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.



     If a Participant enters the Plan from the Company’s 2005 Bonus Plan or enters this Plan as a
new hire 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.



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3.2 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.



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.



     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 each Mid-Year Award or Annual Award, as applicable, shall be made as soon as
practicable as determined by the Committee after the end of the 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.



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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




     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



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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 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.



6.4 Nontransferability of Awards




     No Award granted under the Plan may be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated, other than by will, by the laws of descent and distribution, or to the
limited extent provided in Section 4.4. All rights with respect to an Award granted to a
Participant shall be available during his or her lifetime only to the Participant.



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.



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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 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.



8.5 Captions




     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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