KOMAG, INCORPORATED

                            DISCRETIONARY BONUS PLAN


        I.        PURPOSES OF THE PLAN

                  1.01 Komag,  Incorporated (the "Company")  hereby  establishes
this Discretionary Bonus Plan ("Plan") as an incentive program pursuant to which
discretionary  or other  retention-based  bonuses may be awarded for one or more
fiscal years in order to retain the services of those employees  critical to the
Company's financial success.

                  1.02 The  Company's  compensation  programs  are  designed  to
retain and  motivate  technical  and  managerial  staff  through the delivery of
competitive cash  compensation each year. Base pay is targeted at the mid-market
level of the high technology  industry,  and significantly  greater compensation
will be delivered  through the  Company's  variable  pay programs  (such as cash
profit sharing and payments under the Company's  Management  Bonus Plan).  It is
the Company's  objective to provide total cash compensation at or above the 75th
percentile of a competitive analysis. Accordingly, the Compensation Committee of
the  Company's  Board  of  Directors  as  plan  administrator  shall,  with  the
assistance of the Company's management and such outside compensation specialists
as the Compensation Committee may deem appropriate, undertake such a competitive
analysis  for each fiscal year the Plan  remains in effect.  If the analysis for
any fiscal year  suggests that the level of cash  compensation  for that year is
not significantly  greater than the industry average, a cash bonus pool for that
year will be  established  for  distribution  to selected  employees.  The bonus
distribution  will be targeted to those  employees  considered  essential to the
Company's  continued  financial  success who would  otherwise be  vulnerable  to
competitor recruiting by offers of more attractive compensation.

       II.        ADMINISTRATION OF THE PLAN

                  2.01 The Plan is  hereby  adopted  by the  Company's  Board of
Directors (the "Board"),  effective  December 1, 1996, and shall be administered
by the Compensation Committee ("Committee") of the Board.

                  2.02 The  interpretation  and construction of the Plan and the
adoption of rules and  regulations for  administering  the Plan shall be made by
the  Committee.  Decisions  of the  Committee  shall be final and binding on all
parties who have an interest in the Plan.


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      III.        DISCRETIONARY BONUS POOL

                  3.01 The  Committee  shall  make an annual  assessment  of the
industry,  including such factors as the financial  performance of the Company's
competitors,  the  expansion  plans  of  those  competitors,  and a  competitive
analysis of the Company's annual cash compensation. Should such analysis suggest
that the level of annual cash  compensation  for the  Company's key employees is
not competitive, resulting in their vulnerability to recruitment by other firms,
or should industry  trends reveal that recruiting  activity will in the upcoming
year be significant, the Committee shall have full power and authority to create
a bonus pool  under the Plan for that  fiscal  year.  The bonus pool shall be in
such dollar amount as the Committee  deems  appropriate and shall be distributed
to  selected  employees  as an  incentive  for them to remain  in the  Company's
employ.

       IV.        DETERMINATION OF PARTICIPANTS

                  4.01 Those  individuals  in the  employ of the  Company or any
subsidiary who are significant  contributors to the continued and future success
of the Company's  business shall be eligible to receive a distribution  from one
or more of the bonus pools  established over the term of the Plan. The Company's
Chief  Executive  Officer  and the  Chairman  of the  Board  shall  provide  the
Committee with  recommendations  each fiscal year as to the employees who should
receive  bonus  awards  under the Plan for that fiscal year and the amount to be
allocated to each designated employee.  The Committee shall, on the basis of the
competitive   compensation  analysis  undertaken  for  that  fiscal  year,  have
authority  to accept or modify  such  recommendations.  The  Committee  may also
recommend a bonus  distribution  under the Plan to the Company's Chief Executive
Officer and the Chairman of the Board.

        V.        PAYMENT OF BONUS AWARDS

                  5.01 The  individual  bonus awarded to each employee  shall be
paid to such employee  within thirty (30) days after the completion of the audit
of the fiscal year for which that award is made. In no event,  however,  shall a
bonus award be paid to any  individual  who does not  continue in the  Company's
employ  through  such  payment  date.  Any payment to which an employee  becomes
entitled  under  the  Plan  shall  be  made  in  the  form  of a lump  sum  cash
distribution,  subject to the Company's collection of all applicable federal and
state income and employment withholding taxes.

                  5.02 Bonus  payments  under the Plan shall be  included in the
earnings base eligible for deferral under the Company's  non-qualified  Deferred
Compensation Plan.


                                       2.
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       VI.        GENERAL PROVISIONS

                  6.01 The Plan is  effective  as of December  1, 1996,  and the
initial bonus pool under the Plan will be  established  for the  Company's  1996
fiscal year.  The Board may at any time amend,  suspend or  terminate  the Plan,
provided  such action is effected by written  resolution  and does not adversely
affect the rights and interests of Plan participants to any bonus awards made to
them  prior  to  such  amendment,   suspension  or   termination.   Neither  the
implementation  of the  Plan  nor  any  amendment  to  the  Plan  shall  require
stockholder approval.

                  6.02 No  bonuses  awarded  under the Plan  shall  actually  be
funded,  set aside or otherwise  segregated prior to payment.  The obligation to
pay the  bonuses  awarded  hereunder  shall  at all  times  be an  unfunded  and
unsecured obligation of the Company.  Plan participants shall have the status of
general creditors and shall look solely to the general assets of the Company for
the payment of their bonus awards.

                  6.03 No Plan  participant  shall  have the right to  alienate,
pledge or  encumber  his/her  interest  in any bonus  award to which  he/she may
become  entitled  under the Plan,  and such  interest  shall not (to the  extent
permitted  by  law)  be  subject  in any  way to the  claims  of the  employee's
creditors or to attachment, execution or other process of law.

                  6.04  Neither  the action of the Company in  establishing  the
Plan, nor any action taken under the Plan by the Committee, nor any provision of
the Plan shall be construed so as to grant any person the right to remain in the
employ of the Company or its subsidiaries  for any period of specific  duration.
Rather,  each  employee  of the  Company  or any  subsidiary  will  be  employed
"at-will,"  which means that either such employee or the Company (or subsidiary)
may terminate the employment relationship of that individual at any time for any
reason, with or without cause.

                                       3.