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EXHIBIT 10.1

KOMAG, INCORPORATED

AMENDED AND RESTATED 2002 QUALIFIED STOCK PLAN

(as of April 2005)

     1. Purposes of the Plan. The purposes of this Amended and Restated 2002 Qualified
Stock Plan are:

	 	   	• to attract and retain the best available personnel for positions
of substantial responsibility,
	 
	 	   	• to provide additional incentive to Service Providers, and
	 
	 	   	• to promote the success of the Company’s business.

          Awards granted under the Plan may be Incentive Stock Options, Nonstatutory Stock Options,
Stock Purchase Rights, Stock Appreciation Rights, Performance Shares or Performance Units, as
determined by the Administrator at the time of grant.

     2. Definitions. As used herein, the following definitions shall apply:

          (a) “Administrator” means the Board or any of its Committees as shall be administering
the Plan, in accordance with Section 4 of the Plan.

          (b) “Applicable Laws” means the requirements relating to the administration of equity
compensation plans under U. S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are, or will be, granted under
the Plan.

          (c) “Award” means individually or collectively, a grant under the Plan of Options,
Stock Purchase Rights, Stock Appreciation Rights, Performance Shares or Performance Units.

          (d) “Award Agreement” means the written agreement setting forth the terms and
provisions applicable to each Award granted under the Plan. The Award Agreement is subject to the
terms and conditions of the Plan.

          (e) “Awarded Stock” means the Common Stock subject to an Award.

          (f) “Board” means the Board of Directors of the Company.

          (g) “Change in Control” means the occurrence of any of the following events:

 

 

               (i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act)
becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company’s then outstanding voting securities; or

               (ii) The consummation of the sale or disposition by the Company of all or substantially all of
the Company’s assets;

               (iii) A change in the composition of the Board occurring within a two-year period, as a result
of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors”
means directors who either (A) are Directors as of the effective date of the Plan, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of at least a majority
of the Incumbent Directors at the time of such election or nomination (but will not include an
individual whose election or nomination is in connection with an actual or threatened proxy contest
relating to the election of directors to the Company); or

               (iv) The consummation of a merger or consolidation of the Company with any other corporation,
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 or its parent) at least fifty
percent (50%) of the total voting power represented by the voting securities of the Company or such
surviving entity or its parent outstanding immediately after such merger or consolidation.

          (h) “Code” means the Internal Revenue Code of 1986, as amended.

          (i) “Committee” means a committee of Directors appointed by the Board in accordance
with Section 4 of the Plan.

          (j) “Common Stock” means the common stock of the Company, or in the case of
Performance Units, the cash equivalent thereof.

          (k) “Company” means Komag, Incorporated, a Delaware corporation.

          (l) “Consultant” means any natural person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services to such entity.

          (m) “Deferred Stock Unit” means a deferred stock unit Award granted to a Service
Provider pursuant to Section 13.

          (n) “Director” means a member of the Board.

          (o) “Disability” means total and permanent disability as defined in Section 22(e)(3)
of the Code.

          (p) “Employee” means any person, including Officers and Directors, employed by the
Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be
treated as an Employee in the case of (i) any leave of absence approved by the Company or

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(ii) transfers between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the Company is not so
guaranteed, then three (3) months following the 91st day of such leave any Incentive
Stock Option held by the Participant shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director
nor payment of a director’s fee by the Company shall be sufficient to constitute “employment” by
the Company.

          (q) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          (r) “Fair Market Value” means, as of any date, the value of Common Stock determined as
follows:

               (i) If the Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of
The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such exchange or system on the day of
determination, as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;

               (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock on the day of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems reliable; or

               (iii) In the absence of an established market for the Common Stock, the Fair Market Value
shall be determined in good faith by the Administrator.

               (iv) Notwithstanding the preceding, for federal, state, and local income tax reporting
purposes and for such other purposes as the Administrator deems appropriate, the Fair Market Value
shall be determined by the Administrator in accordance with uniform and nondiscriminatory standards
adopted by it from time to time.

     (s) “Incentive Stock Option” means an Option intended to qualify as an incentive stock
option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

     (t) “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option.

     (u) “Notice of Grant” means a written or electronic notice evidencing certain terms
and conditions of an individual Award. The Notice of Grant is part of the Award Agreement.

     (v) “Officer” means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

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          (w) “Option” means a stock option granted pursuant to the Plan.

          (x) “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code.

          (y) “Participant” means the holder of an outstanding Award granted under the Plan.

          (z) “Performance Goals” means the goal(s) determined by the Administrator (in its
discretion) to be applicable to a Participant with respect to an Award. As determined by the
Administrator, the Performance Goals applicable to an Award may provide for a targeted level or
levels of achievement using one or more of the following measures: (i) cash flow, (ii) customer
satisfaction, (iii) earnings, (iv) gross margin, (v) market price of stock, (vi) market share,
(vii) net income, (viii) operating income, (ix) operating margin, (x) return on capital, (xi)
return on equity, (xii) return on net assets, (xiii) revenue and (xiv) sales. The Performance
Goals may differ from Participant to Participant and from Award to Award. Any criteria used may be
measured, as applicable, (i) in absolute terms, (ii) in relative terms (including, but not limited
to, passage of time and/or against another company or companies), (iii) on a per-share basis, (iv)
against the performance of the Company as a whole or a segment of the Company, and (v) on a pre-tax
or after-tax basis.

          (aa) “Performance Share” means a performance share Award granted to a Service Provider
pursuant to Section 11.

          (bb) “Performance Unit” means a performance unit Award granted to a Service Provider
pursuant to Section 12.

          (cc) “Plan” means this Amended and Restated 2002 Qualified Stock Plan.

          (dd) “Restricted Stock” means Shares, acquired upon exercise of a Stock Purchase
Right, that are subject to vesting, if any.

          (ee) “Rule 16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.

          (ff) “Section 16(b) “ means Section 16(b) of the Exchange Act.

          (gg) “Service Provider” means an Employee, Director or Consultant.

          (hh) “Share” means a share of the Common Stock, as adjusted in accordance with Section
16 of the Plan.

          (ii) “Stock Appreciation Right” or “SAR” means an Award, granted alone or in
connection with a related Option, that pursuant to Section 10 is designated as a SAR.

          (jj) “Stock Purchase Right” means the right to purchase Shares pursuant to Section 9
of the Plan, as evidenced by a Notice of Grant.

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          (kk) “Subsidiary” means a “subsidiary corporation”, whether now or hereafter existing,
as defined in Section 424(f) of the Code.

     3. Stock Subject to the Plan. Subject to the provisions of Section 16 of the Plan,
the maximum aggregate number of Shares that may be issued under the Plan is 3,925,000 Shares, plus
317,054 Shares available for issuance under the Company’s 2002 Employee Stock Purchase Plan. The
Shares may be authorized, but unissued, or reacquired Common Stock.

          If an Award expires or becomes unexercisable without having been exercised in full, or, with
respect to Restricted Stock, Performance Shares, Performance Units or Deferred Stock Units, is
forfeited back to or repurchased by the Company, the unpurchased Shares (or for Awards other than
Options and SARs, the forfeited or repurchased Shares) which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has terminated). However,
Shares that have actually been issued under the Plan, under any Award, shall not be returned to the
Plan and shall not become available for future distribution under the Plan, except that if Shares
of Restricted Stock, Performance Shares, Performance Units or Deferred Stock Units are repurchased
by the Company at their original purchase price or are forfeited to the Company, such Shares shall
become available for future grant under the Plan. To the extent an Award under the Plan is paid
out in cash rather than stock, such cash payment shall not result in reducing the number of Shares
available for issuance under the Plan.

          If a Participant pays the exercise price (or purchase price, if applicable) of an Award
through the tender of Shares, or if Shares are tendered or withheld to satisfy any Company
withholding obligations, the number of Shares so tendered or withheld shall again be available for
issuance pursuant to future Awards under the Plan.

     4. Administration of the Plan.

          (a) Procedure.

               (i) Multiple Administrative Bodies. Different Committees with respect to different
groups of Service Providers may administer the Plan.

               (ii) Section 162(m). To the extent that the Administrator determines it to be
desirable to qualify Options granted hereunder as “performance-based compensation” within the
meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more
“outside directors” within the meaning of Section 162(m) of the Code.

               (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt
under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.

               (iv) Other Administration. Other than as provided above, the Plan shall be
administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy
Applicable Laws.

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          (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:

               (i) to determine the Fair Market Value;

               (ii) to select the Service Providers to whom Awards may be granted hereunder;

               (iii) to determine the number of Shares to be covered by each Award granted hereunder;

               (iv) to approve forms of agreement for use under the Plan;

               (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any
Award granted hereunder. Such terms and conditions include, but are not limited to, the exercise
price, the time or times when Options, Stock Purchase Rights or SARs may be exercised (which may be
based on performance criteria), any vesting acceleration or waiver of forfeiture or repurchase
restrictions, and any restriction or limitation regarding any Award or the Shares relating thereto,
based in each case on such factors as the Administrator, in its sole discretion, shall determine;

               (vi) to construe and interpret the terms of the Plan and Awards granted pursuant to the Plan;

               (vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including
rules and regulations relating to sub-plans established for the purpose of qualifying for preferred
tax treatment under foreign tax laws;

               (viii) to modify or amend each Award (subject to Section 18(c) of the Plan), including the
discretionary authority to extend the post-termination exercisability period of Options or SARs
longer than is otherwise provided for in the Plan. Notwithstanding the previous sentence, the
Administrator may not modify or amend an Option or SAR to reduce the exercise price of such Option
or SAR after it has been granted (except for adjustments made pursuant to Section 16) nor may the
Administrator cancel any outstanding Option or SAR and replace it with a new Option or SAR with a
lower exercise price, unless, in either case, such action is approved by the Company’s
stockholders;

               (ix) to offer to buyout for a payment in cash or Shares an Award previously granted under the
Plan, provided any such offer is approved by the Company’s stockholders;

               (x) to allow Participants to satisfy withholding tax obligations by electing to have the
Company withhold from the Shares or cash to be issued upon exercise or vesting of an Award that
number of Shares or cash having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of any Shares to be withheld shall be determined on the date that the amount
of tax to be withheld is to be determined. All elections by a Participant to have Shares or

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cash withheld for this purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;

               (xi) to authorize any person to execute on behalf of the Company any instrument required to
effect the grant of an Award previously granted by the Administrator; and

               (xii) to make all other determinations deemed necessary or advisable for administering the
Plan.

          (c) Effect of Administrator’s Decision. The Administrator’s decisions, determinations
and interpretations shall be final and binding on all Participants.

     5. Eligibility. Stock Purchase Rights, Performance Shares, Performance Units, Stock
Appreciation Rights, Deferred Stock Units and Nonstatutory Stock Options may be granted to Service
Providers. Incentive Stock Options may be granted only to Employees.

     6. Limitations.

          (a) ISO $100,000 Rule. Each Option shall be designated in the Award Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by the Participant during any calendar
year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options
shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they were granted. The Fair Market Value
of the Shares shall be determined as of the time the Option with respect to such Shares is granted.

          (b) No Rights as a Service Provider. Neither the Plan nor any Award shall confer upon
a Participant any right with respect to continuing his or her relationship as a Service Provider,
nor shall they interfere in any way with the right of the Participant or the right of the Company
or its Parent or Subsidiaries to terminate such relationship at any time, with or without cause.

          (c) 162(m) Limitation. The following limitations shall apply to Awards under the
Plan:

               (i) No Service Provider shall be granted, in any fiscal year of the Company, (A) Option or
SARs to purchase more than 1,500,000 Shares, (B) Stock Purchase Rights to purchase more than
500,000 Shares, (C) Performance Shares covering more than 500,000 Shares and (D) Performance Units
with an initial value in excess of $5,000,000.

               (ii) In connection with his or her initial service, a Service Provider may be granted Options
or SARS to purchase up to an additional 1,500,000 Shares, which shall not count against the limit
set forth in subsection (i) above.

               (iii) The foregoing limitations shall be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 16(a).

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               (iv) If an Award is cancelled in the same fiscal year of the Company in which it was granted
(other than in connection with a transaction described in Section 16(c)), the cancelled Award will
be counted against the limits set forth in subsections (i) and (ii) above.

     7. Term of Plan. The Plan shall become effective upon its adoption by the Board. It
shall continue in effect for a term of ten (10) years unless terminated earlier under Section 18 of
the Plan.

     8. Stock Options.

          (a) Term of Options. The term of each Option shall be ten (10) years from the date of
grant or such shorter term as may be provided in the Award Agreement. Moreover, in the case of an
Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock
Option shall be five (5) years from the date of grant or such shorter term as may be provided in
the Award Agreement.

          (b) Option Exercise Price and Consideration.

               (i) Exercise Price. The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be determined by the Administrator, subject to the following:

                    (A) In the case of an Incentive Stock Option

                         (a) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

                         (b) granted to any Employee other than an Employee described in paragraph (a) immediately
above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share
on the date of grant.

                    (B) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be
determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as
“performance-based compensation” within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.

               (ii) The exercise price for the Shares to be issued pursuant to an already granted Option may
not be changed without the consent of the Company’s stockholders. This shall include, without
limitation, a repricing of the Option as well as an option exchange program whereby the Participant
agrees to cancel an existing Option in exchange for an Option, SAR or other Award.

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          (c) Waiting Period and Exercise Dates. At the time an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and shall determine any
conditions that must be satisfied before the Option may be exercised.

          (d) Form of Consideration. The Administrator shall determine the acceptable form of
consideration for exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at
the time of grant. Such consideration to the extent permitted by Applicable Laws may consist
entirely of:

               (i) cash;

               (ii) check;

               (iii) promissory note;

               (iv) other Shares which meet the conditions established by the Administrator to avoid adverse
accounting consequences (as determined by the Administrator);

               (v) consideration received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan;

               (vi) a reduction in the amount of any Company liability to the Participant, including any
liability attributable to the Participant’s participation in any Company-sponsored deferred
compensation program or arrangement;

               (vii) any combination of the foregoing methods of payment; or

               (viii) such other consideration and method of payment for the issuance of Shares to the extent
permitted by Applicable Laws.

          (e) Exercise of Option.

          (i) Procedure for Exercise; Rights as a Stockholder. Any Option granted hereunder
shall be exercisable according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Award Agreement. Unless the Administrator
provides otherwise, vesting of Options granted hereunder shall be suspended beginning on the
91st day of a Participant’s leave of absence and will resume on the date the Participant
returns to work on a regular schedule as determined by the Company; provided, however, that no
vesting credit will be awarded for the time vesting has been suspended during such leave of
absence. An Option may not be exercised for a fraction of a Share.

     An Option shall be deemed exercised when the Company receives: (i) written or electronic
notice of exercise (in accordance with the Award Agreement) from the person entitled to exercise
the Option, and (ii) full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized by the Administrator
and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option shall
be issued in the name of the Participant or, if requested by the Participant, in the name of the

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Participant and his or her spouse. Until the Shares are issued (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Awarded Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment
will be made for a dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 16 of the Plan.

     Exercising an Option in any manner shall decrease the number of Shares thereafter available,
both for purposes of the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.

          (f) Termination of Relationship as a Service Provider. If a Participant ceases to be
a Service Provider, other than upon the Participant’s death or Disability, the Participant may
exercise his or her Option within such period of time as is specified in the Award Agreement to the
extent that the Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award Agreement). In the absence of a
specified time in the Award Agreement, the Option shall remain exercisable for three (3) months
following the Participant’s termination. If, on the date of termination, the Participant is not
vested as to his or her entire Option, the Shares covered by the unvested portion of the Option
shall revert to the Plan. If, after termination, the Participant does not exercise his or her
Option within the time specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

          (g) Disability of Participant. If a Participant ceases to be a Service Provider as a
result of the Participant’s Disability, the Participant may exercise his or her Option within such
period of time as is specified in the Award Agreement to the extent the Option is vested on the
date of termination (but in no event later than the expiration of the term of such Option as set
forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
Option shall remain exercisable for twelve (12) months following the Participant’s termination.
If, on the date of termination, the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan. If, after
termination, the Participant does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.

          (h) Death of Participant. If a Participant dies while a Service Provider, the Option
may be exercised following the Participant’s death within such period of time as is specified in
the Award Agreement to the extent that the Option is vested on the date of death (but in no event
may the option be exercised later than the expiration of the term of such Option as set forth in
the Award Agreement), by the Participant’s designated beneficiary, provided such beneficiary has
been designated prior to Participant’s death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such Option may be exercised by the
personal representative of the Participant’s estate or by the person(s) to whom the Option is
transferred pursuant to the Participant’s will or in accordance with the laws of descent and
distribution. In the absence of a specified time in the Award Agreement, the Option shall remain
exercisable for twelve (12) months following Participant’s death. If, at the time of death, the
Participant is not vested as to his or her entire Option, the Shares covered by the unvested
portion of

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the Option shall immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

     9. Stock Purchase Rights.

          (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition
to, or in tandem with other Awards granted under the Plan and/or cash awards made outside of the
Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan,
it shall advise the offeree in writing or electronically, of the terms, conditions and restrictions
related to the offer, including the number of Shares that the offeree shall be entitled to
purchase, the price to be paid, and the time within which the offeree must accept such offer. The
offer shall be accepted by execution of an Award Agreement in the form determined by the
Administrator.

          (b) Repurchase Option. Unless the Administrator determines otherwise, the Award
Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary
termination of the purchaser’s service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the Award Agreement shall be
the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at a rate determined by the
Administrator. However, if the Administrator determines it is desirable for the Award to qualify
as “performance-based compensation” for purposes of Section 162(m) of the Code, the repurchase
option shall lapse based upon the achievement of Performance Goals.

          (c) Other Provisions. The Award Agreement shall contain such other terms, provisions
and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole
discretion.

          (d) Rights as a Stockholder. Once the Stock Purchase Right is exercised, the
purchaser shall have the rights equivalent to those of a stockholder, and shall be a stockholder
when his or her purchase is entered upon the records of the duly authorized transfer agent of the
Company. No adjustment will be made for a dividend or other right for which the record date is
prior to the date the Stock Purchase Right is exercised, except as provided in Section 16 of the
Plan.

     10. Stock Appreciation Rights.

          (a) Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be
granted to Service Providers at any time and from time to time as shall be determined by the
Administrator, in its sole discretion. The Administrator shall have complete discretion to
determine the number of SARs granted to any Participant.

          (b) Exercise Price and other Terms. The Administrator, subject to the provision of
the Plan, shall have complete discretion to determine the terms and conditions of SARs granted
under the Plan; provided, however, that no SAR may have a term of more than ten (10) years from the
date of grant. The exercise price for the Shares or cash to be issued pursuant to an already
granted SAR may not be changed without the consent of the Company’s stockholders. This shall
include, without limitation, a repricing of the SAR as well as an SAR exchange program whereby the
Participant agrees to cancel an existing SAR in exchange for an Option, SAR or other Award.

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          (c) Payment of SAR Amount. Upon exercise of a SAR, a Participant shall be entitled to
receive payment from the Company in an amount determined by multiplying:

               (i) the difference between the Fair Market Value of a Share on the date of exercise over the
exercise price; times

               (ii) the number of Shares with respect to which the SAR is exercised.

          (d) Payment upon Exercise of SAR. At the discretion of the Administrator, payment for
a SAR may be in cash, Shares or a combination thereof.

          (e) SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement that shall
specify the exercise price, the term of the SAR, the conditions of exercise, and such other terms
and conditions as the Administrator, in its sole discretion, shall determine.

          (f) Expiration of SARs. Subject to the term stated in Section 10(b), a SAR granted
under the Plan shall expire upon the date determined by the Administrator, in its sole discretion,
and set forth in the Award Agreement.

          (g) Termination of Relationship as a Service Provider. If a Participant ceases to be
a Service Provider, other than upon the Participant’s death or Disability, the Participant may
exercise his or her Stock Appreciation Right within such period of time as is specified in the
Award Agreement to the extent that the Stock Appreciation Right is vested and exercisable on the
date of termination (but in no event later than the expiration of the term of such Stock
Appreciation Right as set forth in the Award Agreement). In the absence of a specified time in the
Award Agreement, the Stock Appreciation Right shall remain exercisable for three (3) months
following the Participant’s termination. If, on the date of termination, the Participant is not
vested as to his or her entire Stock Appreciation Right, the Shares covered by the unvested portion
of the Stock Appreciation Right shall revert to the Plan. If, after termination, the Participant
does not exercise his or her Stock Appreciation Right within the time specified by the
Administrator, the Stock Appreciation Right shall terminate, and the Shares covered by such Stock
Appreciation Right shall revert to the Plan.

          (h) Disability of Participant. If a Participant ceases to be a Service Provider as a
result of the Participant’s Disability, the Participant may exercise his or her Stock Appreciation
Right within such period of time as is specified in the Award Agreement to the extent the Stock
Appreciation Right is vested and exercisable on the date of termination (but in no event later than
the expiration of the term of such Stock Appreciation Right as set forth in the Award Agreement).
In the absence of a specified time in the Award Agreement, the Stock Appreciation Right shall
remain exercisable for twelve (12) months following the Participant’s termination. If, on the date
of termination, the Participant is not vested as to his or her entire Stock Appreciation Right, the
Shares covered by the unvested portion of the Stock Appreciation Right shall revert to the Plan.
If, after termination, the Participant does not exercise his or her Stock Appreciation Right within
the time specified herein, the Stock Appreciation Right shall terminate, and the Shares covered by
such Stock Appreciation Right shall revert to the Plan.

          (i) Death of Participant. If a Participant dies while a Service Provider, the Stock
Appreciation Right may be exercised within such period of time as is specified in the Award
Agreement (but in no event later than the expiration of the term of such Stock Appreciation Right
as

12

 

set forth in the Notice of Grant), by the Participant’s estate or by a person who acquires the
right to exercise the Stock Appreciation Right by bequest or inheritance, but only to the extent
that the Stock Appreciation Right is vested and exercisable on the date of death. In the absence
of a specified time in the Award Agreement, the Stock Appreciation Right shall remain exercisable
for twelve (12) months following the Participant’s termination. If, at the time of death, the
Participant is not vested as to his or her entire Stock Appreciation Right, the Shares covered by
the unvested portion of the Stock Appreciation Right shall immediately revert to the Plan. The
Stock Appreciation Right may be exercised by the executor or administrator of the Participant’s
estate or, if none, by the person(s) entitled to exercise the Stock Appreciation Right under the
Participant’s will or the laws of descent or distribution. If the Stock Appreciation Right is not
so exercised within the time specified herein, the Stock Appreciation Right shall terminate, and
the Shares covered by such Stock Appreciation Right shall revert to the Plan.

     11. Performance Shares.

          (a) Grant of Performance Shares. Subject to the terms and conditions of the Plan,
Performance Shares may be granted to Service Providers at any time and from time to time as shall
be determined by the Administrator, in its sole discretion. The Administrator shall have complete
discretion to determine (i) the number of Shares subject to a Performance Share award granted to
any Participant, and (ii) the conditions that must be satisfied, which typically will be based
principally or solely on achievement of performance milestones but may include a service-based
component, upon which is conditioned the grant or vesting of Performance Shares; provided, however,
that the performance milestones will be based on Performance Goals if the Administrator desires
that the Award qualify as “performance-based compensation” under Section 162(m) of the Code.
Performance Shares shall be granted in the form of units/rights to acquire Shares. Each such
unit/right shall be the equivalent of one Share for purposes of determining the number of Shares
subject to an Award. Until the Shares are issued, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the units/rights to acquire Shares.

          (b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have
complete discretion to determine the terms and conditions of Performance Shares granted under the
Plan. Performance Share grants shall be subject to the terms, conditions, and restrictions
determined by the Administrator at the time the stock is awarded, which may include such
performance-based milestones as are determined appropriate by the Administrator. The Administrator
may require the recipient to sign a Performance Shares agreement as a condition of the award. Any
certificates representing the Shares of stock awarded shall bear such legends as shall be
determined by the Administrator.

          (c) Performance Share Award Agreement. Each Performance Share grant shall be
evidenced by an agreement that shall specify such other terms and conditions as the Administrator,
in its sole discretion, shall determine.

     12. Performance Units.

          (a) Grant of Performance Units. Performance Units are similar to Performance Shares,
except that they shall be settled in a cash equivalent to the Fair Market Value of the underlying
Shares, determined as of the vesting date. Subject to the terms and conditions of the

13

 

Plan, Performance Units may be granted to Service Providers at any time and from time to time
as shall be determined by the Administrator, in its sole discretion. The Administrator shall have
complete discretion to determine (i) the number of Shares subject to a Performance Unit award
granted to any Participant, and (ii) the conditions that must be satisfied, which typically will be
based principally or solely on achievement of performance milestones but may include a
service-based component, upon which is conditioned the grant or vesting of Performance Units;
provided, however, that the performance milestones will be based on Performance Goals if the
Administrator desires that the Award qualify as performance-based compensation under Section 162(m)
of the Code. Performance Units shall be granted in the form of units/rights to acquire Shares.
Each such unit/right shall be the cash equivalent of one Share of Common Stock. No right to vote
or receive dividends or any other rights as a stockholder shall exist with respect to Performance
Units or the cash payable thereunder.

          (b) Other Terms. The Administrator, subject to the provisions of the Plan, shall have
complete discretion to determine the terms and conditions of Performance Units granted under the
Plan. Performance Unit grants shall be subject to the terms, conditions, and restrictions
determined by the Administrator at the time the stock is awarded, which may include such
performance-based milestones as are determined appropriate by the Administrator. The Administrator
may require the recipient to sign a Performance Unit agreement as a condition of the award. Any
certificates representing the Shares of stock awarded shall bear such legends as shall be
determined by the Administrator.

          (c) Performance Unit Award Agreement. Each Performance Unit grant shall be evidenced
by an agreement that shall specify such terms and conditions as the Administrator, in its sole
discretion, shall determine.

     13. Deferred Stock Units. Deferred Stock Units shall consist of a Restricted Stock,
Performance Share or Performance Unit Award that the Administrator, in its sole discretion permits
to be paid out in installments or on a deferred basis, in accordance with rules and procedures
established by the Administrator.

     14. Non-Transferability of Awards. Unless determined otherwise by the Administrator,
an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be exercised, during
the lifetime of the recipient, only by the recipient. If the Administrator makes an Award
transferable, such Award shall contain such additional terms and conditions as the Administrator
deems appropriate.

     15. Leaves of Absence. Subject to any other provision of the Plan, unless the
Administrator provides otherwise or as otherwise required by Applicable Laws, vesting of Awards
granted hereunder shall cease commencing on the first day of any unpaid leave of absence and shall
recommence only upon return to active service.

     16. Adjustments Upon Changes in Capitalization, Dissolution, Merger, or Asset Sale.

          (a) Changes in Capitalization. Subject to any required action by the stockholders of
the Company, the number of Shares covered by each outstanding Award, the number of Shares

14

 

which have been authorized for issuance under the Plan but as to which no Awards have yet been
granted or which have been returned to the Plan upon cancellation or expiration of an Award, the
number of Shares as well as the price per share of Common Stock covered by each such outstanding
Award, and the 162(m) annual share issuance limits under Section 6(c) shall be proportionately
adjusted for any increase or decrease in the number of issued Shares resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued Shares effected without receipt of consideration
by the Company; provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been “effected without receipt of consideration.” Such adjustment
shall be made by the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price of Shares subject
to an Award.

          (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Participant as soon as practicable
prior to the effective date of such proposed transaction. The Administrator in its discretion may
provide for a Participant to have the right to exercise his or her Option or SAR until ten (10)
days prior to such transaction as to all of the Awarded Stock covered thereby, including Shares as
to which the Award would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option or forfeiture rights applicable to any Award shall lapse 100% ,
and that any Award vesting shall accelerate 100%, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has not been previously
exercised (with respect to Options and SARs) or vesting (with respect to other Awards), an Award
will terminate immediately prior to the consummation of such proposed action.

          (c) Merger or Change in Control.

               (i) Options and SARs. In the event of a merger or Change in Control, each outstanding
Option and SAR shall be assumed or an equivalent option or SAR substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the Option or SAR, the Participant shall
fully vest in and have the right to exercise the Option or SAR as to all of the Awarded Stock,
including Shares as to which it would not otherwise be vested or exercisable. If an Option or SAR
becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger
or Change in Control, the Administrator shall notify the Participant in writing or electronically
that the Option or SAR shall be fully vested and exercisable for a period of fifteen (15) days from
the date of such notice, and the Option or SAR shall terminate upon the expiration of such period.
For the purposes of this paragraph, the Option or SAR shall be considered assumed if, following the
merger or Change in Control, the option or stock appreciation right confers the right to purchase
or receive, for each Share of Awarded Stock subject to the Option or SAR immediately prior to the
merger or Change in Control, the consideration (whether stock, cash, or other securities or
property) received in the merger or Change in Control by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or sale or assets is
not solely common stock of the successor corporation or its Parent, the Administrator may, with the
consent of the successor

15

 

corporation, provide for the consideration to be received upon the exercise of the Option or
SAR, for each Share of Awarded Stock subject to the Option or SAR, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share consideration
received by holders of Common Stock in the merger or Change in Control.

               (ii) Officer Adjustment. Officers subject to the short-swing profit restrictions of
Applicable Laws may, in the Administrator’s sole discretion, be granted limited Stock Appreciation
Rights in tandem with their outstanding Options. Upon the occurrence of a Hostile Take-Over, each
outstanding Option with such a limited stock appreciation right in effect for at least six (6)
months shall automatically be cancelled and the recipient shall in be entitled to a cash
distribution from the Company in an amount equal to the excess of (a) the Take-Over Price of the
Shares subject to the cancelled Option (whether or not such Shares are exercisable) over (b) the
aggregate exercise price payable for such Shares. The cash distribution payable upon such
cancellation shall be made within five (5) days following the consummation of the Hostile
Take-Over. Neither the approval of the Administrator nor the consent of the Board shall be
required in connection with such Option cancellation and cash distribution. The Shares subject to
any Option cancelled for an appreciation distribution pursuant to this Section shall not be
available for subsequent grant under the Plan.

               (iii) Hostile Take-Over. A Hostile Take-Over shall be deemed to occur in the event
(a) any person or related group of persons (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting power of the
Company’s outstanding securities pursuant to a tender or exchange offer which the Board does not
recommend the Company’s stockholders to accept, and (b) more than fifty percent (50%) of
the securities so acquired in such tender or exchange offer are accepted from holders other than
Company Officers and Directors subject to the short-swing profit restrictions of Applicable Laws.

     The Take-Over Price per share shall be deemed to be equal to the greater of (a) the Fair
Market Value per share on the date of cancellation, or (b) the highest reported price per share
paid in effecting such Hostile Take-Over; provided, however, that if the cancelled option is an
Incentive Stock Option, the Take-Over Price shall not exceed the Fair Market Value per share on the
date of cancellation.

               (iv) Restricted Stock, Performance Shares, Performance Units and Deferred Stock Units.
In the event of a merger or Change in Control, each outstanding Restricted Stock, Performance
Share, Performance Unit and Deferred Stock Unit award shall be assumed or an equivalent Restricted
Stock, Performance Share, Performance Unit and Deferred Stock Unit award substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. In the event that
the successor corporation refuses to assume or substitute for the Restricted Stock, Performance
Share, Performance Unit or Deferred Stock Unit award, the Participant shall fully vest in the
Restricted Stock, Performance Share, Performance Unit or Deferred Stock Unit including as to Shares
(or with respect to Performance Units, the cash equivalent thereof) which would not otherwise be
vested. For the purposes of this paragraph, a Restricted Stock, Performance Share, Performance
Unit and Deferred Stock Unit award shall be considered assumed if, following the

16

 

merger or Change in Control, the award confers the right to purchase or receive, for each
Share (or with respect to Performance Units, the cash equivalent thereof) subject to the Award
immediately prior to the merger or Change in Control, the consideration (whether stock, cash, or
other securities or property) received in the merger or Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a majority of the
outstanding Shares); provided, however, that if such consideration received in the merger or Change
in Control is not solely common stock of the successor corporation or its Parent, the Administrator
may, with the consent of the successor corporation, provide for the consideration to be received,
for each Share and each unit/right to acquire a Share subject to the Award, to be solely common
stock of the successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or Change in Control.

     17. Date of Grant. The date of grant of an Award shall be, for all purposes, the date
on which the Administrator makes the determination granting such Award, or such other later date as
is determined by the Administrator. Notice of the determination shall be provided to each
recipient within a reasonable time after the date of such grant.

     18. Amendment and Termination of the Plan.

          (a) Amendment and Termination. The Board may at any time amend, alter, suspend or
terminate the Plan.

          (b) Stockholder Approval. The Company shall obtain stockholder approval of any Plan
amendment to the extent necessary and desirable to comply with Applicable Laws.

          (c) Effect of Amendment or Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Participant, unless mutually agreed
otherwise between the Participant and the Administrator, which agreement must be in writing and
signed by the Participant and the Company. Termination of the Plan shall not affect the
Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards
granted under the Plan prior to the date of such termination.

     19. Conditions Upon Issuance of Shares.

          (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of the Award or the issuance and delivery of such Shares (or with respect to
Performance Units, the cash equivalent thereof) shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to such compliance.

          (b) Investment Representations. As a condition to the exercise or receipt of an
Award, the Company may require the person exercising or receiving such Award to represent and
warrant at the time of any such exercise or receipt that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares if, in the opinion
of counsel for the Company, such a representation is required.

     20. Inability to Obtain Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to
be

17

 

necessary to the lawful issuance and sale of any Shares hereunder (or with respect to
Performance Units, the cash equivalent thereof), shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares (or with respect to Performance Units, the cash
equivalent thereof) as to which such requisite authority shall not have been obtained.

     21. Reservation of Shares. The Company, during the term of this Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

     22. Stockholder Approval. The Plan shall be subject to approval by the stockholders
of the Company within twelve (12) months after the date the Plan is adopted by the Board. Such
stockholder approval shall be obtained in the manner and to the degree required under Applicable
Laws.

18exv10w2

 

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	 

-i-

 

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	 

-ii-

 

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.

-2-

 

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.

-3-

 

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.

-4-

 

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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