<PAGE> 1
As filed with the Securities and Exchange Commission on June 14, 1996
Registration No. 333- ___________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
--------------------
KOMAG, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 94-2914864
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
275 SOUTH HILLVIEW DRIVE, MILPITAS, CA 95035
(Address of principal executive offices) (Zip Code)
--------------------
RESTATED 1987 STOCK OPTION PLAN
(Full title of the Plan)
--------------------
STEPHEN C. JOHNSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
KOMAG, INCORPORATED
275 SOUTH HILLVIEW DRIVE, MILPITAS, CA 95035
(Name and address of agent for service)
(408) 946-2300
(Telephone number, including area code, of agent for service)
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
---------- ------------- ------------ -------- ---
<S> <C> <C> <C> <C>
Options to Purchase Common 3,000,000 N/A N/A N/A
Stock, $0.01 par value
(Restated 1987 Stock Option Plan)
Common Stock, 3,000,000 $31.37 $94,110,000 $32,451.72
$0.01 par value
(Restated 1987 Stock Option Plan)
=================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Restated 1987 Stock Option
Plan by reason of any stock dividend, stock split, recapitalization or
any other similar transaction effected without the receipt of
consideration which results in an increase in the number of Komag,
Incorporated's outstanding shares of Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as amended, on the basis of the average of
the high and low selling prices per share of Common Stock of Komag,
Incorporated on June 12, 1996, as reported on the Nasdaq
National Market.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Certain Documents by Reference
The Registrant hereby incorporates by reference into this Registration
Statement the following documents previously filed with the Securities and
Exchange Commission (the "SEC"):
a. The Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, as filed with the SEC on March
8, 1996;
b. The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1996; and
c. The Registrant's Registration Statement No. 0-16852 on Form
8-A filed with the SEC on April 29, 1988 in which there is
described the terms, rights and provisions applicable to the
Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements
filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 (the "1934 Act") after the date of this Registration Statement and
prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all securities
then remaining unsold shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
Item 4. Description of Securities
Not Applicable.
Item 5. Interests of Named Experts and Counsel
Not Applicable.
Item 6. Indemnification of Directors and Officers
The Registrant's Restated Certificate of Incorporation
provides that no director of the Registrant will be personally liable to the
Company or any of its stockholders for monetary damages arising from the
director's breach of fiduciary duty. However, this provision does not apply with
respect to any action in which the director would be liable under Section 174 of
Title 8 of the General Corporation Law of Delaware, nor does it apply with
respect to any liability in which the director (i) breached his duty of loyalty
to the Registrant or its stockholders; (ii) did not act in good faith or, in
failing to act, did not act in good faith; (iii) acted in a manner involving
intentional misconduct or a knowing violation of law or, in failing to act,
acted in a
<PAGE> 3
manner involving intentional misconduct or a knowing violation of law; or (iv)
derived an improper personal benefit.
Pursuant to the provisions of Section 145 of the General
Corporation Law of Delaware, every Delaware corporation has power to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of the corporation) by reason of the fact that he is
or was a director, officer, employee or agent of the Registrant or of any
corporation, partnership, joint venture, trust or other enterprise for which he
is or was serving in such capacity at the request of the Registrant, against any
and all expenses, judgments, fines and amounts paid in settlement and reasonably
incurred by him in connection with such action, suit or proceeding. The power to
indemnify applies only if such person acted in good faith and in a manner he
reasonably believed to be in the best interests, or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
The power to indemnify applies to actions brought by or in the
right of the corporation as well, but only to the extent of defense and
settlement expenses and not to any satisfaction of a judgment or settlement of
the claim itself, and with the further limitation that in such actions no
indemnification shall be made in the event of any adjudication of negligence or
misconduct unless the court, in its discretion, feels that in the light of all
the circumstances indemnification should apply.
To the extent any of the persons referred to in the two
immediately preceding paragraphs is successful in the defense of the action
referred to therein, such person is, pursuant to Section 145 of the Delaware
General Corporation Law, entitled to indemnification as described above. Section
145 also grants power to advance litigation expenses upon receipt of an
undertaking to repay such advances in the event no right to indemnification is
subsequently shown. A corporation may also obtain insurance at its expense to
protect anyone who might be indemnified, or has a right to insist on
indemnification, under the statute.
The Registrant has entered into indemnification agreements
with its then current directors and officers which provide for indemnification
to the fullest extent permitted by Delaware General Corporation Law, including
Section 145 thereof.
Item 7. Exemption from Registration Claimed
Inapplicable
Item 8. Exhibits
Exhibit Number Exhibit
5 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors - Ernst & Young.
23.2 Consent of Independent Auditors - Chuo Audit Corporation.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
99.1 Restated 1987 Stock Option Plan.
99.2 Notice of Grant generally used in connection with the Restated
1987 Stock Option Plan. (Incorporated herein by reference to
Exhibit 28.4 to the Registrant's Registration Statement No.
33-53432 on Form S-8 filed with the SEC on October 16, 1992).
99.3 Form of Stock Option Agreement (Employee/Consultant) generally
used in connection with the Restated 1987 Stock Option Plan.
(Incorporated herein by reference to Exhibit 28.5 to the
Registrant's Registration Statement No. 33-53432 on Form S-8
filed with the SEC on October 16, 1992).
II-2
<PAGE> 4
99.4 Form of Stock Option Agreement (Officer) generally used in
connection with the Restated 1987 Stock Option Plan.
(Incorporated herein by reference to Exhibit 28.7 to the
Registrant's Registration Statement No. 33-53432 on Form S-8
filed with the SEC on October 16, 1992).
99.5 Form of Notice of Non-Employee Director Automatic Option grant
generally used in connection with the Restated 1987 Stock
Option Plan.
99.6 Form of Non-Employee Director Stock Option Agreement (Initial
Option Grant) generally used in connection with the Restated
1987 Stock Option Plan.
99.7 Form of Non-Employee Director Stock Option Agreement (Annual
Option Grant) generally used in connection with the Restated
1987 Stock Option Plan.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "1933
Act"), (ii) to reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this Registration Statement,
and (iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement; provided,
however, that clauses (1)(i) and (1)(ii) shall not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13 or
Section 15(d) of the 1934 Act that are incorporated by reference into the
registration statement; (2) that for the purpose of determining any liability
under the 1933 Act each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and (3) to remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold upon the termination of the Restated 1987 Stock Option Plan.
B. The undersigned Registrant hereby undertakes that,
for purposes of determining any liability under the 1933 Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act that is incorporated by reference into this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising
under the 1933 Act may be permitted to directors, officers or controlling
persons of the Registrant pursuant to the provisions of Item 6 above, or
otherwise, the Registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form S-8 and has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Milpitas, State of
California, on this 10th day of June, 1996.
KOMAG, INCORPORATED
By: /s/ Stephen C. Johnson
------------------------------------------
Stephen C. Johnson
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of KOMAG,
INCORPORATED, a Delaware corporation, do hereby constitute and appoint Stephen
C. Johnson and William L. Potts, Jr., and each of them, the lawful attorneys and
agents, with full power and authority to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, and any one of
them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents, or any of them, shall do or cause to be done
by virtue hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Stephen C. Johnson President, Chief Executive Officer June 10, 1996
- -------------------------------------------- and Director
Stephen C. Johnson (Principal Executive Officer)
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
/s/ Tu Chen Chairman of the Board June 10, 1996
- -------------------------------------------- and Secretary
Tu Chen
/s/ William L. Potts, Jr. Senior Vice President and June 10, 1996
- -------------------------------------------- Chief Financial Officer
William L. Potts, Jr. (Principal Financial and
Accounting Officer)
/s/ Craig R. Barrett Director June 10, 1996
- --------------------------------------------
Craig R. Barrett
/s/ Chris A. Eyre Director June 10, 1996
- --------------------------------------------
Chris A. Eyre
____________________________________________ Director , 1996
Irwin Federman --- --
/s/ George A. Neil Director June 10, 1996
- --------------------------------------------
George A. Neil
/s/ Max Palevsky Director June 10, 1996
- --------------------------------------------
Max Palevsky
/s/ Anthony Sun Director June 10, 1996
- --------------------------------------------
Anthony Sun
/s/ Masayoshi Takebayashi Director June 10, 1996
- --------------------------------------------
Masayoshi Takebayashi
</TABLE>
II-5
<PAGE> 7
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
KOMAG, INCORPORATED
<PAGE> 8
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- -------
5 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors - Ernst & Young.
23.2 Consent of Indpendent Auditors - Chuo Audit Corporation.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-3 of this
Registration Statement.
99.1 Restated 1987 Stock Option Plan.
99.2 Notice of Grant generally used in connection with the Restated
1987 Stock Option Plan. (Incorporated herein by reference to
Exhibit 28.4 to the Registrant's Registration Statement No.
33-53432 on Form S-8 filed with the SEC on October 16, 1992).
99.3 Form of Stock Option Agreement (Employee/Consultant) generally
used in connection with the Restated 1987 Stock Option Plan.
(Incorporated herein by reference to Exhibit 28.5 to the
Registrant's Registration Statement No. 33-53432 on Form S-8
filed with the SEC on October 16, 1992).
99.4 Form of Stock Option Agreement (Officer) generally used in
connection with the Restated 1987 Stock Option Plan.
(Incorporated herein by reference to Exhibit 28.7 to the
Registrant's Registration Statement No. 33-53432 on Form S-8
filed with the SEC on October 16, 1992).
99.5 Form of Notice of Non-Employee Director Automatic Option grant
generally used in connection with the Restated 1987 Stock
Option Plan.
99.6 Form of Non-Employee Director Stock Option Agreement (Initial
Option Grant) generally used in connection with the Restated
1987 Stock Option Plan.
99.7 Form of Non-Employee Director Stock Option Agreement (Annual
Option Grant) generally used in connection with the Restated
1987 Stock Option Plan.
<PAGE> 1
Exhibit 5
Opinion of Brobeck, Phleger & Harrison LLP
June 13, 1996
Komag, Incorporated
275 South Hillview Drive
Milpitas, CA 95035
Re: Komag, Incorporated (the "Company")
Registration Statement for registration
of an aggregate of 3,000,000 Shares of Common Stock
---------------------------------------------------
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of 3,000,000
additional shares of Common Stock available for issuance under the Company's
Restated 1987 Stock Option Plan. We advise you that, in our opinion, when such
shares have been issued and sold pursuant to the applicable provisions of the
Company's Restated 1987 Stock Option Plan and in acordance with the
Registration Statement, such shares will be validly issued, fully paid and
nonassessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours.
/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the Komag, Incorporated Restated 1987 Stock
Option Plan, of our report dated January 17, 1996, with respect to the
consolidated financial statements and schedule of Komag, Incorporated included
in its Annual Report (Form 10-K) for the year ended December 31, 1995, filed
with the Securities and Exchange Commission.
ERNST & YOUNG LLP
San Jose, California
June 7, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of Komag, Incorporated on Form S-8 pertaining to the Komag,
Incorporated restated 1987 Stock Option Plan filed on June 14, 1996 of our
report dated January 27, 1996 on our audits of the consolidated financial
statements of Asahi Komag Co., Ltd. as of December 31, 1995 and 1994, and for
the years ended December 31, 1995, 1994 and 1993, which report is included in
the Annual Report on Form 10-K of Komag, Incorporated for the year ended
December 31, 1995.
CHUO AUDIT CORPORATION
Tokyo, Japan
June 7, 1996
<PAGE> 1
EXHIBIT 99.1
KOMAG, INCORPORATED
RESTATED 1987 STOCK OPTION PLAN
(AMENDED AND RESTATED THROUGH JANUARY 31, 1996)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF THE PLAN
This Restated 1987 Stock Option Plan (the "Plan") is intended
to promote the interests of Komag, Incorporated, a Delaware corporation (the
"Corporation"), by providing a method whereby eligible individuals may be
offered incentives and rewards which will encourage them to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation and continue to render services to the Corporation (or its parent or
subsidiary corporations).
II. STRUCTURE OF THE PLAN
A. Option Programs. The Plan shall be divided into two
separate components: the Discretionary Option Grant Program described in Article
Two and the Automatic Option Grant Program described in Article Three. Under the
Discretionary Option Grant Program, eligible individuals may, at the discretion
of the Plan Administrator, be granted options to purchase shares of Common Stock
in accordance with the provisions of Article Two. Under the Automatic Option
Grant Program, each eligible member of the Corporation's Board of Directors (the
"Board") will automatically receive an option grant to purchase shares of Common
Stock in accordance with the provisions of Article Three.
B. General Provisions. Unless the context clearly indicates
otherwise, the provisions of Articles One and Four of the Plan shall apply to
the Discretionary Option Grant Program and the Automatic Option Grant Program
and shall accordingly govern the interests of all individuals under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Discretionary Option Grant Program shall be
administered by one or more committees comprised of Board members. The primary
committee (the "Primary Committee") shall be comprised of two or more
non-employee Board members and shall have sole and exclusive authority to grant
stock options and stock appreciation rights under
<PAGE> 2
the Discretionary Option Grant Program to officers and employee-directors of the
Corporation subject to the short-swing profit restrictions of the Federal
securities laws. Stock options may be granted under the Discretionary Option
Grant Program to all other eligible employees and consultants by either the
Primary Committee or a second committee comprised of two or more employee-Board
members (the "Secondary Committee"). The members of the Primary Committee and
the Secondary Committee shall each serve for such period of time as the Board
may determine and shall be subject to removal by the Board at any time.
B. No Board member shall be eligible to serve on the Primary
Committee if such individual has, within the twelve (12)-month period
immediately preceding the date he or she is to be appointed to such Committee,
received any option grant, stock appreciation right or stock issuance under this
Plan or any other stock plan of the Corporation (or any parent or subsidiary
corporation), other than pursuant to the Automatic Option Grant Program.
C. Subject to the limited authority provided the Secondary
Committee to effect option grants in accordance with the provisions of paragraph
III.A of this Article One, the Primary Committee shall serve as the Plan
Administrator and shall have full power and authority (subject to the express
provisions of the Discretionary Option Grant Program) to establish such rules
and regulations as it may deem appropriate for the proper administration of such
program and to make such determinations under the program and any outstanding
option as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties with an interest in the
Plan or any outstanding option under this Discretionary Option Grant Program.
D. Administration of the Automatic Option Grant Program shall
be self-executing in accordance with the express terms and conditions of
Article Three.
IV. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to receive options pursuant to the
Discretionary Option Grant Program under Article Two of the Plan shall be
- those key employees (including officers and
directors) of the Corporation (or its parent or subsidiary
corporations) who render services which tend to contribute materially
to the success of the Corporation (or its parent or subsidiary
corporations) or which may reasonably be anticipated to contribute
materially to the future success of the Corporation (or its parent or
subsidiary corporations) and
2.
<PAGE> 3
- those independent contractors and consultants who
provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. Non-employee Board members shall not be eligible to
participate in the Discretionary Option Grant Program or in any other stock
option, stock purchase, stock bonus or other stock plan of the Corporation (or
its parent or subsidiary corporations). However, non-employee Board members
shall be eligible to receive automatic option grants under the provisions of
Article Three.
C. The Plan Administrator shall have full authority to select
the eligible individuals who are to receive option grants under the Plan, the
number of shares to be covered by each granted option, whether such option is to
be an incentive stock option ("Incentive Option") which satisfies the
requirements of Section 422 of the Internal Revenue Code or a non-statutory
option not intended to meet such requirements, the time or times at which such
option is to become exercisable and the maximum term for which the option is to
be outstanding.
D. For purposes of the Plan, the following provisions shall be
applicable in determining the parent and subsidiary corporations of the
Corporation:
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a PARENT corporation of the Corporation, provided each
such corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a SUBSIDIARY of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of the
Corporation's authorized but unissued or reacquired Common Stock. The aggregate
number of shares
3.
<PAGE> 4
which may be issued over the term of the Plan shall not exceed 15,640,000*
shares (subject to adjustment from time to time in accordance with paragraph V.D
of this Article One).
B. In no event any one individual participating in the Plan be
granted stock options and separately exercisable stock appreciation rights for
more than 3,000,000 shares of Common Stock (as adjusted for the December 1995
split) in the aggregate over the remaining term of the Plan, subject to
adjustment from time to time in accordance with paragraph V.D of this Article
One. For purposes of such limitation, no stock options or stock appreciation
rights granted prior to January 1, 1994 shall be taken into account.
C. Should an option be terminated for any reason prior to
exercise in whole or in part, the shares subject to the portion of the option
not so exercised shall be available for subsequent option grants under this
Plan. Shares subject to any option or portion thereof cancelled in accordance
with paragraph V of Article Two or paragraph III of Article Three and shares
repurchased by the Corporation pursuant to its repurchase rights under the Plan
shall not be available for subsequent option grants under the Plan.
D. In the event any change is made to the Common Stock
issuable under the Plan (whether by reason of (i) merger, consolidation or
reorganization or (ii) recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other similar change affecting the
outstanding Common Stock as a class without receipt of consideration), then
unless such change results in the termination of all outstanding options
pursuant to the provisions of paragraph III of Articles Two and Three of the
Plan, appropriate adjustments shall be made to (i) the aggregate number and/or
class of shares issuable under the Plan, (ii) the maximum number and/or class of
shares for which stock options and separately exercisable stock appreciation
rights may be granted to any one participant in the aggregate after December 31,
1993, (iii) the number and/or class of shares and price per share in effect
under each outstanding option under the Discretionary Option Grant Program, (iv)
the number and/or class of shares per non-employee Board member for which
automatic option grants are subsequently to be made under the Automatic Option
Grant Program, and (v) the number and/or class of shares and price per share of
the Common Stock in effect under each automatic grant outstanding under the
Automatic Option Grant Program. The purpose of such adjustments to the
outstanding options shall be to preclude the enlargement or dilution of rights
and benefits under such options.
- --------------------
*Adjusted to reflect (i) the two-for-one split of the Common Stock effected in
December 1995 and (ii) the 3,000,000-share (post-split) increase adopted by the
Board in January 1996 and approved by the stockholders at the 1996 Annual
Meeting. In no event, however, shall more than 8,282,719 shares of Common Stock
(post-split) be issuable under the Plan after March 17, 1996, subject to
adjustment under paragraph V.D of this Article One in the event of certain
changes in the Corporation's capital structure.
4.
<PAGE> 5
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to this Article Two shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or non-statutory
options. Individuals who are not Employees may only be granted non-statutory
options. The granted options shall be evidenced by instruments in such form as
the Plan Administrator shall from time to time approve; provided, however, that
each such instrument shall comply with and incorporate the terms and conditions
specified below. Each instrument evidencing an Incentive Option shall, in
addition, be subject to the applicable provisions of paragraph II of this
Article Two.
A. Option Price.
1. The option price per share shall be fixed by the
Plan Administrator. In no event, however, shall the option price per share be
less than one hundred percent (100%) of the fair market value per share of
Common Stock on the date of the option grant.
2. The option price shall become immediately due upon
exercise of the option and shall, subject to the provisions of paragraph VI of
this Article Two and the instrument evidencing the grant, be payable as follows:
(i) full payment in cash or check drawn to the
Corporation's order;
(ii) full payment in shares of Common Stock held by
the optionee for the requisite period necessary to avoid a charge to
the Corporation's earnings for financial reporting purposes and valued
at fair market value on the Exercise Date (as such term is defined
below) equal to the option price; or
(iii) full payment through a combination of shares of
Common Stock held by the optionee for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting
purposes and valued at fair market value on the Exercise Date and cash
or check, equal in the aggregate to the option price.
5.
<PAGE> 6
(iv) to the extent the option is exercised for vested
shares, the option price may also be paid through a broker-dealer sale
and remittance procedure pursuant to which the optionee shall provide
irrevocable instructions to (I) a Corporation-designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
an amount equal to the aggregate option price payable for the purchased
shares plus all applicable Federal and State income and employment
taxes required to be withheld by the Corporation by reason of such
purchase and (II) the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm.
For purposes of this subparagraph 2, the Exercise
Date shall be the date on which notice of the exercise of the option is
delivered to the Corporation. Except to the extent the sale and remittance
procedure is utilized in connection with the exercise of the option, payment of
the option price for the purchased shares must accompany such notice.
3. The fair market value of a share of Common Stock
on any relevant date under subparagraph 1 or 2 above (and for all other
valuation purposes under the Plan) shall be determined in accordance with the
following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the fair market value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the fair market value shall be the closing selling price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on
either the New York Stock Exchange or the American Stock Exchange, then
the fair market value shall be the closing selling price per share of
Common Stock on the date in question on such exchange, as such price is
officially quoted in the composite tape of transactions on that
exchange. If there is no closing selling price for the Common Stock on
the date in question, then the fair market value shall be the closing
selling price on the last preceding date for which such quotation
exists.
B. Term and Exercise of Options.
Each option granted under this Article Two shall be
exercisable at such time or times, during such period, and for such number of
shares as shall be determined by
6.
<PAGE> 7
the Plan Administrator and set forth in the instrument evidencing such option;
provided, however, that no option granted under this Article Two shall have a
maximum term in excess of ten (10) years from the grant date. During the
lifetime of the optionee, the option shall be exercisable only by the optionee
and shall not be assignable or transferable by the optionee otherwise than by
will or by the laws of descent and distribution.
C. Termination of Service.
1. Should an optionee cease to remain in Service for
any reason (including death, permanent disability or retirement at or after age
65) while the holder of one or more outstanding options granted to such optionee
under the Plan, then such option or options shall not (except to the extent
otherwise provided pursuant to paragraph VII below) remain exercisable for more
than a twelve (12)-month period (or such shorter period as is determined by the
Plan Administrator and set forth in the option agreement) following the date of
cessation of Service; provided, however, that under no circumstances shall any
such option be exercisable after the specified expiration date of the option
term. Except to the extent otherwise provided pursuant to subparagraph I.C.4
below, each such option shall, during such twelve (12)-month or shorter period,
be exercisable for any or all vested shares for which that option is exercisable
on the date of such cessation of Service. Upon the expiration of such twelve
(12)-month or shorter period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be exercisable for any such vested
shares for which the option has not been exercised. However, the option shall,
immediately upon the optionee's cessation of Service, terminate and cease to be
outstanding with respect to any option shares in which the optionee is not
otherwise at that time vested or for which the option is not otherwise at that
time exercisable.
2. Should the optionee die while in Service, or cease
to remain in Service and thereafter die while the holder of one or more
outstanding options under the Plan, each such option may be exercised by the
personal representative of the optionee's estate or by the person or persons to
whom the option is transferred pursuant to the optionee's will or in accordance
with the laws of descent and distribution but, except to the extent otherwise
provided pursuant to subparagraph I.C.4 below, only to the extent of the number
of vested shares (if any) for which the option is exercisable on the date of the
optionee's death. Such exercise must be effected prior to the earlier of (i) the
first anniversary of the date of the optionee's death or (ii) the specified
expiration date of the option term. Upon the occurrence of the earlier event,
the option shall terminate and cease to be exercisable.
3. If (i) the optionee's Service is terminated for
cause (including, but not limited to, any act of dishonesty, willful misconduct,
fraud or embezzlement or any unauthorized disclosure or use of confidential
information or trade secrets) or (ii) the optionee makes or attempts to make any
unauthorized use or disclosure of confidential information or trade secrets of
the Corporation or its parent or subsidiary corporations, then in any such event
all outstanding options granted the optionee under the Plan shall ter-
7.
<PAGE> 8
minate and cease to be exercisable immediately upon such cessation of Service or
(if earlier) upon such unauthorized use or disclosure of confidential or secret
information or attempt thereat.
4. The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at the time
the optionee dies, retires at or after age 65, or ceases to remain in Service,
to establish as a provision applicable to the exercise of one or more options
granted under the Plan that during the limited period of exercisability
following death, retirement at or after age 65, or cessation of Employee status
as provided in subparagraph I.C.1 or I.C.2 above, the option may be exercised
not only with respect to the number of vested shares for which it is exercisable
at the time of the optionee's cessation of Service, but also with respect to one
or more subsequent installments in which the optionee would have otherwise
vested had such cessation of Service not occurred.
5. For purposes of the foregoing provisions of this
paragraph I.C (and all other provisions of the Plan),
- The optionee shall be deemed to remain in the
SERVICE of the Corporation for so long as such individual renders
services on a periodic basis to the Corporation (or any parent or
subsidiary corporation) in the capacity of an Employee, a non-employee
member of the Board or an independent consultant or advisor.
- The optionee shall be considered to be an EMPLOYEE
for so long as such individual remains in the employ of the Corporation
or one or more of its parent or subsidiary corporations, subject to the
control and direction of the employer not only as to the work to be
performed but also as to the manner and method of performance.
D. Stockholder Rights.
An option holder shall have none of the rights of a
stockholder with respect to any shares covered by the option until such
individual shall have exercised the option, paid the option price and been
issued a stock certificate for the purchased shares. No adjustment shall be made
for dividends or distributions (whether paid in cash, securities or other
property) for which the record date is prior to the date the stock certificate
is issued.
E. Repurchase Rights.
The shares of Common Stock acquired upon the exercise
of options granted under this Article Two may be subject to repurchase by the
Corporation in accordance with the following provisions:
8.
<PAGE> 9
The Plan Administrator shall have the discretion to
authorize the issuance of unvested shares of Common Stock under this Article
Two. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase any or all of those unvested
shares at the option price paid per share. The terms and conditions upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the instrument
evidencing such repurchase right.
All of the Corporation's outstanding repurchase
rights shall automatically terminate, and all shares subject to such terminated
rights shall immediately vest in full, upon the occurrence of any Corporate
Transaction under paragraph III of this Article Two, except to the extent: (i)
any such repurchase right is to be assigned to the successor corporation (or
parent thereof) in connection with the Corporate Transaction or (ii) such
termination is precluded by other limitations imposed by the Plan Administrator
at the time the repurchase right is issued.
The Plan Administrator shall have the discretionary
authority, exercisable either before or after the optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with respect
to one or more shares purchased or purchasable by the optionee under this
Article Two and thereby accelerate the vesting of such shares in connection with
the optionee's cessation of Service.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees. Options which are specifically
designated as "non-qualified" or "non-statutory" options when issued under the
Plan shall not be subject to such terms and conditions:
A. Option Price. The option price per share of the Common
Stock subject to an Incentive Option shall in no event be less than one hundred
percent (100%) of the fair market value of a share of Common Stock on the date
of grant.
B. Dollar Limitation. The aggregate fair market value
(determined as of the respective date or dates of grant) of the shares of Common
Stock for which one or more options granted to any employee under the Plan (or
any other option plan of the Corporation or any parent or subsidiary
corporation) may for the first time become exercisable as Incentive Options
during any one (1) calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the employee holds two (2) or more
such options which become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options as
Incentive Options shall be applied on the basis of the order in which such
options are granted.
9.
<PAGE> 10
C. 10% Stockholder. If any individual to whom an Incentive
Option is granted is the owner of stock (as determined under Section 424(d) of
the Internal Revenue Code) possessing 10% or more of the total combined voting
power of all classes of stock of the Corporation or any one of its parent or
subsidiary corporations, then the option price per share shall not be less than
one hundred and ten percent (110%) of the fair market value per share of Common
Stock on the grant date, and the option term shall not exceed five (5) years,
measured from the grant date.
Except as modified by the preceding provisions of this
paragraph II, the provisions of Articles One, Two and Four of the Plan shall
apply to all Incentive Options granted hereunder.
III. CORPORATE TRANSACTIONS
A. In the event of any of the following stockholder-approved
transactions (a "Corporate Transaction"):
(i) a merger or acquisition in which the Corporation
is not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Corporation, or
(iii) any reverse merger in which the Corporation is
the surviving entity,
then each option outstanding under this Article Two shall
automatically become exercisable, during the five (5) business day period
immediately prior to the specified effective date for the Corporate Transaction,
with respect to the full number of shares of Common Stock purchasable under such
option and may be exercised for all or any portion of such shares as fully
vested shares of Common Stock. An outstanding option under the Plan shall not be
so accelerated, however, if and to the extent (i) such option is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation or parent thereof or be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation or parent
thereof or (ii) the acceleration of such option is subject to other limitations
imposed by the Plan Administrator at the time of grant.
B. Immediately following the consummation of the Corporate
Transaction, all outstanding options under the Plan shall, to the extent not
previously exercised or assumed by the successor corporation or its parent
company, terminate and cease to be exercisable.
10.
<PAGE> 11
C. Each outstanding option under this Article Two which is
assumed in connection with the Corporate Transaction or is otherwise to continue
in effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable, in consummation of such Corporate Transaction, to an
actual holder of the same number of shares of Common Stock as are subject to
such option immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the option price payable per share, provided
the aggregate option price payable for such securities shall remain the same. In
addition, the class and number of securities available for issuance under the
Plan following the consummation of the Corporate Transaction shall be
appropriately adjusted.
D. The portion of any Incentive Option accelerated in
connection with a Corporate Transaction shall remain subject to the applicable
limitations of paragraph II.B.
E. Option grants under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
IV. STOCK APPRECIATION RIGHTS
A. One or more officers of the Corporation subject to the
short-swing profit restrictions of the Federal securities laws may, in the Plan
Administrator's sole discretion, be granted limited stock appreciation rights in
tandem with their outstanding options. Upon the occurrence of a Hostile
Take-Over effected at any time after the Corporation's outstanding Common Stock
is registered under Section 12(g) of the Exchange Act, each outstanding option
with such a limited stock appreciation right in effect for at least six (6)
months shall automatically be cancelled and the optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to the cancelled option (whether or not the option is otherwise at the
time exercisable for such shares) over (ii) 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 Plan Administrator nor the consent of the Board
shall be required in connection with such option cancellation and cash
distribution.
B. For purposes of paragraph IV.A, the following definitions
shall be in effect:
A Hostile Take-Over shall be deemed to occur in the
event (i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Exchange Act)
11.
<PAGE> 12
of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer which the Board does not
recommend the Corporation's stockholders to accept and (ii) more than
fifty percent (50%) of the securities so acquired in such tender or
exchange offer are accepted from holders other than Corporation
officers and directors subject to the short-swing profit restrictions
of the federal securities 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, as determined pursuant to the valuation provisions of
subparagraph I.A.3, or (b) the highest reported price per share paid in
effecting such Hostile Take- Over. However, if the cancelled option is
an Incentive Option, the Take-Over Price shall not exceed the clause
(a) price per share.
C. The shares of Common Stock subject to any option cancelled
for an appreciation distribution pursuant to this paragraph V shall NOT be
available for subsequent option grant under the Plan.
V. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority,
exercisable from time to time in its sole discretion, to extend, either at the
time the option is granted or at any time while such option remains outstanding,
the period of time for which the option is to remain exercisable following the
optionee's cessation of Service or death from the twelve (12)-month or shorter
period set forth in the option agreement to such greater period of time as the
Plan Administrator shall deem appropriate; provided, however, that in no event
shall such option be exercisable after the specified expiration date of the
option term.
12.
<PAGE> 13
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
A. Eligible Optionees. The individuals eligible to receive
automatic option grants pursuant to the provisions of this Article Three shall
be limited to the following:
(i) each individual serving as a non-employee member
of the Board on January 24, 1995, the effective date of this Automatic
Option Grant Program (the "Effective Date"); and
(ii) each individual who is first appointed or
elected as a non-employee Board member at any time after the Effective
Date.
B. Limitation. Except for the option grants to be made
pursuant to the provisions of this Article Three, non-employee Board members
shall not be eligible to receive any additional option grants or stock issuances
under this Plan or any other stock plan of the Corporation (or its subsidiary
corporations).
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants will be made under this Article
Three on the dates specified below:
(i) Each individual who first becomes a non-employee
Board member at any time after the Effective Date, whether through
election at an Annual Stockholders Meeting or through appointment by
the Board, shall automatically be granted, at the time of such initial
election or appointment, a non-statutory stock option to purchase
30,000 shares of Common Stock upon the terms and conditions of this
Article Three. The size of such grant has been adjusted to reflect the
two-for-one split of the Common Stock which occurred in December 1995,
but then reduced by twenty-five percent (25%) to effect a net
adjustment on a 1.5-for-one basis.
(ii) On the date of each Annual Stockholders Meeting,
beginning with the 1995 Annual Stockholders Meeting, each individual
who is at the time elected or reelected as a non-employee member of the
Board shall receive an additional grant of a non-statutory option under
the Plan to purchase 7,500 shares of the Common Stock, provided such
individual has been a member of the Board for at least six (6) months.
The size of such
13.
<PAGE> 14
grant has been adjusted to reflect the two-for-one split of the Common
Stock which occurred in December 1995, but then reduced by twenty-five
percent (25%) to effect a net adjustment on a 1.5-for-one basis.
The applicable 30,000-share and 7,500-share limitations on the
automatic option grants to be made to non-employee Board members under this
Article Three shall be subject to periodic adjustment pursuant to the applicable
provisions of paragraph V.C of Article One.
B. Exercise Price. The exercise price per share shall be equal
to one hundred percent (100%) of the fair market value per share of Common Stock
on the automatic grant date.
C. Payment.
The exercise price shall be payable in one of the alternative
forms specified below:
(i) full payment in cash or check made payable to the
Corporation's order;
(ii) full payment in shares of Common Stock held for
the requisite period necessary to avoid a charge to the Corporation's
reported earnings and valued at fair market value on the Exercise Date
(as such term is defined below); or
(iii) full payment in a combination of shares of
Common Stock held for the requisite period necessary to avoid a charge
to the Corporation's reported earnings and valued at fair market value
on the Exercise Date and cash or check payable to the Corporation's
order.
(iv) the option price may also be paid through a
broker-dealer sale and remittance procedure pursuant to which the
optionee shall provide irrevocable instructions to (I) a
Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, an amount equal to the
aggregate option price payable for the purchased shares plus all
applicable Federal and State income and employment taxes required to be
withheld by the Corporation by reason of such purchase and (II) the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm.
For purposes of this subparagraph, the Exercise Date shall be
the date on which notice of the option exercise is delivered to the Corporation,
and the fair market
14.
<PAGE> 15
value per share of Common Stock on any relevant date shall be determined in
accordance with the provisions of paragraph I.A.3 of Article Two. Except to the
extent the sale and remittance procedure specified above is utilized for the
exercise of the option, payment of the exercise price for the purchased shares
must accompany such notice.
D. Option Term. Each automatic grant under this Article Three
shall have a maximum term of ten (10) years measured from the automatic grant
date.
E. Exercisability. The initial 30,000-share automatic grant
made to each newly-elected or newly-appointed non-employee Board member shall
become exercisable for the option shares in four (4) installments as follows:
(i) The option shall become exercisable for twenty-
five percent (25%) of the option shares upon the completion of twelve
(12) months of Board service measured from the automatic grant date.
(ii) The option shall become exercisable for an
additional twenty-five percent (25%) of the option shares upon the
completion of twenty-four (24) months of Board service measured from
the automatic grant date.
(iii) The option shall become exercisable for an
additional twenty-five percent (25%) of the option shares upon the
completion of thirty-six (36) months of Board service measured from the
automatic grant date.
(iv) The option shall become exercisable for the
final twenty-five percent (25%) of the option shares upon the
completion of forty-eight (48) months of Board service measured from
the automatic grant date.
The annual 7,500-share option grant made to each re-elected
non-employee Board member shall become exercisable for all the option shares
upon the optionee's completion of twelve (12) months of Board service measured
from the automatic grant date.
As the option becomes exercisable for one or more installments
of the option shares, those installments shall accumulate, and the option shall
remain exercisable for the accumulated installments until the expiration or
sooner termination of the option term. The option, however, shall not become
exercisable for any additional option shares following the optionee's cessation
of Board service, except to the extent the option is otherwise to become
exercisable in accordance with the provisions of paragraph III of this Article
Three.
15.
<PAGE> 16
F. Non-Transferability. During the lifetime of the optionee,
the option shall be exercisable only by the optionee and shall not be assignable
or transferable by the optionee otherwise than by will or by the laws of descent
and distribution following the optionee's death.
G. Effect of Termination of Board Membership.
1. Should the optionee cease to be a Board member for
any reason (other than death) while holding an automatic option grant under this
Article Three, then such optionee shall have a six (6)-month period following
the date of such cessation of Board membership in which to exercise such option
for any or all of the shares of Common Stock for which the option is exercisable
at the time the optionee ceases service as a Board member.
2. Should the optionee die while serving as a Board
member or during the six (6)-month period following his or her cessation of
Board service, then the option may subsequently be exercised, for any or all of
the shares of Common Stock for which the option is exercisable at the time of
the optionee's cessation of Board membership, by the personal representative of
the optionee's estate or by the person or persons to whom the option is
transferred pursuant to the optionee's will or in accordance with the laws of
descent and distribution. Any such exercise must, however, occur within twelve
(12) months after the date of the optionee's death.
3. In no event shall any automatic grant under this
Article Three remain exercisable after the specified expiration date of the ten
(10)-year option term. Upon the expiration of the applicable exercise period in
accordance with subparagraphs 1 and 2 above or (if earlier) upon the expiration
of the ten (10)-year option term, the automatic grant shall terminate and cease
to be exercisable.
H. Stockholder Rights. The holder of an automatic option grant
under this Article Three shall have no stockholder rights with respect to any
shares covered by such option until such individual shall have exercised the
option, paid the exercise price for the purchased shares and been issued a stock
certificate for such shares.
I. Remaining Terms. The remaining terms and conditions of each
automatic option grant shall be as set forth in the prototype Non-statutory
Stock Option Agreement attached as Exhibit A to the Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-
OVER
A. In connection with any Corporate Transaction (as such term
is defined in paragraph III of Article Two, above), the exercisability of each
automatic option grant outstanding under this Article Three shall automatically
accelerate so that each such option
16.
<PAGE> 17
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for all
or any portion of such shares. Upon the consummation of the Corporate
Transaction, all automatic option grants under this Article Three shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
B. In connection with any Change in Control of the
Corporation, the exercisability of each automatic option grant at the time
outstanding under this Article Three shall automatically accelerate so that each
such option shall, immediately prior to the specified effective date for the
Change in Control, become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
for all or any portion of such shares. For purposes of this Article Three, a
Change in Control shall be deemed to occur in the event:
(i) any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer which the Board does not recommend the Corporation's stockholders
to accept; or
(ii) there is a change in the composition of the
Board over a period of twenty-four (24) consecutive months or less such
that a majority of the Board members ceases, by reason of one or more
proxy contests for the election of Board members, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least two-thirds of
the Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
C. Upon the occurrence of a Hostile Take-Over, each automatic
option grant which has been outstanding under this Article Three for a period of
at least six (6) months shall automatically be cancelled in return for a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to the
cancelled option (whether or not the option is otherwise at the time exercisable
for such shares) over (ii) 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 Plan Administrator nor the consent of the Board shall be
required in connection with such option cancellation and cash distribution.
17.
<PAGE> 18
D. For purposes of this Article Three, Hostile Take-Over shall
have the meaning assigned to such term in paragraph V.B of Article Two. 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, as determined pursuant
to the valuation provisions of paragraph I.A.3 of Article Two, or (b) the
highest reported price per share paid in effecting such Hostile Take-Over.
E. The shares of Common Stock subject to each option cancelled
in connection with the Hostile Take-Over shall NOT be available for subsequent
issuance under this Plan.
F. The automatic option grants outstanding under this Article
Three shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
IV. AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS
The provisions of this Automatic Option Grant Program,
including any automatic option grants outstanding under this Article Three, may
not be amended at intervals more frequently than once every six (6) months,
other than to the extent necessary to comply with applicable Federal income tax
laws and regulations.
18.
<PAGE> 19
ARTICLE FOUR
MISCELLANEOUS
I. AMENDMENT OF THE PLAN
The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, (i) no such amendment or modification shall, without the consent of the
holders, adversely affect rights and obligations with respect to options at the
time outstanding under the Plan and (ii) any amendment made to the Automatic
Option Grant Program (or any options outstanding thereunder) shall be in
compliance with the limitation of paragraph IV of Article Three. In addition,
the Board shall not, without the approval of the Corporation's stockholders, (i)
materially increase the maximum number of shares issuable under the Plan or the
number of shares for which any one individual participating in the Plan may be
granted stock options and separately exercisable stock appreciation rights in
the aggregate after December 31, 1993, except for permissible adjustments under
paragraph V.D of Article One, (ii) materially modify the eligibility
requirements for the grant of options under the Plan or (iii) otherwise
materially increase the benefits accruing to participants under the Plan.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The Corporation's 1983 Stock Option Plan was initially
adopted by the Board of Directors in October 1983 and approved by the
Corporation's stockholders in November 1983. In January 1987, the Plan was
renamed the Komag, Incorporated 1987 Stock Option Plan. The Board then amended
the Plan in May 1987 and such amendment was approved by the stockholders at the
Annual Meeting held in May 1987. The Plan was subsequently amended and restated
by the Board in December 1987 and January 1988, respectively, and such
restatement and amendments were approved by the stockholders at the Annual
Meeting held in June of 1988. The Plan was further amended by the Board in
January 1991 and the amendment was approved by the stockholders in May 1991. The
January 23, 1992 restatement of the Plan, together with the 1,000,000 share
increase, was approved by the Board on January 23, 1992 and became effective on
such date. The stockholders approved the January 23, 1992 restatement on May 21,
1992. On January 27, 1994, the Board adopted an amendment which increased the
number of shares of Common Stock issuable under the Plan by an additional
1,000,000 shares. The increase was approved by the stockholders at the 1994
Annual Meeting.
B. On January 24, 1995, the Board approved an amendment to the
Plan to effect the following changes to the Automatic Option Grant Program: (i)
increase the number of shares subject to the initial automatic option grant made
to newly-elected or newly-appointed non-employee Board members from 3,500 shares
to 20,000 shares per individual; (ii) increase the number of shares subject to
the annual automatic option grant made to each re-elected non-employee Board
member from 3,500 shares to 5,000 shares;
19.
<PAGE> 20
and (iii) adjust the vesting schedule in effect for each such annual 5,000-share
grant to provide for full vesting upon completion of one (1) year of Board
service rather than annual vesting over a four (4)-year period. The amendments
to the Automatic Option Grant Program were approved by the stockholders at the
1995 Annual Meeting.
C. In January 1996 the Board approved an amendment to the Plan
to (i) eliminate the discretion of the Plan Administrator to grant options
under the Discretionary Option Grant Program with an exercise price per share
less than 100% of the fair market value per share of Common Stock on the grant
date, (ii) eliminate the loan provisions of the Plan pursuant to which one or
more holders of options under the Discretionary Option Grant Program would have
otherwise had the opportunity to finance the exercise of those options through
the delivery of full-recourse promissory notes and (iii) increase the number of
shares of Common Stock reserved for issuance over the term of the Plan by an
additional 3,000,000 shares and (iv) adjust the number of shares granted to
non-employee Board members. The amendments described at (iii) and (iv) were
approved by the stockholders at the 1996 Annual Meeting.
D. The special sale and remittance procedure for the exercise
of outstanding options under the Plan, which was approved by the Board in
January 1991, shall be in effect for all options outstanding as of January 24,
1991 which already include such procedure as a method of exercise and for all
options granted after January 24, 1991. In addition, such procedure shall be
available for all non-qualified options currently held by officers and directors
which do not otherwise include such procedure and for any disqualifying
dispositions of Incentive Option shares effected after January 24, 1991.
E. The provisions of each restatement and amendment of the
Plan apply only to stock options and stock appreciation rights granted under the
Plan from and after the effective date of such restatement or amendment. All
stock options and stock appreciation rights issued and outstanding under the
Plan immediately prior to such effective date shall continue to be governed by
the terms and conditions of the Plan (and the respective instruments evidencing
each such option or stock appreciation right) as in effect on the date each such
option or stock appreciation right was previously granted, and nothing in any
such restatement or amendment shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such options or stock appreciation
rights with respect to their acquisition of shares of Common Stock under such
options or their exercise of such stock appreciation rights.
F. Unless sooner terminated in accordance with paragraph III
of Articles Two and Three, the Plan shall terminate upon the earlier of (i)
January 22, 2002 or (ii) the date on which all shares available for issuance
under the Plan shall have been issued or cancelled pursuant to the exercise or
surrender of options granted hereunder. If the date of termination is determined
under clause (i) above, then options outstanding on such date shall not be
affected by the termination of the Plan and shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such
options.
20.
<PAGE> 21
G. Options may be granted under this Plan to purchase shares
of Common Stock in excess of the number of shares then available for issuance
under the Plan, provided (i) an amendment to increase the maximum number of
shares issuable under the Plan is adopted by the Board prior to the initial
grant of any such option and is thereafter submitted to the Corporation's
stockholders for approval and (ii) each option so granted is not to become
exercisable, in whole or in part, at any time prior to the obtaining of such
stockholder approval.
III. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
IV. TAX WITHHOLDING
The Corporation's obligation to deliver shares or cash upon
the exercise or surrender of any option granted under the Discretionary Option
Grant Program shall be subject to the satisfaction of all applicable federal,
state and local income and employment tax withholding requirements.
V. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing or
restating the Plan, nor any action taken by the Plan Administrator hereunder,
nor any provision of the restated Plan shall be construed so as to grant any
individual the right to remain in the employ or service of the Corporation (or
any parent or subsidiary corporation) for any period of specific duration, and
the Corporation (or any parent or subsidiary corporation retaining the services
of such individual) may terminate such individual's employment or service at any
time and for any reason, with or without cause.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option
hereunder, and the issuance of stock upon the exercise or surrender of any such
option shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the stock issued pursuant to it.
21.
<PAGE> 22
EXHIBIT A
NON-EMPLOYEE DIRECTOR
NON-STATUTORY STOCK OPTION AGREEMENT
<PAGE> 1
EXHIBIT 99.5
DATE:
TO: 1~
FROM: Terry Tirey
RE: Notice of Non-Employee Director Automatic Option Grant
Pursuant to the automatic grant program, you were granted an
option (the "Option") to purchase shares of the common stock ("Common Stock") of
Komag, Incorporated (the "Corporation") as follows:
Grant Date: 2~
Type of Option: Non-Statutory Stock Option
Option Price Per Share: 3~
Number of Option Shares: 4~ shares
Expiration Date of Option: 5~
Optionee understands that the Option is granted subject to and
in accordance with the terms and conditions of the Komag, Incorporated Restated
1987 Stock Option Plan (the "Plan") governing automatic option grants to
non-employee directors and hereby agrees to be bound by such terms and
conditions and the provisions of the Stock Option Agreement attached hereto as
Exhibit A which evidences such grant.
Optionee hereby acknowledges receipt of a copy of the Plan
prospectus.
KOMAG, INCORPORATED
By: _______________________ Optionee: ___________________________
Vice President 1~
Date: _____________________ Date: ____________________________
Address: _________________________
_________________________
Note: Exhibit A must be attached.
<PAGE> 1
EXHIBIT 99.6
EXHIBIT A
KOMAG, INCORPORATED
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
INITIAL OPTION GRANT
RECITALS
A. The Corporation has approved an automatic option grant program under
the Restated 1987 Stock Option Plan (the "Plan") pursuant to which the
non-employee members of the Corporation's Board of Directors (the "Board") will
automatically receive periodic option grants designed to reward them for
services they have rendered to the Corporation and to encourage them to continue
in the service of the Corporation.
B. Optionee is a non-employee member of the Board, and this Agreement
is executed pursuant to, and is intended to carry out the purposes of, the Plan
in connection with the automatic grant on this day of a stock option to purchase
shares of the Corporation's common stock, $0.01 par value ("Common Stock"),
under the Plan.
C. The granted option is intended to be a non-statutory option which
does not meet the requirements of Section 422 of the Internal Revenue Code.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions set
forth in this Agreement and in the notice of grant accompanying this Agreement
("Notice of Grant"), there is hereby automatically granted to Optionee, as of
the date of grant specified in the Notice of Grant (the "Grant Date"), a stock
option to purchase up to the number of shares of the Corporation's Common Stock
(the "Option Shares") as is specified in the Notice of Grant at the price per
share (the "Option Price") specified in the Notice of Grant which is one hundred
percent (100%) of the fair market value of the Corporation's Common Stock on the
grant date.
2. OPTION TERM. The automatic option grant shall have a term of ten
(10) years measured from the automatic grant date and shall accordingly expire
at the close of business on the Expiration Date specified in the Notice of
Grant, unless sooner terminated in accordance with Paragraph 5 or 7.
3. LIMITED TRANSFERABILITY. This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution
<PAGE> 2
following Optionee's death and may be exercised, during Optionee's lifetime,
only by Optionee.
4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in a series of four (4) successive annual installments as follows:
(i) The option shall become exercisable for twenty-five percent
(25%) of the Option Shares upon the completion of twelve (12) months of
Board service measured from the automatic grant date.
(ii) The option shall become exercisable for an additional
twenty-five percent (25%) of the Option Shares upon the completion of
twenty-four (24) months of Board service measured from the automatic grant
date.
(iii) The option shall become exercisable for an additional
twenty-five percent (25%) of the Option Shares upon the completion of
thirty-six (36) months of Board service measured from the automatic grant
date.
(iv) The option shall become exercisable for the final
twenty-five percent (25%) of the Option Shares upon the completion of
forty-eight (48) months of Board service measured from the automatic grant
date.
As the option becomes exercisable for one or more installments of
the Option Shares, those installments shall accumulate, and the option shall
remain exercisable for the accumulated installments until the expiration or
sooner termination of the option term.
5. TERMINATION OF BOARD MEMBERSHIP. Should the Optionee's service as a
Board member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to remain
outstanding) prior to the Expiration Date in accordance with the following
provisions:
(i) Should Optionee cease to be a Board member for any reason
other than death while holding this option, then the period for exercising
this option shall be reduced to a six (6)-month period commencing with the
date of such cessation of Board membership, but in no event shall this
option be exercisable at any time after the Expiration Date. During such
limited period of exercisability, this option may not be exercised in the
aggregate for more than the number of Option Shares (if any) for which it is
exercisable on the date the Optionee ceased service as a Board member.
2.
<PAGE> 3
Upon the expiration of such six (6)-month period or (if earlier) upon the
specified Expiration Date of the option term, the option shall terminate and
cease to be exercisable.
(ii) Should Optionee die while serving as a Board member or
during the six (6)-month period following his or her cessation of Board
service, then the personal representative of the Optionee's estate or the
person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution
shall have the right to exercise this option for any or all of the Option
Shares for which the option is at the time exercisable. Such right of
exercise shall terminate, and this option shall accordingly cease to be
outstanding, upon the earlier of (A) the expiration of the twelve (12)-month
period measured from the date of Optionee's death or (B) the specified
Expiration Date of the option term.
6. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Common Stock issuable under
the Plan (whether by reason of (i) merger, consolidation or reorganization or
(ii) recapitalization, stock dividend, stock split, combination of shares,
exchange of shares or other similar change affecting the outstanding Common
Stock as a class without receipt of consideration), then, unless such change
results in the termination of all outstanding options pursuant to the provisions
of paragraph III of Articles Two and Three of the Plan, the number and class of
securities purchasable under this option and the Option Price payable per share
shall be appropriately adjusted to prevent the dilution or enlargement of the
Optionee's rights and benefits hereunder.
B. If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Option Price,
provided the aggregate Option Price shall remain the same.
7. CORPORATE TRANSACTION. In the event of any of the following
stockholder-approved transactions (a "Corporate Transaction"):
(i) a merger or acquisition in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of
which is to change the State of the Corporation's incorporation,
3.
<PAGE> 4
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation, or
(iii) any reverse merger in which the Corporation is the
surviving entity,
this option, to the extent outstanding at the time, shall
automatically accelerate so that such option shall, immediately prior to the
specified effective date for the Corporate Transaction, become fully exercisable
for all of the Option Shares at the time subject to the option and may be
exercised for any or all of those Option Shares as fully-vested shares.
Immediately following the consummation of the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
8. CHANGE IN CONTROL/HOSTILE TAKEOVER.
A. Immediately prior to the occurrence of a Change in Control as
defined below, this option, to the extent outstanding at the time, shall
automatically accelerate and become immediately exercisable for all of the
Option Shares at the time subject to the option and may be exercised for any or
all of those Option Shares as fully-vested shares. The option shall remain
exercisable for such fully-vested shares until the earlier of (i) the specified
Expiration Date of the option term or (ii) the termination of the option
pursuant to the provisions of Paragraph 5.
B. Upon the occurrence of a Hostile Takeover (as defined below), this
option, provided it has been outstanding for at least six (6) months, shall be
automatically cancelled in exchange for a cash payment from the Corporation in
an amount equal to the excess of (I) the Take-Over Price of all the Option
Shares at the time subject to the cancelled option over (II) the aggregate
Option Price payable for such shares. The cash payment shall be made within five
(5) days following the consummation of the Hostile Take-Over.
C. For purposes of this Paragraph 8, the following definitions shall be
in effect:
A CHANGE IN CONTROL shall be deemed to occur in the event:
(i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the
4.
<PAGE> 5
Securities Exchange Act of 1934) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer which the
Board does not recommend the Corporation's stockholders to accept; or
(ii) there is a change in the composition of the Board over a
period of twenty-four (24) consecutive months or less such that a majority
of the Board members ceases, by reason of one or more proxy contests for the
election of Board members, to be comprised of individuals who either (A)
have been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during such
period by at least two-thirds of the Board members described in clause (A)
who were still in office at the time such election or nomination was
approved by the Board.
A HOSTILE TAKE-OVER shall be deemed to occur in the event (i)
any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934) of securities possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer which the Board does not
recommend the Corporation's stockholders to accept and (ii) more than fifty
percent (50%) of the securities so acquired in such tender or exchange offer
are accepted from holders other than officers and directors of the
Corporation subject to the short-swing profit restrictions of the federal
securities 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 the option
cancellation or (b) the highest reported price per share paid in effecting
such Hostile Take-Over.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option for all or any part of the Option
Shares, Optionee (or in the case of exercise after Optionee's death, the
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
(i) Either provide the Stock Administrator of the Corporation
(or his/her designee) with written notice of the exercise in which there is
specified the number of Option Shares for which the option is being
5.
<PAGE> 6
exercised or initiate the exercise through the interactive response system
established with a Corporation-designated brokerage firm.
(ii) Pay the aggregate Option Price for the purchased shares in
one or more of the following alternative forms:
1. full payment in cash or check drawn to the Corporation's
order; or
2. full payment in shares of Common Stock held by the
Optionee for the requisite period necessary to avoid a charge to the
Corporation's reported earnings for financial reporting purposes and valued
at Fair Market Value on the Exercise Date; or
3. full payment through a combination of shares of Common
Stock held by the Optionee for the requisite period necessary to avoid a
charge to the Corporation's reported earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date and cash or
check, equal to the aggregate of the Option Price; or
4. payment effected through a broker-dealer sale and
remittance procedure pursuant to which the Optionee shall provide
irrevocable instructions to (I) a Corporation-designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date, an
amount equal to the aggregate option price payable for the purchased shares
plus all applicable Federal and State income and employment taxes required
to be withheld by the Corporation by reason of such purchase and (II) the
Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option, if other than Optionee, have
the right to exercise this option.
B. For purposes of subparagraph A above and for all other valuation
purposes under this Agreement, the Fair Market Value per share of Common Stock
on any relevant date shall be determined in accordance with the following
provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such
6.
<PAGE> 7
price is reported by the National Association of Securities Dealers on the
Nasdaq National Market or any successor system. If there is no closing
selling price for the Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on either the
New York Stock Exchange or the American Stock Exchange, then the Fair Market
Value shall be the closing selling price per share of Common Stock on the
date in question on such exchange, as such price is officially quoted in the
composite tape of transactions on that exchange. If there is no closing
selling price for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last preceding date
for which such quotation exists.
C. The Exercise Date shall be the first date on which there is
compliance with all the terms and conditions of subparagraphs A and B above
applicable to such exercise.
D. As soon as practical after the Exercise Date, the Corporation shall
issue to or on behalf of the Optionee (or any other person or persons exercising
this option) a certificate or certificates representing the Option Shares
purchased and paid for in accordance herewith.
E. In no event may this option be exercised for any fractional share.
10. STOCKHOLDER RIGHTS. The holder of this option shall not have any of
the rights of a stockholder with respect to the Option Shares until such
individual shall have exercised this option, paid the Option Price for the
purchased shares and been issued one or more certificates for the purchased
shares.
11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise make
changes in its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets. Nor
shall this Agreement in any way be construed or interpreted so as to affect
adversely or otherwise impair the Corporation's right to remove the Optionee
from the Board at any time in accordance with the provisions of applicable law.
7.
<PAGE> 8
12. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this option
and the issuance of the Option Shares upon such exercise shall be subject to
compliance by the Corporation and the Optionee with all applicable requirements
of law relating thereto and with all applicable regulations of any stock
exchange (or the Nasdaq National Market System, if applicable) on which shares
of the Corporation's Common Stock are at the time listed for trading.
13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided in
Paragraph 3 or 7, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Corporation.
14. DISCHARGE OF LIABILITY. The inability of the Corporation to obtain
approval from any regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common Stock pursuant to
this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. However, the Corporation shall use its best efforts to
obtain all such applicable approvals.
15. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Stock Administrator at the Corporate Offices
at 275 South Hillview Drive, Milpitas, California 95035. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to Optionee
at the address indicated below Optionee's signature line on the Notice of Grant.
All notices shall be deemed to have been given or delivered upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
16. CONSTRUCTION/GOVERNING LAW. This Agreement and the option evidenced
hereby are made and granted pursuant to the Plan and are in all respects limited
by and subject to the express terms and provisions of the Plan. The
interpretation, performance, and enforcement of this Agreement shall be governed
by the laws of the State of California.
8.
<PAGE> 1
EXHIBIT 99.7
EXHIBIT A
KOMAG, INCORPORATED
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
ANNUAL OPTION GRANT
RECITALS
A. The Corporation has approved an automatic option grant
program under the Restated 1987 Stock Option Plan (the "Plan") pursuant to which
the non-employee members of the Corporation's Board of Directors (the "Board")
will automatically receive periodic option grants designed to reward them for
services they have rendered to the Corporation and to encourage them to continue
in the service of the Corporation.
B. Optionee is a non-employee member of the Board, and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant on this day of a stock option to
purchase shares of the Corporation's common stock, $0.01 par value ("Common
Stock"), under the Plan.
C. The granted option is intended to be a non-statutory option
which does not meet the requirements of Section 422 of the Internal Revenue
Code.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and
conditions set forth in this Agreement and in the notice of grant accompanying
this Agreement ("Notice of Grant"), there is hereby automatically granted to
Optionee, as of the date of grant specified in the Notice of Grant (the "Grant
Date"), a stock option to purchase up to the number of shares of the
Corporation's Common Stock (the "Option Shares") as is specified in the Notice
of Grant at the price per share (the "Option Price") specified in the Notice of
Grant which is one hundred percent (100%) of the fair market value of the
Corporation's Common Stock on the grant date.
2. OPTION TERM. The automatic option grant shall have a term
of ten (10) years measured from the automatic grant date and shall accordingly
expire at the close of business on the Expiration Date specified in the Notice
of Grant, unless sooner terminated in accordance with Paragraph 5 or 7.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
<PAGE> 2
4. DATES OF EXERCISE. The option shall become exercisable for
all the Option Shares upon the Optionee's completion of one (1) year of
continuous service as a Board member, measured from the automatic grant date.
Once the option becomes exercisable for the Option Shares, the option shall
remain so exercisable until the expiration or sooner termination of the option
term.
5. TERMINATION OF BOARD MEMBERSHIP. Should the Optionee's
service as a Board member cease while this option remains outstanding, then the
option term specified in Paragraph 2 shall terminate (and this option shall
cease to remain outstanding) prior to the Expiration Date in accordance with the
following provisions:
(i) Should Optionee cease to be a Board member for
any reason other than death while holding this option, then the period
for exercising this option shall be reduced to a six (6)-month period
commencing with the date of such cessation of Board membership, but in
no event shall this option be exercisable at any time after the
Expiration Date. During such limited period of exercisability, this
option may not be exercised in the aggregate for more than the number
of Option Shares (if any) for which it is exercisable on the date the
Optionee ceased service as a Board member. Upon the expiration of such
six (6)-month period or (if earlier) upon the specified Expiration Date
of the option term, the option shall terminate and cease to be
exercisable.
(ii) Should Optionee die while serving as a Board
member or during the six (6) months following his or her cessation of
Board service, then the personal representative of the Optionee's
estate or the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of
descent and distribution shall have the right to exercise this option
for any or all of the Option Shares for which the option is at the time
exercisable. Such right of exercise shall terminate, and this option
shall accordingly cease to be outstanding, upon the earlier of (A) the
expiration of the twelve (12)-month period measured from the date of
Optionee's death or (B) the specified Expiration Date of the option
term.
6. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Common Stock
issuable under the Plan (whether by reason of (i) merger, consolidation or
reorganization or (ii) recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other similar change affecting the
outstanding Common Stock as a class without receipt of consideration), then,
unless such change results in the termination of all outstanding options
pursuant to the provisions of paragraph III of Articles Two and Three of the
Plan, the number and class of securities purchasable under this option and the
Option Price payable
2.
<PAGE> 3
per share shall be appropriately adjusted to prevent the dilution or enlargement
of the Optionee's rights and benefits hereunder.
B. If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Option Price,
provided the aggregate Option Price shall remain the same.
7. CORPORATE TRANSACTION. In the event of any of the following
stockholder-approved transactions (a "Corporate Transaction"):
(i) a merger or acquisition in which the Corporation
is not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Corporation, or
(iii) any reverse merger in which the Corporation is
the surviving entity,
this option, to the extent outstanding at the time, shall
automatically accelerate so that such option shall, immediately prior to the
specified effective date for the Corporate Transaction, become fully exercisable
for all of the Option Shares at the time subject to the option and may be
exercised for any or all of those Option Shares as fully-vested shares.
Immediately following the consummation of the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
8. CHANGE IN CONTROL/HOSTILE TAKEOVER.
A. Immediately prior to the occurrence of a Change in Control
as defined below, this option, to the extent outstanding at the time, shall
automatically accelerate and become immediately exercisable for all of the
Option Shares at the time subject to the option and may be exercised for any or
all of those Option Shares as fully-vested shares. The option shall remain
exercisable for such fully-vested shares until the earlier of (i) the specified
Expiration Date of the option term or (ii) the termination of the option
pursuant to the provisions of Paragraph 5.
B. Upon the occurrence of a Hostile Takeover (as defined
below), this option, provided it has been outstanding for at least six (6)
months, shall be automatically cancelled in exchange for a cash payment from the
Corporation in an amount equal to the
3.
<PAGE> 4
excess of (I) the Take-Over Price of all the Option Shares at the time subject
to the cancelled option over (II) the aggregate Option Price payable for such
shares. The cash payment shall be made within five (5) days following the
consummation of the Hostile Take-Over.
C. For purposes of this Paragraph 8, the following definitions
shall be in effect:
A CHANGE IN CONTROL shall be deemed to occur in the event:
(i) any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer which the Board does not
recommend the Corporation's stockholders to accept; or
(ii) there is a change in the composition of the
Board over a period of twenty-four (24) consecutive months or less such
that a majority of the Board members ceases, by reason of one or more
proxy contests for the election of Board members, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least two-thirds of
the Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
A HOSTILE TAKE-OVER shall be deemed to occur in the event (i)
any person or related group of persons (other than the Corporation or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Corporation) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer which the Board does not recommend the Corporation's
stockholders to accept and (ii) more than fifty percent (50%) of the securities
so acquired in such tender or exchange offer are accepted from holders other
than officers and directors of the Corporation subject to the short-swing profit
restrictions of the federal securities laws.
4.
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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 the option
cancellation or (b) the highest reported price per share paid in effecting such
Hostile Take-Over.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option for all or any part of the
Option Shares, Optionee (or in the case of exercise after Optionee's death, the
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
(i) Either provide the Stock Administrator of the
Corporation (or his/her designee) with written notice of the exercise
in which there is specified the number of Option Shares for which the
option is being exercised or initiate the exercise through the
interactive response system established with a Corporation-designated
brokerage firm.
(ii) Pay the aggregate Option Price for the purchased
shares in one or more of the following alternative forms:
1. full payment in cash or check drawn to the
Corporation's order; or
2. full payment in shares of Common Stock held by the
Optionee for the requisite period necessary to avoid a charge to the
Corporation's reported earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date; or
3. full payment through a combination of shares of
Common Stock held by the Optionee for the requisite period necessary to
avoid a charge to the Corporation's reported earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date
and cash or check, equal in the aggregate to the Option Price; or
4. payment effected through a broker-dealer sale and
remittance procedure pursuant to which the Optionee shall provide
irrevocable instructions to (I) a Corporation-designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
an amount equal to the aggregate option price payable for the purchased
shares plus all applicable Federal and State income and employment
taxes required to be withheld by the Corporation by reason of such
purchase and (II) the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm.
5.
<PAGE> 6
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option, if
other than Optionee, have the right to exercise this option.
B. For purposes of subparagraph A above and for all other
valuation purposes under this Agreement, the Fair Market Value per share of
Common Stock on any relevant date shall be determined in accordance with the
following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on
either the New York Stock Exchange or the American Stock Exchange, then
the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on such exchange, as such price is
officially quoted in the composite tape of transactions on that
exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
C. The Exercise Date shall be the first date on which there is
compliance with all the terms and conditions of subparagraphs A and B above
applicable to such exercise.
D. As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of the Optionee (or any other person or
persons exercising this option) a certificate or certificates representing the
Option Shares purchased and paid for in accordance herewith.
E. In no event may this option be exercised for any fractional
share.
10. STOCKHOLDER RIGHTS. The holder of this option shall not
have any of the rights of a stockholder with respect to the Option Shares until
such individual shall have exercised this option, paid the Option Price for the
purchased shares and been issued one or more certificates for the purchased
shares.
6.
<PAGE> 7
11. NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the Corporation's
right to remove the Optionee from the Board at any time in accordance with the
provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
option and the issuance of the Option Shares upon such exercise shall be subject
to compliance by the Corporation and the Optionee with all applicable
requirements of law relating thereto and with all applicable regulations of any
stock exchange (or the Nasdaq National Market System, if applicable) on which
shares of the Corporation's Common Stock are at the time listed for trading.
13. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraph 3 or 7, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of Optionee and the successors and assigns of
the Corporation.
14. DISCHARGE OF LIABILITY. The inability of the Corporation
to obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any Common Stock
pursuant to this option shall relieve the Corporation of any liability with
respect to the non-issuance or sale of the Common Stock as to which such
approval shall not have been obtained. However, the Corporation shall use its
best efforts to obtain all such applicable approvals.
15. NOTICES. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation in care of the Stock Administrator at the Corporate
Offices at 275 South Hillview Drive, Milpitas, California 95035. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on the
Notice of Grant. All notices shall be deemed to have been given or delivered
upon personal delivery or upon deposit in the U.S. mail, postage prepaid and
properly addressed to the party to be notified.
16. CONSTRUCTION/GOVERNING LAW. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the Plan.
The interpretation, performance, and enforcement of this Agreement shall be
governed by the laws of the State of California.
7.
