As filed with the Securities and Exchange Commission on July 15, 1997
Registration No. 333-_________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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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)
1704 Automation Parkway, San Jose, CA 95131
(Address of principal executive offices) (Zip Code)
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KOMAG, INCORPORATED RESTATED 1987 STOCK OPTION PLAN
KOMAG, INCORPORATED 1988 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the Plan)
--------------
STEPHEN C. JOHNSON
President and Chief Executive Officer
KOMAG, INCORPORATED
1704 Automation Parkway, San Jose, CA 95131
(Name and address of agent for service)
(408) 576-2000
(Telephone number, including area code, of agent for service)
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CALCULATION OF REGISTRATION FEE
================================================================================
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
---------- ------------- ------------ -------- ---
Options to Purchase Common 2,500,000 N/A N/A N/A
Stock, $0.01 per value
(Restated 1987 Stock
Option Plan)
Common Stock, $0.01 par 2,500,000 shares $18.00 $45,000,000 $13,636.00
value (Restated 1987
Stock Option Plan)
Common Stock, $0.01 par 750,000 shares $18.00 $13,500,000 $ 4,091.00
value (1988 Employee
Stock Purchase Plan)
Aggregate filing fee $17,727.00
================================================================================
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Komag, Incorporated
Restated 1987 Stock Option Plan and the 1988 Employee Stock Purchase
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 outstanding
shares of Common Stock of Komag, Incorporated.
(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 July 10, 1997, as reported on the Nasdaq National
Market.
<PAGE>
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Certain Documents by Reference
Komag, Inc. (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 29, 1996, filed with the SEC on March 7,
1997;
b. The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 30, 1997, filed with the SEC on April 30,
1997; and
c. The Registrant's Registration Statement No. 00-016852 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 Registrant 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 resulting from any transaction 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)
<PAGE>
acted in a manner involving intentional misconduct or a knowing violation of law
or, in failing to act, acted in a 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 actions 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
Not applicable.
Item 8. Exhibits
Exhibit Number Exhibit
-------------- -------
4 Instruments Defining Rights of Stockholders. Reference is made
to Registrant's Registration Statement No. 00-016852 on Form
8-A which is incorporated herein by reference pursuant to Item
3.c.
5 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors - Ernst & Young LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 Komag, Incorporated Restated 1987 Stock Option Plan.
II-2
<PAGE>
99.2* Form of Notice of Grant of Stock Option.
99.3* Form of Stock Option Agreement (Employees/Consultants).
99.4* Form of Stock Option Agreement (Officers).
99.5** Form of Notice of Non-Employee Director Automatic Option
Grant.
99.6 Form of Non-Employee Director Stock Option Agreement (Initial
Option Grant).
99.7 Form of Non-Employee Director Stock Option Agreement (Annual
Grant).
99.8*** Komag, Incorporated 1988 Employee Stock Purchase Plan.
99.9 Plan Amendment to Komag, Incorporated 1988 Employee Stock
Purchase Plan effective as of January 22, 1997.
99.10*** Form of Enrollment Form to be generally used in connection
with Komag, Incorporated 1988 Employee Stock Purchase Plan.
*Incorporated by reference to Exhibits 28.4, 28.5 and 28.7, respectively, to
Registrant's Registration Statement No. 33-53432 on Form S-8 filed with the SEC
on October 16, 1992.
** Incorporated by reference to Exhibit 99.5 to Registrant's Registration
Statement No. 333-06081 on Form S-8 filed with the SEC on June 14, 1996.
*** Incorporated by reference to Exhibits 28.1 and 28.2, respectively, to
Registrant's Registration Statement No. 33-53432 on Form S-8 filed with the SEC
on October 16, 1992.
II-3
<PAGE>
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
either the Restated 1987 Stock Option Plan or the 1988 Employee Stock Purchase
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 indemnity provisions summarized in 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-4
<PAGE>
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 San Jose, State of California, on this 14th day
of July, 1997.
KOMAG, INCORPORATED
By: _____________________________________
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.
Signatures Title Date
- ---------- ----- ----
- ------------------------ President, Chief Executive Officer July 14, 1997
Stephen C. Johnson and Director (Principal Executive
Officer)
II-5
<PAGE>
Signatures Title Date
- ---------- ----- ----
- ------------------------ Chairman of the Board July 14, 1997
Tu Chen
- ------------------------ Senior Vice President, July 14, 1997
William L. Potts, Jr. Chief Financial Officer and
Secretary (Principal Financial
and Accounting Officer)
- ------------------------ Director July 14, 1997
Craig R. Barrett
- ------------------------ Director July 14, 1997
Chris A. Eyre
- ------------------------ Director July 14, 1997
Irwin Federman
- ------------------------ Director July 14, 1997
George A. Neil
- ------------------------ Director July 14, 1997
Max Palevsky
- ------------------------ Director July 14, 1997
Anthony Sun
- ------------------------ Director July 14, 1997
Masayoshi Takebayashi
II-6
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
KOMAG, INCORPORATED
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Exhibit
-------------- -------
4 Instruments Defining Rights of Stockholders. Reference is made
to Registrant's Registration Statement No. 00-016852 on Form
8-A which is incorporated herein by reference pursuant to Item
3.c.
5 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Auditors - Ernst & Young LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-5 of this
Registration Statement.
99.1 Komag, Incorporated Restated 1987 Stock Option Plan.
99.2* Form of Notice of Grant of Stock Option.
99.3* Form of Stock Option Agreement (Employees/Consultants).
99.4* Form of Stock Option Agreement (Officers).
99.5** Form of Notice of Non-Employee Director Automatic Option
Grant.
99.6 Form of Non-Employee Director Stock Option Agreement (Initial
Option Grant).
99.7 Form of Non-Employee Director Stock Option Agreement (Annual
Grant).
99.8*** Komag, Incorporated 1988 Employee Stock Purchase Plan.
99.9 Plan Amendment to Komag, Incorporated 1988 Employee Stock
Purchase Plan effective as of January 22, 1997.
99.10*** Form of Enrollment Form to be generally used in connection
with Komag, Incorporated 1988 Employee Stock Purchase Plan.
*Incorporated by reference to Exhibits 28.4, 28.5 and 28.7, respectively, to
Registrant's Registration Statement No. 33-53432 on Form S-8 filed with the SEC
on October 16, 1992.
** Incorporated by reference to Exhibit 99.5 to Registrant's Registration
Statement No. 333-06081 on Form S-8 filed with the SEC on June 14, 1996.
*** Incorporated by reference to Exhibits 28.1 and 28.2, respectively, to
Registrant's Registration Statement No. 33-53432 on Form S-8 filed with the SEC
on October 16, 1992.
July 10, 1997
Komag, Incorporated
1704 Automation Parkway
San Jose, California 95131
Re: Komag, Incorporated (the "Company") --
Registration Statement for Offering of 3,250,000 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 an aggregate of
3,250,000 shares of Common Stock of Komag, Incorporated (the "Company")
authorized for issuance under the Company's Restated 1987 Stock Option Plan and
the 1988 Employee Stock Purchase Plan (together, the "Plans"). We advise you
that, in our opinion, when such shares have been issued and sold pursuant to the
applicable provisions of the Plans and in accordance with the Registration
Statement, such shares will be validly issued, fully paid and non-assessable
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
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Komag, Incorporated Restated 1987 Stock Option Plan and
the Komag, Incorporated 1988 Employee Stock Purchase Plan of our report dated
January 16, 1997, 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 29, 1996, filed with the Securities and Exchange
Commission.
Ernst & Young LLP
San Jose, California
July 11, 1997
KOMAG, INCORPORATED
RESTATED 1987 STOCK OPTION PLAN
(Amended and Restated through March 31, 1997)
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 the Discretionary Option Grant
Program to officers and employee-directors of the
<PAGE>
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. 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.
C. 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),
- non-employee Board members who render valuable services to
the Corporation (or its parent or subsidiary corporations), and
- those independent contractors and consultants who provide
valuable services to the Corporation (or its parent or subsidiary
corporations).
B. Non-employee Board members shall also be eligible to
receive automatic option grants under the provisions of Article Three.
2.
<PAGE>
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 ("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 which may be issued over the term of the Plan shall not exceed
18,140,000* shares (subject to adjustment from time to time in accordance with
paragraph V.D of this Article One). Such share reserve includes an increase of
2,500,000 shares that was adopted by the Board in March 1997, subject to
stockholder approval at the 1997 Annual Meeting.
- --------
*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 10,136,696 shares of Common Stock
(post-split) be issuable under the Plan after March 17, 1997, subject to
adjustment under paragraph V.D of this Article One in the event of certain
changes in the Corporation's capital structure.
3.
<PAGE>
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. In addition, unvested shares issued under the Plan and subsequently
repurchased by the Corporation at the original exercise price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants under the Plan. However, shares subject to any option
or portion thereof cancelled in accordance with paragraph IV 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.
4.
<PAGE>
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>
(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.
6.
<PAGE>
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 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.
C. Limited Transferability of Options.
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. However, the Plan Administrator may
grant one or more Non-Statutory Options under this Article Two which may, in
connection with the optionee's estate plan, be assigned in whole or in part
during the optionee's lifetime to one or more members of the optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
D. 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.D.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.
7.
<PAGE>
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.D.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 terminate 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.D.1 or I.D.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.D (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.
8.
<PAGE>
- 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:
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.
9.
<PAGE>
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.
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 more than 10% 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,
10.
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(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.
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.
11.
<PAGE>
IV. STOCK APPRECIATION RIGHTS
A. Officers and non-employee Board members 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 under this Article
Two. 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 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.
The Plan Administrator shall pre-approve, at the time the limited right is
granted, the subsequent exercise of that right in accordance with the terms of
the grant and the provisions of this Section IV. No additional approval of the
Plan Administrator or the Board shall be required at the time of the actual
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 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) 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.
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.
12.
<PAGE>
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.
13.
<PAGE>
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
I. ELIGIBILITY
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.
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 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 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.
14.
<PAGE>
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 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.
15.
<PAGE>
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.
F. Limited Transferability of Options. During the lifetime of
the optionee, the option shall only be exercisable by the optionee and shall not
be assignable or transferable by the optionee otherwise than by will or the by
the laws of descent and distribution following the optionee's death. However,
each option granted under this Automatic Option Grant Program on or after the
date of the 1997 Annual Stockholders
16.
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Meeting shall be assignable in whole or in part by the optionee during his or
her lifetime, but only to the extent such assignment is made in connection with
the optionee's estate plan to one or more members of the optionee's immediate
family or to a trust established exclusively for one or more such family
members. The assigned portion may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to the assignment. The
terms applicable to the assigned portion shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the Plan Administrator may deem
appropriate.
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.
17.
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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 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; 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 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
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(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. Stockholder approval of this 1997
restatement of the Plan shall constitute pre-approval of each option
subsequently granted with such an automatic cancellation provision and the
subsequent cancellation of that option in accordance with the terms and
provisions of this paragraph III.C. No additional approval of the Plan
Administrator or the Board shall be required at the time of the actual option
cancellation and cash distribution.
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.
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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, 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. In addition, certain amendments may require
stockholder approval pursuant to applicable laws or regulations.
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; 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.
20.
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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, (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 clause (iii) and (iv) amendments were approved
by the stockholders at the 1996 Annual Meeting.
D. In March 1997 the Board amended and restated the Plan to
effect the following revisions: (i) increase the number of shares of Common
Stock reserved for issuance over the term of the Plan by an additional 2,500,000
shares, (ii) render the non-employee Board members eligible to receive option
grants under the Discretionary Option Grant Program, (iii) allow unvested shares
issued under the Plan and subsequently repurchased by the Corporation at the
option exercise price or issue price paid per share to be reissued under the
Plan, (iv) remove certain restrictions on the eligibility of non-employee Board
members to serve as Plan Administrator and (v) effect a series of additional
changes to the provisions of the Plan (including the stockholder approval
requirements) in order to take advantage of the recent amendments to Rule 16b-3
of the Securities Exchange Act of 1934, as amended, which exempts certain
officer and director transactions under the Plan from the short-swing liability
provisions of the federal securities laws. The 1997 restatement of the Plan is
subject to stockholder approval at the 1997 Annual Meeting.
E. 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.
F. 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
21.
<PAGE>
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.
G. 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.
H. 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.
22.
<PAGE>
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.
23.
<PAGE>
EXHIBIT A
Non-Employee Director
Non-Statutory Stock Option Agreement
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 may, in connection
with optionee's estate plan, be assigned in whole or in part during the
optionee's lifetime to one or more members of the optionee's immediate family or
to a trust established exclusively for one or more such family members. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The
<PAGE>
terms applicable to the assigned portion shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the administrator of the Plan may deem
appropriate. Should the Optionee die while holding this option, then this option
shall be transferred in accordance with Optionee's will or the laws of
inheritance.
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
2.
<PAGE>
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)-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>
(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 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 Securities Exchange Act of
1934) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's
4.
<PAGE>
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders; 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 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.
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:
5.
<PAGE>
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 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.
6.
<PAGE>
(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.
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, if applicable) on which shares of
the Corporation's Common Stock are at the time listed for trading.
7.
<PAGE>
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 1704 Automation Parkway, San Jose, California 95131. 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.
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 may, in connection
with optionee's estate plan, be assigned in whole or in part during the
optionee's lifetime to one or more members of the optionee's immediate family or
to a trust established exclusively for one or more such family members. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The
<PAGE>
terms applicable to the assigned portion shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the administrator of the Plan may deem
appropriate. Should the Optionee die while holding this option, then this option
shall be transferred in accordance with Optionee's will or the laws of
inheritance.
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.
2.
<PAGE>
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,
(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).
3.
<PAGE>
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 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 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 made directly to the
Corporation's stockholders; 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.
4.
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A Hostile Take-Over shall be deemed to occur in the
event 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.
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
5.
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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 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.
6.
<PAGE>
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.
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 1704 Automation Parkway, San Jose, California 95131. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below
7.
<PAGE>
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.
KOMAG, INCORPORATED
1988 EMPLOYEE STOCK PURCHASE PLAN
PLAN AMENDMENT
The Komag, Incorporated 1988 Employee Stock Purchase Plan, as
restated June 29, 1992 and amended as of June 28, 1996 (the "Purchase Plan"), is
hereby amended, effective as of January 22, 1997, as follows:
1. Paragraph (a) of Article VI is hereby amended to read as
follows:
(a) The Stock purchasable by Participants under the
Plan shall, solely in the Board's discretion, be made available from
either authorized but unissued Stock or from reacquired Stock,
including shares of Stock purchased on the open market. The total
number of shares of Stock which may be issued under the Plan shall not
exceed 3,550,000 shares1 (subject to adjustment under Section VI(b)).
2. Paragraph (c) of Article XI is hereby amended to read as
follows:
(c) The Plan shall terminate upon the earlier of (i)
December 31, 20012 or (ii) the date on which all shares available for
issuance under the Plan shall have been sold pursuant to purchase
rights exercised under the Plan.
3. Except as modified by this Plan Amendment, all the terms
and provisions of the Plan (as previously restated and amended) shall continue
in full force and effect.
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1 Includes a 750,000-share increase authorized by the Board on January
22, 1997, subject to stockholder approval at the 1997 Annual Meeting. No shares
shall be issued on the basis of such increase unless such stockholder approval
is obtained.
2 The three-year extension of the term of the Purchase Plan was
authorized by the Board on January 22, 1997, subject to stockholder approval at
the 1997 Annual Meeting.
