As filed with the Securities and Exchange Commission on August 5, 1999
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------
KOMAG, INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 94-2914864
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1704 Automation Parkway, San Jose, CA 95131
(Address of principal executive offices) (Zip Code)
----------
KOMAG, INCORPORATED 1988 EMPLOYEE STOCK PURCHASE PLAN
KOMAG, INCORPORATED 1997 SUPPLEMENTAL STOCK OPTION 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)
----------
<TABLE>
CALCULATION OF REGISTRATION FEE
================================================================================================================
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
---------- ------------- ------------ -------- ---
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value 5,350,000 $3.6875 $19,728,125 $5,484.42
================================================================================================================
<FN>
(1) This Registration Statement shall also cover any additional shares of Common Stock which become
issuable under the Registrant's Amended and Restated 1988 Employee Stock Purchase Plan by reason of any
stock dividend, stock split, recapitalization or any other similar transaction effected without the
Registrant's receipt of consideration which results in an increase in the number of outstanding shares
of the Registrant's Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the Securities Act of 1933, as
amended, on the basis of the average of the high and low sales price per share of the Registrant's
Common Stock on August 2, 1999, as reported on the Nasdaq National Market.
</FN>
</TABLE>
<PAGE>
PART II
Information Required in the Registration Statement
Item 3. Incorporation of Certain Documents by Reference
Komag, Incorporated (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 January 3, 1998;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended April 4, 1999 and the fiscal quarter ended July
4, 1999; and
(c) The description of the Registrant's common stock, which is
incorporated by reference to the Registrant's Registration
Statement on Form 8-A filed with the SEC on April 29, 1988.
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 such 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) 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
<PAGE>
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 such person 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 on the past of such person, unless the court, in its discretion,
feels that in the light of all the circumstances indemnification should apply.
To the extent any person 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
See exhibit index.
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
<PAGE>
time shall be deemed to be the initial bona fide offering thereof; and (3) to
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold upon the termination of the 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.
<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 5th day
of August, 1999.
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.
<TABLE>
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.
<CAPTION>
Signatures Title Date
- ---------- ----- ----
<S> <C> <C>
- -------------------------- President, Chief Executive Officer August 4, 1999
Stephen C. Johnson and Director (Principal Executive
Officer)
<PAGE>
Signatures Title Date
- ---------- ----- ----
- -------------------------- Chairman of the Board August 4, 1999
Tu Chen
- -------------------------- Senior Vice President, August 4, 1999
William L. Potts, Jr. Chief Financial Officer and
Secretary (Principal Financial
and Accounting Officer)
- -------------------------- Director August 4, 1999
Chris A. Eyre
- -------------------------- Director August 4, 1999
Irwin Federman
- -------------------------- Director August 4, 1999
George A. Neil
- -------------------------- Director August 4, 1999
Michael R. Splinter
- -------------------------- Director August 4, 1999
Anthony Sun
- -------------------------- Director August 4, 1999
Masayoshi Takebayashi
</TABLE>
<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
-------------- -------
5.1 Opinion of Wilson Sonsini Goodrich and Rosati
23.1 Consent of Ernst & Young LLP
23.2 Consent of Chuo Audit Corporation
23.3 Consent of Wilson Sonsini Goodrich and Rosati (included in
Exhibit 5.1)
24 Power of Attorney (see signature page)
99.1 Komag, Incorporated 1988 Employee Stock Purchase Plan (as
amended and restated on February 4, 1999)
99.2* Form of Enrollment Form to be generally used in connection
with Komag, Incorporated 1988 Employee Stock Purchase
Plan.
99.3 Komag, Incorporated 1997 Supplemental Stock Option Plan
(as amended on June 12, 1998).
99.4 Notice of Grant generally used in connection with the 1997
Supplemental Stock Option Plan.
99.5 Form of Stock Option Agreement generally used in
connection with the 1997 Supplemental Stock Option Plan.
* 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 .
EXHIBIT 5.1
Opinion of Wilson, Sonsini, Goodrich and Rosati
[Wilson Sonsini Goodrich & Rosati letterhead]
August 4, 1999
Komag, Incorporated
1704 Automation Parkway
San Jose, CA 95131
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by you with
the Securities and Exchange Commission on or about August 5th, 1999 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of an aggregate of 5,350,000 shares of
Common Stock, no par value (the "Shares"), reserved for issuance pursuant to the
Komag, Incorporated 1998 Employee Stock Purchase Plan and the Komag,
Incorporated 1997 Supplemental Stock Option Plan (together, the "Plans"). As
your legal counsel, we have examined the proceedings taken and are familiar with
the proceedings proposed to be taken by you in connection with the sale and
issuance of the Shares under the Plans.
It is our opinion that the Shares will be, when issued and sold in the
manner referred to in the Plans, legally and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement and any subsequent amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Komag, Incorporated 1988 Employee Stock Purchase Plan,
and the Komag, Incorporated 1997 Supplemental Stock Option Plan of our report
dated January 22, 1999, with respect to the consolidated financial statements
and schedule of Komag, Incorporated included in its Annual Report (Form 10-K)
for the year ended January 3, 1999, filed with the Securities and Exchange
Commission.
ERNST & YOUNG, LLP
San Jose, California
August 5, 1999
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
[Chuo Audit Corporation letterhead]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Komag, Incorporated on Form S-8 pertaining to the Komag, Incorporated 1988
Restated Employee Stock Purchase Plan and the 1997 Supplemental Stock Option
Plan filed on or about August 4, 1999 as of our report dated January 22, 1999 on
our audits of the consolidated financial statements of Asahi Komag Co., Ltd. As
of December 31, 1998 and 1997, and for the years ended December 31, 1998, 1997
and 1996, which report is included in the Annual Report on Form 10-K of Komag,
Incorporated for the year ended December 31, 1998.
Chuo Audit Corporation
Tokyo, Japan
July 30, 1999
EXHIBIT 23.3
consent of Wilson, Sonsini, Goodrich and Rosati
Included in Exhibit 5.1
EXHIBIT 99.1
1988 Employee Stock Purchase Plan
(As amended on February 4, 1999)
KOMAG, INCORPORATED Exhibit 99.1
1988 EMPLOYEE STOCK PURCHASE PLAN
(Restated June 29, 1992 and Amended January 27, 1994,
January 22, 1997, January 30, 1998 and February 4, 1999)
I. PURPOSE
The Komag, Incorporated 1988 Employee Stock Purchase Plan (the
"Plan") is intended to provide eligible employees of the Company and one or more
of its Corporate Affiliates with the opportunity to acquire a proprietary
interest in the Company through participation in a plan designed to qualify as
an employee stock purchase plan under Section 423 of the Internal Revenue Code
(the "Code").
II. DEFINITIONS
For purposes of administration of the Plan, the following
terms shall have the meanings indicated:
Base Compensation means (i) the regular base earnings paid to
a Participant by one or more Participating Companies, before deduction for any
contributions made on the Participant's behalf to any Code Section 401(k) Plan
maintained by the Company or any Corporate Affiliate. The calculation of Base
Compensation may also include, at the discretion of the Plan Administrator
exercisable prior to the start of any purchase period, bonuses, overtime pay,
shift differentials and other differentials. Base Compensation shall be
calculated on the basis of equivalent bi-weekly straight-time hours (up to a
maximum of 79.50 hours for three-day shift employees and 80.00 hours for all
other employees) multiplied by straight-time rate. In no event shall Base
Compensation include any profit-sharing or other non-salary deferral
contributions made on the Participant's behalf pursuant to any qualified
profit-sharing plan under Code Section 401(a).
Board means the Board of Directors of the Company.
Company means Komag, Incorporated, a Delaware corporation, and
any corporate successor to all or substantially all of the assets or voting
stock of Komag, Incorporated, which shall by appropriate action adopt the Plan.
Corporate Affiliate means any company which is either the
parent corporation or a subsidiary corporation of the Company (as determined in
accordance with Section 424 of the Code), including any parent or subsidiary
corporation which becomes such after the Effective Date.
Effective Date means, with respect to the 1992 plan
restatement, June 29, 1992. However, should any Corporate Affiliate become a
Participating Company in the Plan after such applicable date, then such entity
shall designate a separate Effective Date with respect to its
employee-Participants.
<PAGE>
Employee means any person who is regularly engaged, for a
period of more than 20 hours per week for more than 5 months per calendar year,
in the rendition of personal services to the Company or any other Participating
Company for earnings considered wages under Section 3121(a) of the Code.
Fiscal Quarter means a three-month period corresponding to a
fiscal quarter of the Company, based on the Company's 52-53 week fiscal year
ending on the Sunday closest to December 31st of each year.
Participant means any Employee of a Participating Company
actively participating in the Plan.
Participating Company means the Company and such Corporate
Affiliate or Affiliates as may be designated from time to time by the Board. The
Participating Companies in the Plan, as of the Effective Date, are listed in
attached Schedule A.
Stock means shares of the common stock of the Company.
III. ADMINISTRATION
(a) The Plan shall be administered by a committee (the
"Committee") comprised of at least two non-employee members of the Board
appointed from time to time by the Board. The Committee as Plan Administrator
shall have full authority to administer the Plan, including authority to
interpret and construe any provision of the Plan and to adopt such rules and
regulations for administering the Plan as it may deem necessary in order to
comply with the requirements of Code Section 423. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan.
(b) No member of the Committee while serving as such shall be
eligible to participate in the Plan.
IV. PURCHASE PERIODS
(a) Stock shall be offered for purchase under the Plan through
a series of successive purchase periods until such time as (i) the maximum
number of shares of Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated in accordance with
Article X or Article XI.
(b) The Plan shall be implemented in a series of successive
purchase periods, each of such duration (not to exceed six months) as determined
by the Plan Administrator prior to the start date of the purchase period.
Purchase periods will start, at the Plan Administrator's discretion, either on
the first day or the first Monday of each successive Fiscal Quarter or each
alternate successive Fiscal Quarter. Accordingly, either four (4) or two (2)
separate purchase periods may commence per Fiscal Year.
(c) The Participant shall be granted a separate purchase right
for each purchase period in which he/she participates. The purchase right shall
be granted on the first day of the purchase period and shall be automatically
exercised in (i) successive quarterly installments on the last day of each
Fiscal Quarter such purchase right remains outstanding, in the case of a
purchase period in which purchases are effected quarterly, or (ii) successive
semi-annual installments on the last day of each alternate Fiscal Quarter such
purchase right remains outstanding, in the case of a purchase period in which
purchases are effected semi-annually.
(d) An Employee may participate in only one purchase period at
a time. Accordingly, an Employee who wishes to join a new purchase period must
withdraw from the current purchase period in which he/she is participating and
must also enroll in the new purchase period prior to the commencement date for
that period.
<PAGE>
(e) The acquisition of Stock through participation in the Plan
for any purchase period shall neither limit nor require the acquisition of Stock
by the Participant in any subsequent purchase period. However, the acquisition
of Stock through participation in the Plan for any purchase period shall be
counted toward the limitations on the number of purchasable shares as provided
in Section VII(b) and the accrual limitations as provided in Section VIII.
(f) Under no circumstances shall any purchase rights granted
under the Plan be exercised, nor shall any shares of Stock be issued hereunder,
until such time as (i) the Plan shall have been approved by the Company's
shareholders and (ii) the Company shall have complied with all applicable
requirements of the Securities Act of 1933 (as amended), all applicable listing
requirements of any securities exchange on which the Stock is listed and all
other applicable requirements established by law or regulation.
V. ELIGIBILITY AND PARTICIPATION
(a) Every Employee of a Participating Company shall be
eligible to participate in the Plan on the first day of the first purchase
period following the Employee's commencement of service with the Company or any
Corporate Affiliate, but in no event shall participation commence prior to the
Effective Date.
(b) In order to participate in the Plan for a particular
purchase period, the Employee must complete the enrollment forms prescribed by
the Plan Administrator (including a purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) prior to the commencement date of the purchase period. Such
enrollment shall be effective for subsequent, but not overlapping, purchase
periods, unless the Employee notifies the Plan Administrator (or its designate)
to the contrary prior to the commencement date of any such subsequent purchase
period.
(c) The payroll deduction authorized by a Participant for
purposes of acquiring Stock under the Plan may be any multiple of 1% of the Base
Compensation paid to the Participant during the relevant purchase period, up to
a maximum of 10%. The deduction rate so authorized shall continue in effect for
the entire purchase period and for each subsequent purchase period, unless the
Participant shall, prior to the end of the purchase period for which the
purchase right is in effect, reduce the rate by filing the appropriate form with
the Plan Administrator (or its designate). The reduced rate shall become
effective as soon as practicable following the filing of such form. Each
Participant shall be permitted such a rate reduction only two (2) times in each
purchase period. The reduced rate shall continue in effect for the entire
purchase period and for each subsequent purchase period, unless the Participant
shall, prior to the commencement of any subsequent purchase period designate a
different rate (up to the 10% maximum) by filing the appropriate form with the
Plan Administrator (or its designate). The new rate shall become effective for
the first purchase period commencing after the filing of such form. Payroll
deductions, however, will automatically cease upon the termination of the
Participant's purchase right in accordance with Section VII(d) or (e) below.
VI. STOCK SUBJECT TO PLAN
(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 7,400,000 shares (subject to
adjustment under Section VI(b)). Such share reserve includes the 2,550,000-share
increase authorized by the Board on February 4, 1999, subject to stockholder
approval at the 1999 Annual Meeting.
(b) In the event any change is made to the Stock purchasable
under the Plan by reason of any recapitalization, stock dividend, stock split,
combination of shares or other change affecting the outstanding common stock of
the Company as a class without receipt of consideration, then appropriate
adjustments shall be made by the
<PAGE>
Plan Administrator to the class and maximum number of shares purchasable under
the Plan, the class and maximum number of shares purchasable per Participant
under any purchase right outstanding at the time or purchasable per Participant
over the term of the Plan, and the class and number of shares and the price per
share of the Stock subject to outstanding purchase rights held by Participants
under the Plan.
VII. PURCHASE RIGHTS
An Employee who participates in the Plan for a particular
purchase period shall have the right to purchase Stock on the purchase dates
designated by the Plan Administrator for such purchase period upon the terms and
conditions set forth below and shall execute a purchase agreement embodying such
terms and conditions and such other provisions (not inconsistent with the Plan)
as the Plan Administrator may deem advisable.
(a) Purchase Price. The purchase price per share shall be the
lesser of (i) 85% of the fair market value of a share of Stock on the date on
which the purchase right is granted or (ii) 85% of the fair market value of a
share of Stock on the date the purchase right is exercised. For purposes of
determining such fair market value (and for all other valuation purposes under
the Plan), the fair market value per share of Stock on any date shall be
determined in accordance with the following provisions:
(i) If the Stock is not at
the time listed or admitted to trading on
any stock exchange but is traded on the
Nasdaq National Market, the fair market
value per share shall be the closing
selling price per share of Stock on the
date in question, as such prices are
reported by the National Association of
Securities Dealers on the Nasdaq National
Market. If there is no reported closing
selling price on the date in question,
then the closing selling on the last
preceding date for which such quotation
exists shall be determinative of fair
market value.
(ii) If the Stock is at the
time listed or admitted to trading on any
stock exchange, then the fair market value
shall be the closing selling price per
share of Stock on the date in question on
the stock exchange determined by the Plan
Administrator to be the primary market for
the Stock, as such price is officially
quoted on such exchange. If there is no
reported sale of Stock on such exchange on
the date in question, then the fair market
value shall be the closing selling price
on the exchange on the last preceding date
for which such quotation exists.
(b) Number of Purchasable Shares. The number of shares
purchasable by a Participant on any particular purchase date shall be the number
of whole shares obtained by dividing the amount collected from the Participant
through payroll deductions during the quarterly or semi-annual period beginning
with the start of the purchase period or the most recent purchase date in the
same purchase period (whichever is applicable), together with any amount carried
over from the preceding purchase date in the same purchase period pursuant to
the provisions of Section VII(f), by the purchase price in effect for such
purchase date. However, the maximum number of shares purchasable by the
Participant on any purchase date shall not exceed 3,000 shares, in the case of a
purchase period in which purchases are effected quarterly, or 6,000 shares, in
the case of a purchase period in which purchases are effected semi-annually
(subject in either instance to adjustment under Section VI(b)). In addition, the
maximum number of shares for which purchase rights may in the aggregate be
granted to any individual who is subject to the short-swing profit restrictions
of the Federal securities laws shall not exceed 50,000 shares (subject to
adjustment under Section VI(b)) over the term of the Plan. Accordingly, no such
officer or director shall be eligible to receive purchase rights for any
purchase period if the number of shares which would otherwise be purchasable by
such individual for that purchase period would result in the issuance to such
individual of shares of Stock in excess of the maximum number of shares
purchasable in the aggregate by such individual over the term of the Plan. Each
of the foregoing
<PAGE>
share-limitations has been adjusted to reflect the two-for-one forward split of
the Stock effected on December 21, 1995.
Under no circumstances shall purchase rights be granted under
the Plan to any Employee if such Employee would, immediately after the grant,
own (within the meaning of Section 424(d) of the Code), or hold outstanding
options or other rights to purchase, stock possessing 5% or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Corporate Affiliates.
(c) Payment. Payment for Stock purchased under the Plan shall
be effected by means of the Participant's authorized payroll deductions. Such
deductions shall begin on the first pay day coincident with or immediately
following the commencement date of the relevant purchase period and shall
terminate with the pay day ending with or immediately prior to the last day of
the purchase period. The amounts so collected shall be credited to the
Participant's individual account under the Plan, but no interest shall be paid
on the balance from time to time outstanding in the account. The amounts
collected from a Participant may be commingled with the general assets of the
Company and may be used for general corporate purposes.
(d) Termination of Purchase Rights.
(i) A Participant may, prior to any purchase date,
terminate his/her outstanding purchase right under the Plan by filing the
prescribed notification form with the Plan Administrator (or its designate). The
Company will then refund all sums previously collected from the Participant and
not previously applied to the purchase of Stock during the purchase period, and
no further amounts will be collected from the Participant with respect to the
terminated purchase right.
(ii) The termination shall be irrevocable with
respect to the particular purchase period to which it pertains and shall also
require the Participant to re-enroll in the Plan (by making a timely filing of a
new purchase agreement and payroll deduction authorization) if the Participant
wishes to resume participation in a subsequent purchase period.
(e) Termination of Employment. If a Participant ceases
Employee status during any purchase period, then the Participant's outstanding
purchase right under the Plan shall immediately terminate and all sums
previously collected from the Participant and not previously applied to the
purchase of stock during such purchase period shall be promptly refunded.
However, should the Participant die or become permanently disabled while in
Employee status, then the Participant or the person or persons to whom the
rights of the deceased Participant under the Plan are transferred by will or by
the laws of descent and distribution (the "successor") will have the election,
exercisable at any time prior to the purchase date for the quarterly or
semi-annual period in which the Participant dies or becomes permanently
disabled, to (i) withdraw all the funds in the Participant's payroll account at
the time of his/her cessation of Employee status or (ii) have such funds applied
to the purchase of shares of Stock on the next purchase date. In no event,
however, shall any further payroll deductions be added to the Participant's
account following his/her cessation of Employee status.
For purposes of the Plan: (a) a Participant shall be
considered to be an Employee for so long as such Participant remains in the
employ of the Company or any other Participating Company under the Plan and (b)
a Participant shall be deemed to be permanently disabled if he/she is unable, by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of at least twelve (12) months,
to engage in any substantial gainful employment.
(f) Stock Purchase. Outstanding purchase rights shall be
automatically exercised in a series of successive installments as provided in
Section IV(c). The exercise shall be effected by applying the amount credited to
the Participant's account on the last date of the Fiscal Quarter, in the case of
a purchase period in which purchases are
<PAGE>
effected quarterly, or the last date of the alternate Fiscal Quarter, in the
case of a purchase period in which purchases are effected semi-annually, to the
purchase of whole shares of Stock (subject to the limitations on the maximum
number of purchasable shares set forth in Section VII(b)) at the purchase price
in effect for such purchase date. Any amount remaining in the Participant's
account after such purchase shall be held for the purchase of Stock on the next
quarterly or semi-annual purchase date within the purchase period; provided,
however, that any amount not applied to the purchase of Stock at the end of a
purchase period shall be refunded promptly after the close of the purchase
period, and any amount not applied to the purchase of stock by reason of the
Section VII(b) limitations on the maximum number of purchasable shares shall be
refunded promptly after the quarterly or semi-annual purchase date.
(g) Proration of Purchase Rights. Should the total number of
shares of Stock which are to be purchased pursuant to outstanding purchase
rights on any particular date exceed the number of shares then available for
issuance under the Plan, the Plan Administrator shall make a pro-rata allocation
of the available shares on a uniform and nondiscriminatory basis, and any
amounts credited to the accounts of Participants shall, to the extent not
applied to the purchase of Stock, be refunded to the Participants.
(h) Rights as Shareholder. A Participant shall have no rights
as a shareholder with respect to shares covered by the purchase rights granted
to the Participant under the Plan until the shares are actually purchased on the
Participant's behalf in accordance with Section VII(f). No adjustments shall be
made for dividends, distributions or other rights for which the record date is
prior to the date of such purchase.
A Participant shall be entitled to receive, as soon as
practicable after the date of each purchase, stock certificates for the number
of shares purchased on the Participant's behalf. Such certificate may, upon the
Participant's request, be issued in the names of the Participant and his/her
spouse as community property or as joint tenants with right of survivorship.
In lieu of delivering a stock certificate to each Participant,
the Plan Administrator may, in its discretion, implement a designated broker
program and direct the Company to issue a single stock certificate to a broker
designated by the Plan Administrator. Such designated broker shall establish an
account for each Participant in the Plan and shall effect transfers and sales
from such account at the direction of the Participant. To facilitate the
designated broker program, the Plan Administrator may require, as a condition to
participation in the Plan, that a Participant agree to the issuance of his or
her stock certificates directly to the designated broker.
(i) Assignability. No purchase rights granted under the Plan
shall be assignable or transferable by a Participant except by will or by the
laws of descent and distribution, and the purchase rights shall, during the
lifetime of the Participant, be exercisable only by such Participant.
(j) Merger or Liquidation of Company. In the event the Company
or its shareholders enter into an agreement to dispose of all or substantially
all of the assets or outstanding capital stock of the Company by means of a
sale, merger or reorganization in which the Company will not be the surviving
corporation (other than a reorganization effected primarily to change the State
in which the Company is incorporated) or in the event the Company is liquidated,
then all outstanding purchase rights under the Plan shall automatically be
exercised immediately prior to such sale, merger, reorganization or liquidation
by applying all sums previously collected from Participants pursuant to their
payroll deductions in effect for such rights to the purchase of whole shares of
Common Stock, subject, however, to the applicable limitations of Section VII(b).
VIII. ACCRUAL LIMITATIONS
(a) No Participant shall be entitled to accrue rights to
acquire Stock pursuant to any purchase right under this Plan if and to the
extent such accrual, when aggregated with (I) Stock rights accrued under other
purchase rights outstanding under this Plan and (II) similar rights accrued
under other employee stock purchase plans (within the meaning of Section 423 of
the Code) of the Company or its Corporate Affiliates, would otherwise permit
<PAGE>
such Participant to purchase more than $25,000 worth of stock of the Company or
any Corporate Affiliate (determined on the basis of the fair market value of
such stock on the date or dates such rights are granted to the Participant) for
each calendar year such rights are at any time outstanding.
(b) For purposes of applying the accrual limitations of
Section VIII(a), the right to acquire Stock under each purchase right
outstanding under the restated Plan shall accrue as follows:
- The right to acquire Stock under each such purchase
right shall accrue in a series of successive quarterly or semi-annual
installments as and when the purchase right first becomes exercisable
for each installment as provided in Section IV(c).
- No right to acquire Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Stock under that
purchase right or any other purchase rights held by the Participant at
the rate of $25,000 worth of Stock (based on the fair market value on
the date or dates of grant) for each calendar year (or portion thereof)
for which such purchase rights have been outstanding.
- If by reason of the Section VIII(a) limitations, the
Participant's outstanding purchase right does not accrue for a
particular purchase date of any purchase period, then the payroll
deductions which the Participant made during that quarterly or
semi-annual period with respect to such purchase right shall be
promptly refunded.
(c) In the event there is any conflict between the provisions
of this Article VIII and one or more provisions of the Plan or any instrument
issued thereunder, the provisions of this Article VIII shall be controlling.
IX. STATUS OF PLAN UNDER FEDERAL TAX LAWS
(a) The Plan is designed to qualify as an employee stock
purchase plan under Code Section 423. However, the Plan Administrator may, at
any time in its discretion, cease to administer the Plan as a qualified employee
stock purchase plan under Code Section 423. Accordingly, share purchases
effected under the Plan at any time after the Plan ceases to be administered as
a qualified employee stock purchase plan under Code Section 423 (whether
pursuant to purchase rights granted before or after the Plan ceases to be
qualified) shall result in taxable income to each Participant equal to the
excess of (i) the fair market value of the purchased shares on the purchase date
over (ii) the purchase price paid for such shares.
(b) To the extent required by law, the Company's obligation to
deliver shares to the Participant upon the exercise of any outstanding purchase
right shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding requirements.
X. AMENDMENT AND TERMINATION
(a) The Board may from time to time alter, amend, suspend or
discontinue the Plan; provided, however, that no such action shall become
effective prior to the exercise of outstanding purchase rights at the end of the
quarterly or semi-annual period in which such action is authorized; and
provided, further, that no such action of the Board may, without the approval of
the shareholders of the Company, increase the number of shares issuable under
the Plan or the maximum number of shares which any one Participant may purchase
during a single purchase period or over the term of the Plan (except for
adjustments permitted under Section VI(b)), alter the purchase price formula so
as to reduce the purchase price specified in the Plan, otherwise materially
increase the benefits accruing to Participants under the Plan or materially
modify the requirements for eligibility to participate in the Plan.
<PAGE>
(b) The Company shall have the right, exercisable in the sole
discretion of the Plan Administrator, to terminate the Plan immediately
following the end of a quarterly or semi-annual purchase date. Should the
Company elect to exercise such right, then the Plan shall terminate in its
entirety, and no further purchase rights shall thereafter be granted, and no
further payroll deductions shall thereafter be collected, under the Plan.
XI. GENERAL PROVISIONS
(a) The Plan was initially adopted by the Board on January 21,
1988 and approved by the stockholders on June 7, 1988. In January 1991, the
Board approved a 250,000-share increase in the number of shares of Common Stock
issuable under the Plan, and the stockholders approved such increase in May
1991. The 1992 restatement of the Plan and the 250,000-share increase approved
by the Board on January 23, 1992 became effective on the first day of the first
purchase period which began after the 1992 Annual Stockholders Meeting.
Additional amendments were made to the Plan on January 27, 1994, January 22,
1997, and January 30, 1998 to increase the number of shares of Stock reserved
for issuance under the Plan, and the January 1997 amendment also extended the
term of the Plan to December 31, 2001. On February 4, 1999, the Board authorized
an amendment to the Plan to increase the number of shares of Stock available for
issuance hereunder by an additional 2,550,000 shares, subject to stockholder
approval at the 1999 Annual Meeting. If such stockholder approval is not
obtained, then no purchase rights will be granted under the Purchase Plan on the
basis of the 2,550,000-share increase.
(b) The provisions of this restated Plan shall apply only to
purchase rights exercised under the Plan from and after the Effective Date of
such restatement. All exercises effected under the Plan prior to such Effective
Date were governed by the terms and conditions of the Plan as in effect on each
such exercise date, and nothing in this restated Plan shall be deemed to affect
or otherwise modify the rights or obligations of the holders of the shares of
Common Stock acquired thereunder.
(c) The Plan shall terminate upon the earlier of (i) December
31, 2001 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.
(d) All costs and expenses incurred in the administration of
the Plan shall be paid by the Company.
(e) Neither the action of the Company in establishing the
Plan, nor any action taken under the Plan by the Plan Administrator, nor any
provision of the Plan itself shall be construed so as to grant any person the
right to remain in the employ of the Company or any of its Corporate Affiliates
for any period of specific duration, and such person's employment may be
terminated at any time, with or without cause.
(f) The provisions of the Plan shall be governed by the laws
of the State of California.
<PAGE>
Schedule A
Companies Participating in
1988 Employee Stock Purchase Plan
As of February 4, 1999
Komag, Incorporated
Komag Material Technology, Inc.
Komag U.S.A. (Malaysia) Sdn.
Komag Asia Pacific, Inc.
EXHIBIT 99.3
1997 Supplemental Stock Option Plan
(As amended on June 12, 1998)
KOMAG, INCORPORATED
1997 SUPPLEMENTAL STOCK OPTION PLAN
(Amended June 12, 1998)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSES OF THE PLAN
This 1997 Non-Executive Officer 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. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by one or more committees
comprised of Board members (the "Committee") or the Board may retain the power
to administer the Plan. The members of the 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. The Committee (or the Board if no Committee has been
designated) shall serve as the Plan Administrator and shall have full power and
authority (subject to the express provisions of the Plan) 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 options or shares issued hereunder.
III. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to participate in the Plan shall be
- employees (excluding officers and directors) of
the Corporation (or its parent or subsidiary corporations), or
- independent contractors and consultants who
provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. 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, the time or times at
which such option is to become exercisable and the maximum term for which the
option is to be outstanding.
<PAGE>
C. 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.
IV. 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
Six Million One Hundred Thousand (6,100,000) shares (subject to adjustment from
time to time in accordance with paragraph IV.C of this Article One).
B. 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.
C. 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 the Corporation's receipt of
consideration), then unless such change results in the termination of all
outstanding options pursuant to the provisions of paragraph II of Article Two of
the Plan, appropriate adjustments shall be made to (i) the aggregate number
and/or class of shares issuable under the Plan, and (ii) the number and/or class
of shares and price per share in effect under each outstanding option under the
Plan. The purpose of such adjustments to the outstanding options shall be to
preclude the enlargement or dilution of rights and benefits under such options.
<PAGE>
ARTICLE TWO
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 shall be 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.
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 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.
(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
<PAGE>
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 day prior to 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 day prior to 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 day prior to 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 day prior to the date in question, then the
fair market value shall be the closing selling price on the last
preceding date for which such quotation exists.
B. Term and Exercise of Options.
Each option granted under this Article Two shall be
exercisable at such time or times, during such period, and for such number of
shares as shall be determined by 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 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.
<PAGE>
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.
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
<PAGE>
of the Board or an independent consultant or advisor.
- The optionee shall be considered to be an Employee
for so long as such individual remains in the employ of the Corporation
or one or more of its parent or subsidiary corporations, subject to the
control and direction of the employer not only as to the work to be
performed but also as to the manner and method of performance.
E. 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.
F. 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 II of this Article Two, except to the extent: (i) any such
repurchase right is to be assigned to the successor corporation (or parent
thereof) in connection with the Corporate Transaction or (ii) such termination
is precluded by other limitations imposed by the Plan Administrator at the time
the repurchase right is issued.
The Plan Administrator shall have the discretionary
authority, exercisable either before or after the optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with respect
to one or more shares purchased or purchasable by the optionee under this
Article Two and thereby accelerate the vesting of such shares in connection with
the optionee's cessation of Service.
II. CORPORATE TRANSACTIONS
A. In the event of any of the following stockholder-approved
transactions (a "Corporate Transaction"):
(i) a merger or acquisition in which the
Corporation is not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or other disposition of
all or substantially all of the assets of the Corporation, or
<PAGE>
(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. 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, liquidat or sell or transfer all or any part of its business or
assets.
III. CANCELLATION AND REGRANT
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options covering the same or different numbers of
shares of Common Stock but having an exercise price per share equal to one
hundred percent (100%) of the fair market value of the Common Stock on the new
grant date.
IV. 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.
<PAGE>
ARTICLE THREE
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.
II. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective upon its adoption by the
Board. Unless sooner terminated in accordance with paragraph II of Article Two,
the Plan shall terminate upon the earlier of (i) September 26, 2007 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.
B. On January 30, 1998, the Board approved an amendment to
the Plan to increase the number of shares of Common Stock reserved for issuance
over the term of the Plan by an additional 1,000,000 shares.
C. On June 12, 1998, the Board approved an amendment to the
Plan to increase the number of shares of Common Stock reserved for issuance over
the term of the Plan by an additional 1,500,000 shares.
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 Plan shall be subject
to the satisfaction of all applicable federal, state and local income and
employment tax withholding requirements.
V. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing or
restating the Plan, nor any action taken by the Plan Administrator hereunder,
nor any provision of the restated Plan shall be construed so as to grant any
individual the right to remain in the employ or service of the Corporation (or
any parent or subsidiary corporation) for any period of specific duration, and
the Corporation (or any parent or subsidiary corporation retaining the services
of such individual) may terminate such individual's employment or service at any
time and for any reason, with or without cause.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any option
hereunder, and the issuance
<PAGE>
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.
B. No shares of Common Stock or other assets shall be issued
or delivered under the Plan unless and until there shall
have been compliance with all applicable requirements of
Federal and state securities laws, including the filing
and effectiveness of the Form S-8 registration statement
for the shares of Common Stock issuable under the Plan,
and all applicable listing requirements of any stock
exchange (or the Nasdaq National Market, if applicable) on
which Common Stock is then listed for trading.
EXHIBIT 99.4
Notice of Grant generally used in connection with the 1997
Supplemental Stock Option Plan.
KOMAG, INCORPORATED
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of Komag, Incorporated. (the
"Corporation"):
Optionee:___________________________________________
Grant Date:_________________ Exercise Price:$______ per share
Option Type: Non-Statutory Stock Option Number of Option Shares:________
Vesting Commencement Date:____________ Expiration Date:________________
Exercise Schedule: The Option shall become vested and exercisable for
twenty-five percent (25%) of the Option Shares upon Optionee's completion of one
(1) year of Service measured from the Grant Date and shall become exercisable
for the balance of the Option Shares in thirty-six (36) successive equal monthly
installments upon Optionee's completion of each additional month of Service over
the thirty-six (36) month period measured from the first anniversary of the
Grant Date.
Optionee understands and agrees that the Option is granted subject to and in
accordance with the terms of the Komag, Incorporated 1997 Supplemental Stock
Option Plan (the "Option Plan"). Optionee further agrees to be bound by the
terms of the Option Plan and the terms of the Option as set forth in the Stock
Option Agreement (the "Option Agreement") referenced herein. Optionee assumes
responsibility for reviewing the official prospectus for the Plan, and Stock
Option Agreement available on Komag's Intranet Stock Plan Pages, and on Komag's
Public File Server at KUS1\VOL1\KOMAG in the folder titled STKINFO:
Plan summary and Prospectus file named OPSCT97.DOC
Plan Stock Option Agreement file named OPAGR97.DOC
Copies of these documents are also available upon request from the Stock Plan
Administrator.
No Employment or Service Contract. Nothing in this Notice or in the
attached Option Agreement or in the Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the referenced Option Agreement.
KOMAG, INCORPORATED
By:______________________________ Optionee:_______________________
Title:___________________________ Date:___________________________
EXHIBIT 99.5
Form of Stock Option Agreement generally used in connection
with the 1997 Supplemental Stock Option Plan
KOMAG, INCORPORATED
STOCK OPTION AGREEMENT
WITNESSETH:
RECITALS
A. The Corporation's Board of Directors (the "Board") has adopted the
Corporation's 1997 Supplemental Stock Option Plan (the "Plan") for the purpose
of attracting and retaining the services of employees and consultants of the
Corporation and its parent or subsidiary corporations.
B. Optionee is an individual who is to render valuable services to the
Corporation or its subsidiaries, and this Agreement is executed pursuant to and
is intended to carry out the purposes of the Plan in connection with the
Corporation's grant of a stock option to Optionee.
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, the Corporation hereby grants to
Optionee, as of the grant date (the "Grant Date") specified in the accompanying
Notice of Grant of Stock Option (the "Grant Notice"), a stock option to purchase
up to that number of shares of the Corporation's Common Stock (the "Option
Shares") as is specified in the Grant Notice. Such Option Shares shall be
purchasable from time to time during the option term at the option price (the
"Option Price") specified in the Grant Notice.
2. Option Term. This option shall have a maximum term of ten
(10) years measured from the Grant Date and shall accordingly expire at the
close of business on the expiration date (the "Expiration Date") specified in
the Grant Notice, unless sooner terminated in accordance with Paragraph 5 or
subparagraph 7(c).
3. Limited Transferability. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. Dates of Vesting and Exercise.
(a) Except as otherwise provided in this Paragraph 4
or in subparagraph 7(a), this option shall become vested and exercisable for the
Option Shares in one or more installments in accordance with the exercise
schedule specified in the Grant Notice. However, the Optionee may not exercise
any vested Option Shares until July 1, 1999 except in the event of Optionee's
death or disability. As this option becomes vested in installments, those
installments shall accumulate, and, after July 1, 1999, this option shall be
vested and exercisable for the accumulated installments until the expiration or
sooner termination of the option term.
Notwithstanding the above, if the Optionee is
terminated involuntarily (other than for "Cause" (as defined herein)) following
a "Corporate Transaction" (as defined in Section 7(a)), this option shall become
fully exercisable as to the vested Option Shares and may be exercised for all or
any portion of the vested Option Shares for a thirty (30) day period commencing
with the date of such cessation of Service. For this purpose, "Cause" is defined
as (i) an act of dishonesty made by the Optionee in connection with the
Optionee's
<PAGE>
responsibilities as an employee, (ii) Optionee's conviction of, or plea of nolo
contendere to, a felony, (iii) Optionee's serious misconduct, (iv) Optionee's
continued violations of his or her employment duties after Optionee has received
a written demand for performance from the Corporation which specifically sets
forth the factual basis for the Corporation's belief that Optionee has not
substantially performed his or her duties, or (v) Optionee's death or permanent
and total disability.
(b) As of the ninety-first (91st) day following the
commencement date of any unpaid leave of absence authorized by the Plan
Administrator (or its delegate) in writing, the exercise schedule in effect for
this option shall automatically be suspended, and the option shall not become
exercisable for any additional Option Shares, until such time as the Optionee
returns to active Service, provided such return to active Service occurs on or
before the authorized expiration date of the leave. Upon such return to active
Service, the exercise schedule for this option shall be reinstated as of the
point where the suspension occurred, and this option shall thereafter become
exercisable for one or more additional Option Shares under the reinstated
exercise schedule over the Optionee's period of subsequent Service and shall
remain so exercisable until the expiration or sooner termination of the option
term.
5. Termination of Service. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should one of the following provisions become
applicable:
(i) Except to the extent otherwise provided in
Section 4 and subparagraphs (ii) through (iv) below, should Optionee cease to
remain in Service at any time during the option term, then the vested portion of
this option shall not remain exercisable for more than a thirty (30)-day period
commencing with the date of such cessation of Service. Upon the expiration of
such thirty (30)-day period or (if earlier) upon the specified Expiration Date
of the option term, this option shall terminate and cease to be outstanding. The
unvested portion of this option shall terminate on the date Optionee ceases to
remain in Service.
(ii) Should Optionee die while in Service or within
the thirty (30)-day period following his or her cessation of Service, then the
personal representative of the Optionee's estate or the person or persons to
whom this 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 the
option. Such right shall lapse, and this option shall terminate and cease to
remain exercisable, upon the earlier of (A) the expiration of the twelve
(12)-month period measured from the date of Optionee's death or (B) the
Expiration Date.
(iii) Should Optionee become permanently disabled and
cease by reason thereof to remain in Service at any time during the option term,
then the vested option of this option shall not remain exercisable for more than
a twelve (12) month period commencing with the date of such cessation of
Service. Upon the expiration of such limited period of exercisability or (if
earlier) upon the Expiration Date, the vested portion of this option shall
terminate and cease to be outstanding. The unvested portion of this option shall
terminate on the date Optionee ceases to remain in Service.
(iv) Should (A) the Optionee's Service be terminated
for misconduct (including, but not limited to, any act of dishonesty, willful
misconduct, fraud or embezzlement) or (B) the Optionee 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 this option shall
terminate immediately and cease to be exercisable. The unvested portion of this
option shall terminate on the date Optionee ceases to remain in Service.
(v) In no event shall this option be exercisable at
any time after the specified Expiration Date of the option term.
<PAGE>
(vi) During the limited post-Service period of
exercisability determined in accordance with subparagraphs (i) through (iii)
above, this option may not be exercised for more than the number of Option
Shares (if any) for which this option is, at the time of the Optionee's
cessation of Service, exercisable in accordance with either the normal exercise
provisions specified in the Grant Notice or the special acceleration provisions
of Paragraph 7 of this Agreement. However, should Optionee's Service be
terminated by reason of death, then this option may also be exercised, during
the applicable period of exercisability provided under subparagraph (ii) or
(iii) above, for any or all additional Option Shares for which this option would
have otherwise become exercisable had the Optionee continued in Service through
the last date of the installment exercise schedule specified for this option in
the Grant Notice. Upon Optionee's cessation of Service for any reason other than
death, this option shall immediately terminate and cease to be outstanding with
respect to any Option Shares for which this option is not otherwise at that time
exercisable.
(vii) For purposes of this Paragraph 5 and for all
other purposes under this Agreement, the following definitions shall be in
effect:
(A) 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.
(B) The Optionee shall be deemed 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.
(C) The Optionee shall be deemed to be
permanently disabled or have incurred a permanent
disability if the Optionee is, by reason of any
medically determinable physical or mental impairment
expected to result in death or to be of continuous
duration of not less than twelve (12) consecutive
months or more, unable to engage in any substantial
gainful activity.
(D) 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.
(E) 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.
(F) An unpaid leave of absence which has
been authorized by the Plan Administrator in writing
shall not constitute a cessation of Optionee's
Service, provided Optionee returns to active Service
on or prior to the authorized expiration date of such
leave.
<PAGE>
6. Adjustment in Option Shares. Should any change be made to
the Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Option Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
7. Corporate Transaction.
(a) In the event of one or more 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 such time but
not otherwise fully exercisable for all the Option Shares (in accordance with
the installment exercise schedule set forth in the Grant Notice or the
provisions of Paragraph 5 above), shall automatically accelerate so that such
option shall, during the five (5) business day period immediately prior to the
specified effective date for the Corporate Transaction, become fully exercisable
with respect to all the Option Shares and may be exercised for all or any
portion of those shares as fully-vested shares. No such acceleration of this
option, however, shall occur if and to the extent this 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. The determination of option comparability shall be made by the Plan
Administrator, and such determination shall be final, binding and conclusive.
(b) Immediately following the Corporate Transaction,
this option shall terminate and cease to be outstanding, except to the extent
assumed by the successor corporation (or parent thereof) in connection with the
Corporate Transaction. The Corporation shall use its best efforts to (i) provide
the Optionee with at least ten (10) days prior written notice of the specified
effective date for the Corporate Transaction and (ii) have the option assumed by
the successor corporation or its parent company, to the extent not exercised in
connection with such Corporate Transaction.
(c) 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
Exercise Price, provide the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any 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.
<PAGE>
8. Privilege of Stock Ownership. 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 the option in accordance with
the provisions of Paragraph 9, paid the Option Price for the purchased shares
and been issued a stock certificate for such shares.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to
all or any part of the Option Shares for which this option is at the time
exercisable, 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) Deliver (A) an executed notice of stock
option exercise (the "Exercise Notice") to the Stock Administrator of the
Corporation in which there is specified the number of Option Shares to be
purchased under the exercised option and (B) any additional documents which the
Plan Administrator may, in its discretion, deem advisable.
(ii) Pay the aggregate Option Price for the
purchased shares through one or more of the following alternatives:
(A) payment in cash or by check
payable to the Corporation's order;
(B) payment in shares of Common
Stock of the Corporation held by the Optionee (or any other person exercising
this option) 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 terms are defined below);
(C) payment effected through a
broker-dealer sale and remittance procedure pursuant to which the Optionee shall
provide irrevocable written instructions (I) to 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) to the
Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale transaction.
(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 9(a) above (and all
other valuation purposes hereunder), the Fair Market Value per share of Common
Stock on any relevant date shall be determined in accordance with subparagraphs
(i) and (ii) below, and the Exercise Date shall be the date on which the
following documents shall have been delivered to the Corporation (I) the
Exercise Notice and any additional documents required by the Corporation in
connection with the option exercise and (II) any representations which the
Corporation may require of the Optionee in order to comply with the applicable
requirements of Federal and State securities laws.
(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 day prior to 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 day prior
<PAGE>
to 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 day prior to the date in question on such exchange, as such
price is officially quoted on the composite tape of transactions on that
exchange. If there is no closing selling price for the Common Stock on the day
prior to the date in question, then the Fair Market Value shall be the closing
price on the last preceding date for which such quotation exists.
(c) This option shall be deemed to have been
exercised with respect to the number of Option Shares specified in the Exercise
Notice at such time as the Exercise Notice shall have been delivered to the
Corporation. Except to the extent the special payment procedure specified in
clause (C) of Paragraph 9 is used, payment of the Option Price shall accompany
the Exercise Notice. As soon as practical after receipt of the Exercise Notice,
the Corporation shall mail or deliver (including by electronic transmission) to
or on behalf of Optionee (or his representative) or to any other person or
persons exercising this option in accordance herewith, appropriate documentation
evidencing ownership of the shares for which the option has been so exercised.
(d) In no event shall this option be exercisable for
any fractional shares.
10. Compliance with Laws and Regulations. The exercise of
this option and the issuance of 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 on which shares of the Corporation's Common Stock may be listed
at the time of such exercise and issuance.
11. Successors and Assigns. Except to the extent otherwise
provided in Paragraph 3 or Paragraphs 7, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the successors, administrators,
heirs and legal representatives of Optionee and the successors and assigns of
the Corporation.
12. Liability of Corporation.
(a) If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares which may without Board of
Directors' approval be issued under the Plan, then this option shall be void
with respect to such excess shares unless Board of Directors' approval of an
amendment sufficiently increasing the number of shares issuable under the Plan
is obtained in accordance with the provisions of the Plan.
(b) 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.
13. No Employment/Service Contract. Except to the extent the
terms of any employment or other service contract with the Optionee may
expressly provide otherwise, nothing in this Agreement or in the Plan shall
confer upon Optionee any right to continue in Service for any period of specific
duration or interfere with or otherwise restrict in any way the rights of the
Corporation (or any parent or subsidiary employing or retaining Optionee) or of
Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service at any time for any reason, with or without cause.
14. 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 its Stock Administrator at its
<PAGE>
corporate offices. Any notice required to be given or delivered to Optionee
shall be in writing and addressed to Optionee at the address indicated for
Optionee on the Corporation's books and records. 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.
15. Construction. 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. All decisions of
the Plan Administrator with respect to any question or issue arising under the
Plan or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. Governing Law. The interpretation, performance, and
enforcement of this Agreement shal l be governed by the laws of the State of
California.
17. Withholding. Optionee hereby agrees to make appropriate
arrangements with the corporation employing or retaining Optionee for the
satisfaction of any federal, state or local income tax withholding requirements
and federal social security employment tax requirements applicable to the
exercise of this option.
