STORMEDIA INC
S-8, 1996-05-24
MAGNETIC & OPTICAL RECORDING MEDIA
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<PAGE>   1
            As filed with the Securities and Exchange Commission on May 24, 1996
                                                 Registration No. 33-
                                                                     -----------
================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                             STORMEDIA INCORPORATED
             (Exact name of registrant as specified in its charter)


                  Delaware                            77-0373062
      (State or other jurisdiction of              (I.R.S. Employer
       incorporation or organization)           Identification Number)

                                 390 Reed Street
                          Santa Clara, California 95050
    (Address, including zip code, and telephone number, including area code,
                  of registrant's principal executive offices)

                  1994 INCENTIVE STOCK OPTION PLAN, AS AMENDED
                  1995 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED
                            (Full title of the plans)

                                WILLIAM J. ALMON
                Chairman of the Board and Chief Executive Officer
                             Stormedia Incorporated
                                 390 Reed Street
                          Santa Clara, California 95050
                                 (408) 988-1409
 (Name, address, including zip code, and telephone number, including area code,
                             of agent for service)

                                    Copy to:
                             JUDITH M. O'BRIEN, ESQ.
                       WILSON, SONSINI, GOODRICH & ROSATI
                            Professional Corporation
                               650 Page Mill Road
                        Palo Alto, California 94304-1050

                         CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
==============================================================================================================================
                                                                         Proposed               Proposed
                                                                          Maximum               Maximum
                                                     Amount              Offering              Aggregate           Amount of
              Title of Securities                     to be                Price                Offering          Registration
               to be Registered                   Registered (1)         Per Share               Price                Fee
- ------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>                    <C>                  <C>                 <C>
 Class A Common Stock, $0.013 par value             1,175,000             $41.50              $48,672,500           $16,815
</TABLE>

(1)      Pursuant to Rule 428 under the Securities Act of 1933, as amended
         ("Act"), the prospectus contained herein with respect to the 1994
         Incentive Stock Option Plan also relates to shares registered under the
         Form S-8 Registration Statement No. 33- 95230

(2)      Estimated in accordance with Rule 457(c) and (h) under the Act solely
         for the purpose of calculating the registration fee, based on the
         average of the high and low price of the Registrant's Common Stock as
         reported by Nasdaq NMS on May 21, 1996.
<PAGE>   2
                             STORMEDIA INCORPORATED
                       REGISTRATION STATEMENT ON FORM S-8

                                     PART II

ITEM 3.  INCORPORATION OF DOCUMENTS BY REFERENCE.

         There are hereby incorporated by reference into this Registration
Statement the following documents and information heretofore filed with the
Securities and Exchange Commission (the "Commission") by the Registrant:

         (a)      The Registrant's Annual Report on Form 10-K for the fiscal
                  year ended December 31, 1995 filed pursuant to Section 13(a)
                  of the Securities Exchange Act of 1934, as amended (the
                  "Exchange Act");

         (b)      Registrant's Quarterly Report on Form 10-Q for the fiscal
                  quarter ended March 29, 1996, filed pursuant to Section 13(a)
                  of the Exchange Act; and

         (c)      The Registrant's Current Report on Form 8-K filed with the
                  Securities and Exchange Commission pursuant to Section 13 (a)
                  or 15 (d) of the Exchange Act.

         All documents filed by Registrant pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof, and prior to the filing of
a post-effective amendment which indicates that all securities offered hereunder
have been sold or which de-registers all securities then remaining unsold under
this registration statement, shall be deemed to be incorporated by reference
herein and to be part hereof from the date of filing of such documents.

ITEM 4.  DESCRIPTION OF SECURITIES.

         Not applicable.

ITEM 5.  INTERESTS OF NAMED EXPERTS AND COUNSEL.

         The validity of the issuance of shares of Class A Common Stock offered
hereby will be passed upon for the Registrant by Wilson, Sonsini, Goodrich &
Rosati, P.C., Palo Alto, California.

ITEM 6.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

         Section 145 of the Delaware General Corporations Law authorizes a court
to award, or a corporation's Board of Directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Act. The Registrant's
Bylaws provides for the mandatory indemnification of its directors and officers
and permissible indemnification of employees and other agents to the maximum
extent permitted by Delaware General Corporation Law. Registrant has entered
into an indemnification agreement with each of its officers and directors which
provide the Registrant's officers and directors with indemnification to the
maximum extent permitted by the Delaware General Corporation Law.

                                        2
<PAGE>   3
In addition, the Registrant's Corrected Amended and Restated Certificate of
Incorporation provides that, pursuant to Delaware law, its directors shall not
be liable for monetary damages for a breach of the directors' fiduciary duty as
a director to Registrant and its stockholders, provided that such liability does
not arise from certain proscribed conduct. Registrant also currently maintains
officer and director liability insurance.

ITEM 7.  EXEMPTION FROM REGISTRATION CLAIMED.

         Not applicable.

ITEM 8.  INDEX TO EXHIBITS.

<TABLE>
<CAPTION>
Exhibit
Number                       Description of Document                                      
- -------  ----------------------------------------------------------------- 
<S>      <C>                                                           
 3.1*    Corrected Amended and Restated Certificate of Incorporation

 5.1     Opinion of Counsel as to legality of securities being registered.

10.27    1994 Incentive Stock Option Plan, as amended

10.35    1995 Employee Stock Purchase Plan, as amended

23.1     Consent of Independent Auditors.

23.2     Consent of Counsel (contained in Exhibit 5.1).

24.1     Power of Attorney (see page 6).
</TABLE>


- ----------------------
* Incorporated by reference to the Registrant's Registration Statement on 
Form S-8 (No. 33-95320) previously filed with the Commission.

                                        3
<PAGE>   4
ITEM 9.  UNDERTAKINGS.

         The undersigned Registrant hereby undertakes:

         (a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement. That, for the purpose of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof. To remove from
registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.

         (b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the 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
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the Registrant's Certificate of
Incorporation, Bylaws, indemnification agreements or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.

                                        4
<PAGE>   5
                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, 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 Santa Clara, State of California, on this 24th day of
May, 1996.


                                   STORMEDIA INCORPORATED


                                   By:/s/ Stephen M. Abely       
                                      ------------------------------------------
                                      Stephen M. Abely
                                      Vice President and Chief Financial Officer


                                        5
<PAGE>   6
                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William J. Almon and Stephen M. Abely,
his or her attorneys-in-fact, each with the power of substitution, for him in
any and all capacities, to sign any amendments to this Registration Statement on
Form S-8 and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorney-in-fact, or his or her
substitute or substitutes, may do or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

    Signatures                        Title                             Date
- ---------------------     -------------------------------------     ------------

/s/ WILLIAM J. ALMON      Chairman of the Board and Chief           May 24, 1996
- ---------------------     Executive Officer                        
William J. Almon          
                                                                   
/s/ MICHAEL E. OXSEN      President                                 May 24, 1996
- ---------------------
Michael E. Oxsen                                                   
                                                                   
/s/ STEPHEN M. ABELY      Chief Financial Officer and               May 24, 1996
- ---------------------     Assistant Secretary                                
Stephen M. Abely          
                                                                   
/s/ JOHN A. DOWNER        Director                                  May 24, 1996
- ---------------------
John A. Downer                                                     
                                                                   
/s/ FRANCIS J. LUNGER     Director                                  May 24, 1996
- ---------------------
Francis J. Lunger                                                  
                                                                   
/s/ MARK S. ROSSI         Director                                  May 24, 1996
- ---------------------
Mark S. Rossi                                                      


                                        6

<PAGE>   1
                                                                     EXHIBIT 5.1


                                  May 24, 1996



StorMedia Incorporated
390 Reed Street
Santa Clara, California 95050
Attn: William J. Almon  

         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 May 23, 1996 (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of a total of 1,000,000 shares of your Class
A Common Stock reserved for issuance under the 1994 Incentive Stock Option Plan,
as amended and 175,000 shares of your Class A Common Stock reserved for issuance
under the 1995 Employee Stock Purchase Plan, as amended (collectively , the
"Shares") (collectively, the "Plans". As legal counsel for StorMedia
Incorporated, we have examined the proceedings taken and are familiar with the
sale and issuance of the Shares under the Plans.

         It is our opinion that, when issued and sold in the manner referred to
in the Plans and pursuant to the respective agreement which accompanies each
grant under the Plans, the Shares will be 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 it appears in the
Registration Statement and any amendments to it.

                                              Very truly yours,

                                              WILSON, SONSINI, GOODRICH & ROSATI
                                              Professional Corporation

<PAGE>   1
                                  Exhibit 10.27

                             STORMEDIA INCORPORATED
                  1994 INCENTIVE STOCK OPTION PLAN, AS AMENDED


         1.       Purposes of the Plan. The purposes of this Incentive Stock
Option Plan are:

                  -        to attract and retain the best available personnel
                           for positions of substantial responsibility,

                  -        to provide additional incentive to Employees and
                           Consultants, and

                  -        to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options.

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

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

                  b.       "Applicable Laws" means the legal requirements
relating to the administration of stock option plans under state corporate and
securities laws and the Code.

                  c.       "Board" means the Board of Directors of the Company.

                  d.       "Code" means the Internal Revenue Code of 1986, as
amended.

                  e.       "Committee" means a Committee appointed by the Board
in accordance with Section 4 of the Plan.

                  f.       "Common Stock" means the Common Stock of the Company.

                  g.       "Company" means Stormedia Incorporated.

                  h.       "Consultant" means any person, including an advisor
or Director, engaged by the Company or a Parent or Subsidiary to render services
and who is compensated for such services.

                  i.       "Continuous Status as an Employee or Consultant"
means that the employment or consulting relationship with the Company, any
Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as an
Employee or Consultant shall not be considered interrupted in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, its Parent, any Subsidiary, or any
successor. A leave of absence approved by the Company shall include sick leave,
military leave, or any other personal leave approved by an authorized
representative of the Company. For purposes of Incentive Stock Options, no such
leave may exceed 90 days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If
<PAGE>   2
reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the 181st day of such leave any Incentive Stock Option
held by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option.

                  j.       "Director" means a member of the Board.

                  k.       "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.

                  l.       "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

                  m.       "Exchange Act" means the Securities Exchange Act of
1934, as amended.

                  n.       "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:

                           i.       If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a
Share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such system or exchange (or
the exchange with the greatest volume of trading in Common Stock) on the last
market trading day prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable;

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

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

                  o.       "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

                  p.       "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option. 

                  q.       "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option grant. The Notice of Grant
is part of the Option Agreement.

                                      -2-
<PAGE>   3
                  r.       "Officer" means a person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

                  s.       "Option" means a stock option granted pursuant to the
Plan.

                  t.       "Option Agreement" means a written agreement between
the Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

                  u.       "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.

                  v.       "Optioned Stock" means the Common Stock subject to an
Option.

                  w.       "Optionee" means an Employee or Consultant who holds
an outstanding Option.

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

                  y.       "Pre-IPO Options" means stock options granted under
the Plan prior to the date of effectiveness of the Company's registration
statement on Form S-1.

                  z.       "Plan" means this 1994 Incentive Stock Option Plan.

                  aa.      "Rule 16b-3" means Rule 16b-3 of the Exchange Act or
any successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.

                  ab.      "Section 16(b)" means Section 16(b) of the Securities
Exchange Act of 1934, as amended.

                  ac.      "Share" means a share of the Common Stock, as
adjusted in accordance with Section 12 of the Plan.

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

         3.       Stock Subject to the Plan. Subject to the provisions of
Section 12 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 3,131,250 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock.

                  If an Option expires or becomes unexercisable without having
been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
the Plan, whether upon exercise of

                                       -3-
<PAGE>   4
an Option, shall not be returned to the Plan and shall not become available for
future distribution under the Plan.

         4.       Administration of the Plan.

                  a.       Procedure.

                           i.       Multiple Administrative Bodies. If permitted
by Rule 16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Employees who are neither
Directors nor Officers.

                           ii.      Administration With Respect to Directors and
Officers Subject to Section 16(b). With respect to Option grants made to
Employees who are also Officers or Directors subject to Section 16(b) of the
Exchange Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in a manner complying with the rules under Rule 16b-3
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity securities
are to be made, or (B) a committee designated by the Board to administer the
Plan, which committee shall be constituted to comply with the rules under Rule
16b-3 relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made.

                           iii.     Administration With Respect to Other
Persons. With respect to Option grants made to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a committee designated by the Board, which committee shall
be constituted to satisfy Applicable Laws. Once appointed, such Committee shall
serve in its designated capacity until otherwise directed by the Board. The
Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.

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

                           i.       to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(n) of the Plan;

                                       -4-
<PAGE>   5
                           ii.      to select the Consultants and Employees to
whom Options may be granted hereunder;

                           iii.     to determine whether and to what extent
Options are granted hereunder;

                           iv.      to determine the number of shares of Common
Stock to be covered by each Option granted hereunder;

                           v.       to approve forms of agreement for use under
the Plan;

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

                           vii.     to reduce the exercise price of any Option
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Option shall have declined since the date the Option was
granted;

                           viii.    to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan;

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

                           x.       to modify or amend each Option (subject to
Section 14(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;

                           xi.      to authorize any person to execute on behalf
of the Company any instrument required to effect the grant of an Option
previously granted by the Administrator;

                           xii.     to institute an Option Exchange Program;

                           xiii.    to determine the terms and restrictions
applicable to Options; and

                           xiv.     to make all other determinations deemed
necessary or advisable for administering the Plan.

                  c.       Effect of Administrator's Decision. The
Administrator's decisions, determinations and interpretations shall be final and
binding on all Optionees and any other holders of Options.

                                       -5-
<PAGE>   6
         5.       Eligibility. Nonstatutory Stock Options may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been granted
an Option may be granted additional Options.

         6.       Limitations.

                  a.       Each Option shall be designated in the Notice of
Grant as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value:

                           i.       of Shares subject to an Optionee's Incentive
Stock Options granted by the Company, any Parent or Subsidiary, which

                           ii.      become exercisable for the first time during
any calendar year (under all plans of the Company or any Parent or Subsidiary)

exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time of grant.

         b.       Neither the Plan nor any Option shall confer upon an Optionee
any right with respect to continuing the Optionee's employment or consulting
relationship with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.

         c.       The following limitations shall apply to grants of Options to
Employees:

                  i.       No Employee shall be granted, in any fiscal year of
the Company, Options to purchase more than 300,000 Shares.

                  ii.      The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.

                  iii.     If an Option is canceled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 12), the canceled Option will be counted against the limit
set forth in Section 6(c)(i). For this purpose, if the exercise price of an
Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

         7.       Term of Plan. Subject to Section 18 of the Plan, the Plan
shall become effective upon the earlier to occur of its adoption by the Board or
its approval by the shareholders of the Company as described in Section 18 of
the Plan. It shall continue in effect for a term of ten (10) years unless
terminated earlier under Section 14 of the Plan.

                                       -6-
<PAGE>   7
         8.       Term of Option. The term of each Option shall be stated in the
Notice of Grant; provided, however, that in the case of an Incentive Stock
Option, the term shall be ten (10) years from the date of grant or such shorter
term as may be provided in the Notice of Grant. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Notice of
Grant.

         9.       Option Exercise Price and Consideration.

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

                  i.       In the case of an Incentive Stock Option

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

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

                  ii.      In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator.

         b.       Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.

         c.       Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:

                  i.       cash;

                  ii.      check;

                  iii.     promissory note;

                                       -7-
<PAGE>   8
                  iv.      other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;

                  v.       delivery of a properly executed exercise notice 
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to 
the Company of the sale or loan proceeds required to pay the exercise price;

                  vi.      any combination of the foregoing methods of payment;
or

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

         10.      Exercise of Option.

                  a.       Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement.

                           An Option may not be exercised for a fraction of a
Share.

                           An Option shall be deemed exercised when the Company
receives: (i) written notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the stock certificate evidencing such Shares is issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.

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

                  b.       Termination of Employment or Consulting Relationship.
Upon termination of an Optionee's Continuous Status as an Employee or
Consultant, other than upon the Optionee's death or Disability, the Optionee may
exercise his or her Option, but only within such period of time as is specified
in the Notice of Grant, and only to the extent that the Optionee was entitled to
exercise it at the date of

                                       -8-
<PAGE>   9
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). In the absence of a specified time
in the Notice of Grant, the Option shall remain exercisable for 30 days
following the Optionee's termination of Continuous Status as an Employee or
Consultant. In the case of an Incentive Stock Option, such period of time shall
not exceed ninety (90) days from the date of termination. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the Shares covered by the unexercisable portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

                  c.       Disability of Optionee. In the event that an
Optionee's Continuous Status as an Employee or Consultant terminates as a result
of the Optionee's Disability, the Optionee may exercise his or her Option at any
time within twelve (12) months from the date of such termination, but only to
the extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

                  d.       Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the Optionee
was not entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

         11.      Non-Transferability of Options. An Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

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

                  a.       Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares

                                       -9-
<PAGE>   10
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.

                  b.       Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, to the extent that an Option
has not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.

                  c.       Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option may be assumed or an
equivalent option may be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event options are not so assumed
or substituted, each Optionee shall have the right to exercise the Option as to
all of the Optioned Stock, including Shares as to which it would not otherwise
be exercisable. If an Option becomes exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee that the Option shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option will terminate
upon the expiration of such period.

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

         14.      Amendment and Termination of the Plan.

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

                  b.       Shareholder Approval. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary and desirable
to comply with Rule 16b-3 or with Section 422 of the Code (or any successor rule
or statute or other applicable law, rule or regulation, including the
requirements of any exchange or quotation system on which the Common Stock is
listed or quoted). Such shareholder approval, if required, shall be obtained in
such a manner and to such a degree as is required by the applicable law, rule or
regulation.

                  c.       Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between

                                      -10-
<PAGE>   11
the Optionee and the Administrator, which agreement must be in writing and
signed by the Optionee and the Company.

         15.      Conditions Upon Issuance of Shares.

                  a.       Legal Compliance. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

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

         16.      Liability of Company.

                  a.       Inability to Obtain Authority. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

                  b.       Grants Exceeding Allotted Shares. If the Optioned
Stock covered by an Option exceeds, as of the date of grant, the number of
Shares which may be issued under the Plan without additional shareholder
approval, such Option shall be void with respect to such excess Optioned Stock,
unless shareholder approval of an amendment sufficiently increasing the number
of Shares subject to the Plan is timely obtained in accordance with Section
14(b) of the Plan.

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

         18.      Shareholder Approval. Continuance of the Plan shall be subject
to approval by the shareholders of the Company within twelve (12) months before
or after the date the Plan is adopted. Such shareholder approval shall be
obtained in the manner and to the degree required under applicable federal and
state law.

         19.      Pre-IPO Options. Pre-IPO Options shall be subject to the Plan
as in effect prior to the date of effectiveness of the Company's registration
statement on Form S-1 (the "IPO Date"), subject to differing provisions
contained in Sections 4, 9 and 12 of the Plan as amended and restated effective
as of the IPO Date.

                                      -11-

<PAGE>   12
                                  PLAN HISTORY


May 4, 1994     Amended and Restated effective as of the date of the
                Effectiveness of the Company's Registration Statement on 
                Form S-1

March 14, 1995  Amended to Reflect the Reverse Stock Split

April 29, 1996  Amended to increase authorized shares by 1,000,000 (pre-split)
                shares to an aggregate of 2,087,500 (pre-split) shares

May 13, 1996    Amended to Reflect the Three-for-Two Stock Split.
                2,087,500 becomes 3,131,250 post-split shares

<PAGE>   13
                             STORMEDIA INCORPORATED
                        1994 INCENTIVE STOCK OPTION PLAN

                             STOCK OPTION AGREEMENT


        Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.

I.  NOTICE OF STOCK OPTION GRANT

[Optionee's Name and Address]

    You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:

    Grant Number                    _______________________________

    Date of Grant                   _______________________________

    Vesting Commencement Date       _______________________________

    Exercise Price per Share        $______________________________

    Total Number of Shares Granted  _______________________________

    Total Exercise Price            $______________________________

    Type of Option:                 _____ Incentive Stock Option

                                    _____ Nonstatutory Stock Option

    Term/Expiration Date:           _______________________________

    
 Vesting Schedule:

    This Option may be exercised, in whole or in part, in accordance with the
following schedule:

<PAGE>   14

        Termination Period:

        This Option may be exercised for 30 days after termination of the
Optionee's employment or consulting relationship with the Company. Upon the
death or Disability of the Optionee, this Option may be exercised for such
longer period as provided in the Plan. In the event of the Optionee's change in
status from Employee to Consultant or Consultant to Employee, this Option
Agreement shall remain in effect. In no event shall this Option be exercised
later than the Term/Expiration Date as provided above.

II.     AGREEMENT

        1.      Grant of Option.  The Plan Administrator of the Company hereby
grants to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee"), an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share
set forth in the Notice of Grant (the "Exercise Price"), subject to the terms
and conditions of the Plan, which is incorporated herein by reference. Subject
to Section 14(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.

                If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
under Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").

        2.      Exercise of Option.

                (a)   Right to Exercise.  This Option is exercisable during its
term in accordance with the Vesting Schedule set out in the Notice of Grant and
the applicable provisions of the Plan and this Option Agreement. In the event
of Optionee's death, Disability or other termination of Optionee's employment
or consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.

                (b)   Method of Exercise.  This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A (the
"Exercise Notice"), which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised (the
"Exercised Shares"), and such other representations and agreements as may be
required by the Company pursuant to the provisions of the Plan. The Exercise
Notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price. 

        No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with all relevant provisions of law
and the requirements of any stock exchange or quotation service upon which the
Shares are then listed. Assuming such compliance, for income tax 


                                      -2-
<PAGE>   15
purposes the Exercised Shares shall be considered transferred to the Optionee
on the date the Option is exercised with respect to such Exercised Shares.

        3. Method of Payment. Payment of the aggregate Exercise  Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:

           (a) cash, or

           (b) check, or

           (c) delivery of a properly executed exercise notice together with
        such other documentation as the Administrator and the broker, if
        applicable, shall require to effect an exercise of the Option and
        delivery to the Company of the sale or loan proceeds required to pay the
        exercise price; or

           (d) surrender of other Shares which (i) in the case of Shares
        acquired upon exercise of an option, have been owned by the Optionee for
        more than six (6) months on the date of surrender, and (ii) have a Fair
        Market Value on the date of surrender equal to the aggregate Exercise
        Price of the Exercised Shares.

        4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by the Optionee. The
terms of the Plan and this Option Agreement shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.

        5. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

        6. Tax Consequences. Some of the federal and California tax
consequences relating to this Option, as of the date of this Option, are set
forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

           (a) Exercising the Option.

                (i) Nonstatutory Stock Option. The Optionee may incur regular
federal income tax and California income tax liability upon exercise of a NSO.
The Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market
Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price. If the Optionee is an Employee or a former Employee, the
Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to


                                      -3-

<PAGE>   16
honor the exercise and refuse to deliver Shares if such withholding amounts are
not delivered at the time of exercise.

                (ii)   Incentive Stock Option.  If this Option qualifies as an
ISO, the Optionee will have no regular federal income tax or California income
tax liability upon its exercise, although the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price will be treated as an adjustment to alternative
minimum taxable income for federal tax purposes and may subject the Optionee to
alternative minimum tax in the year of exercise. In the event that the Optionee
undergoes a change of status from Employee to Consultant, any Incentive Stock
Option of the Optionee that remains unexercised shall cease to qualify as an
Incentive Stock Option and will be treated for tax purposes as a Nonstatutory
Stock Option on the ninety-first (91st) day following such change of status.

        (b)     Disposition of Shares.

                (i)   NSO.  If the Optionee holds NSO Shares for a least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

                (ii)  ISO.  If the Optionee holds ISO Shares for at least one
year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise
and the aggregate Exercise Price, or (B) the difference between the sale price
of such Shares and the aggregate Exercise Price.

        (c)     Notice of Disqualifying Disposition of ISO Shares.  If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii)
one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.

        7.   Entire Agreement: Governing Law.  The Plan is incorporated herein
by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee's interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by California
law except for that body of law pertaining to conflict of laws.

        By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had 


                                      -4-
<PAGE>   17
an opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option
Agreement. Optionee hereby agrees to accept as binding, conclusive and final
all decisions or interpretations of the Administrator upon any questions
relating to the Plan and Option Agreement. Optionee further agrees to notify
the Company upon any change in the residence address indicated below.

OPTIONEE:                                   STORMEDIA INCORPORATED



                                            By:
- ---------------------------------              -------------------------------
Signature

                                            Title:
- ---------------------------------                 ----------------------------
Print Name



- ---------------------------------
Residence Address







                                      -5-
<PAGE>   18
                               CONSENT OF SPOUSE


        The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.



                                        _____________________________________
                                        Spouse of Optionee











                                      -6-
<PAGE>   19
                                   EXHIBIT A

                             STORMEDIA INCORPORATED
                        1994 INCENTIVE STOCK OPTION PLAN

                                EXERCISE NOTICE


Stormedia Incorporated
390 Reed Street
Santa Clara, CA 95050
Attention: Secretary

        1.      Exercise of Option.  Effective as of today, _______________,
199_, the undersigned ("Purchaser") hereby elects to purchase ____________
shares (the "Shares") of the Common Stock of Stormedia Incorporated (the
"Company") under and pursuant to the 1994 Incentive Stock Option Plan (the
"Plan") and the Stock Option Agreement dated __________, 19__ (the "Option
Agreement"). The purchase price for the Shares shall be $_______, as required by
the Option Agreement.

        2.      Delivery of Payment.  Purchaser herewith delivers to the Company
the full purchase price for the Shares.

        3.      Representations of Purchaser.  Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.

        4.      Rights as Shareholder.  Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 12
of the Plan.

        5.      Tax Consultation.  Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares. Purchaser represents that Purchaser has consulted
with any tax consultants Purchaser deems advisable in connection with the
purchase or disposition of the Shares and that Purchaser is not relying on the
Company for any tax advise.

        6.      Entire Agreement: Governing Law.  The Plan and Option Agreement
are incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by California law except for that body of law pertaining to conflict
of laws.

Submitted by:                           Accepted by:

PURCHASER:                              STORMEDIA INCORPORATED


___________________________             By:__________________________________
Signature


___________________________             Its:_________________________________
Print Name


Address:                                Address:


__________________________              390 Reed Street
                                        Santa Clara, CA 95050

__________________________
 
<PAGE>   20
                                    EXHIBIT B


                             STORMEDIA INCORPORATED

                        1995 EMPLOYEE STOCK PURCHASE PLAN

                              NOTICE OF WITHDRAWAL


         The undersigned participant in the Offering Period of the StorMedia
Incorporated 1995 Employee Stock Purchase Plan which began on ___________ 19____
(the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period shall be automatically terminated. The undersigned understands further
that no further payroll deductions shall be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.


                                               Name and Address of Participant:

                                               _______________________________

                                               _______________________________

                                               _______________________________



                                               Signature:

                                               _______________________________


                                               Date: _________________________

<PAGE>   1
                                EXHIBIT 10.35

                             STORMEDIA INCORPORATED

                  1995 EMPLOYEE STOCK PURCHASE PLAN, AS AMENDED

         The following constitute the provisions of the 1995 Employee Stock
Purchase Plan of StorMedia Incorporated.

         1.       Purpose. The purpose of the Plan is to provide employees of
the Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is the
intention of the company to have the Plan qualify as an "Employee Stock Purchase
Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.

         2.       Definitions.

                  (a)      "Board" shall mean the Board of Directors of the
company.

                  (b)      "Code" shall mean the Internal Revenue Code of 1986,
as amended.

                  (c)      "Common Stock" shall mean the Class A Common Stock of
the Company.

                  (d)      "Company" shall mean StorMedia Incorporated, a
Delaware corporation, and any Designated Subsidiary of the Company.

                  (e)      "Compensation" shall mean all base straight time
gross earnings, overtime and shift premiums, sales commissions, incentive
compensation, bonuses, but shall exclude other compensation.

                  (f)      "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.

                  (g)      "Employee" shall mean any individual who is an
Employee of the Company for tax purposes whose customary employment with the
Company is at least twenty (20) hours per week and more than five (5) months in
any calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.

                  (h)      "Enrollment Date" shall mean the first day of each
Offering Period.

                  (i)      "Exercise Date" shall mean the last day of each
Purchase Period.

                  (j)      "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
<PAGE>   2
                           (1) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sale price for the Common Stock (or the mean of the closing bid and
asked prices, if no sales were reported), as quoted on such exchange (or the
exchange with the greatest volume of trading in Common Stock) or system on the
date of such determination (or the last Trading Day prior to the date of
determination, if the date of determination is not a Trading Day), as reported
in The Wall Street Journal or such other source as the Board deems reliable, or;

                           (2) If the Common Stock is quoted on the NASDAQ
System (but not on the Nasdaq National Market thereof) or is regularly quoted by
a recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination (or the last Trading Day prior to
the date of determination, if the date of determination is not a Trading Day),
as reported in The Wall Street Journal or such other source as the Board deems
reliable, or;

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

                           (4) For purposes of the Enrollment Date under the
first Offering Period under the Plan, the Fair Market Value shall be the initial
price to the public as set forth in the final Prospectus included within the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock.

                  (k)      "Offering Periods" shall mean the periods of
approximately twenty-four (24) months during which an option granted pursuant to
the Plan may be exercised, which shall commence on the first Trading Day on or
after May 15 and November 15 of each year and shall terminate on the last
Trading Day of the periods ending twenty-four months later; provided, however,
that the first Offering Period shall begin on the effective date of the
Company's initial public offering (May 4, 1995), shall continue for twenty- six
(26) full payroll periods thereafter, and shall end on May 10, 1996. The
duration of Offering Periods may be changed pursuant to Section 4 of this Plan.

                  (l)      "Plan" shall mean this 1995 Employee Stock Purchase
Plan.

                  (m)      "Purchase Price" shall mean an amount equal to 85% of
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower.

                  (n)      "Purchase Period" shall mean the approximately six
month period commencing after one Exercise Date and ending with the next
Exercise Date, except that the first Purchase Period of any Offering Period
shall commence on the Enrollment Date and end with the next Exercise Date.

                                       -2-
<PAGE>   3
                  (o)      "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.

                  (p)      "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.

                  (q)      "Trading Day" shall mean a day on which national
stock exchanges and the NASDAQ System are open for trading.

         3.       Eligibility.

                  (a)      Any Employee (as defined in Section 2(g)), who shall
be employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.

                  (b)      Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary.

         4.       Offering Periods. The Plan shall be implemented by
consecutive, overlapping Offering Periods with a new Offering Period commencing
on the first Trading Day on or after May 15 and November 15 each year, or on
such other date as the Board shall determine, and continuing thereafter until
terminated in accordance with Section 19 hereof; provided, however, that the
first Offering Period shall begin on the effective date of the Company's initial
public offering (May 4, 1995), shall continue for twenty- six (26) full payroll
periods thereafter, and shall end on May 10, 1996. The Board shall have the
power to change the duration of Offering Periods (including the commencement
dates thereof) with respect to future offerings without stockholder approval if
such change is announced at least fifteen (15) days prior to the scheduled
beginning of the first Offering Period to be affected thereafter.

         5.       Participation.

                  (a)      An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the office designated by
the Company to receive such agreements prior to the applicable Enrollment Date.

                  (b)      Payroll deductions for a participant shall commence
on the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.

                                       -3-
<PAGE>   4
                  (c)      An eligible Employee may participate in an Offering
Period only if, as of the Enrollment Date of such Offering Period, such Employee
is not participating in any prior Offering Period which is continuing at the
time of such proposed enrollment.

         6.       Payroll Deductions.

                  (a)      At the time a participant files his or her
subscription agreement, he or she shall elect to have payroll deductions made on
each pay day during an Offering Period in an amount not exceeding five percent
(5%) of the Compensation which he or she receives on each pay day during the
Offering Period.

                  (b)      All payroll deductions made for a participant shall
be credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.

                  (c)      A participant may discontinue his or her
participation in the Plan as provided in Section 10 hereof, and may increase or
decrease the rate of his or her payroll deductions during the Offering Period
but not more frequently than one (1) time each month. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

                  (d)      Notwithstanding the foregoing, to the extent
necessary to comply with Section 423(b)98) of the Code and Section 3(b) hereof,
a participant's payroll deductions may be decreased to 0% at such time during
any Purchase Period which is scheduled to end during the current calendar year
(the "Current Purchase Period") that the aggregate of all payroll deductions
which were previously used to purchase stock under the Plan in a prior Purchase
Period which ended during that calendar year plus all payroll deductions
accumulated with respect to the Current Purchase Period equal $21,250. Payroll
deductions shall recommence at the rate provided in such participant's
subscription agreement at the beginning of the first Purchase Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.

                  (e)      At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock. At
any time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale or
early disposition of Common Stock by the Employee.

         7.       Grant of Option. On the Enrollment Date of each Offering
Period, each eligible Employee participating in such Offering Period shall be
granted an option to purchase on each Exercise Date of such Offering Period (at
the applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the participant's account as of the
Exercise Date by the applicable Purchase Price. In no event shall an Employee be
permitted to purchase during each Purchase Period more than a number

                                       -4-
<PAGE>   5
of shares determined by dividing $25,000 by the Fair Market Value of a share of
the Common Stock on the Enrollment Date. All such purchases shall be subject to
the limitations set forth in Sections 3(b) and 12 hereof. Exercise of the option
shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof. The option shall expire on the last day
of the Offering Period.

         8.       Exercise of Option. Unless a participant withdraws from the
Plan as provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on each Exercise Date of the Offering
Period, and the maximum number of full shares subject to option shall be
purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions in his or her account. No fractional shares shall
be purchased; any payroll deductions accumulated in a participant's account
which are not sufficient to purchase a full share shall be retained in the
participant's account for the subsequent Exercise Date in such Offering Period,
unless the Offering Period has been over-subscribed or has terminated with such
Exercise Date, in which event, any monies left over in a participant's account
shall be returned to the participant. During a participant's lifetime, a
participant's option to purchase shares hereunder is exercisable only by him or
her.

         9.       Delivery. As promptly as practicable after each Exercise Date
on which a purchase of shares occurs, either the Company shall arrange the
delivery to each participant of a certificate representing the shares purchased
upon exercise of his or her option, or the shares shall be credited to an
account in the participant's name with a brokerage firm selected by the Company
to hold the shares in its street name.

         10.      Withdrawal.

         (a)      A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
within two weeks after receipt of written notice of withdrawal. Such
participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made
during the Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.

         (b)      Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof) for any reason, he or she shall be deemed to have elected
to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option shall be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 14 hereof, and
such participant's option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.

                                       -5-
<PAGE>   6
                  (c)      A participant's withdrawal from an Offering Period
shall not have any effect upon his or her eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws.

         11.      Interest. No interest shall accrue on the payroll deductions
of a participant in the Plan.

         12.      Stock.

                  (a)      The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be FOUR
HUNDRED TWELVE THOUSAND FIVE HUNDRED (412,500) shares, subject to adjustment
upon changes in capitalization of the Company as provided in Section 18 hereof.
If on a given Exercise Date the number of shares with respect to which options
are to be exercised exceeds the number of shares then available under the Plan,
the Company shall make a pro rata allocation of the shares remaining available
for purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.

                  (b)      The participant shall have no interest or voting
right in shares covered by his or her option until such option has been
exercised.

                  (c)      Shares to be delivered to a participant under the
Plan shall be registered in the name of the participant or in the name of the
participant and his or her spouse.

         13.      Administration.

                  (a)      Administrative Body. The Plan shall be administered
by the Board or a committee of members of the Board appointed by the Board. The
Board or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties.

                  (b)      Rule 16b-3 Limitations. Notwithstanding the
provisions of Subsection (a) of this Section 13, in the event that Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor provision ("Rule 16b-3") provides specific requirements
for the administrators of plans of this type, the Plan shall be administered
only by such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.

         14.      Designation of Beneficiary.

                  (a)      A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death

                                       -6-
<PAGE>   7
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.

                  (b)      Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.

         15.      Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.

         16.      Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.

         17.      Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.

         18.      Adjustments Upon Changes in Capitalization.

                  (a)      Changes in Capitalization. Subject to any required
action by the stockholders of the Company, the Reserves as well as the price per
share of Common Stock covered by each option under the Plan which has not yet
been exercised shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock

                                       -7-
<PAGE>   8
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
option.

                  (b)      Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Offering Period shall
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Board.

                  (c)      Merger or Asset Sale. In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date") or to cancel each
outstanding right to purchase and refund all sums collected from participants
during the Offering Period then in progress. If the Board shortens the Offering
Period then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for his or her option has been changed to the New Exercise Date and that
his or her option shall be exercised automatically on the New Exercise Date,
unless prior to such date he has withdrawn from the Offering Period as provided
in Section 10 hereof. For purposes of this paragraph, an option granted under
the Plan shall be deemed to be assumed if, following the sale of assets or
merger, the option confers the right to purchase or receive, for each share of
option stock subject to the option immediately prior to the sale of assets or
merger, the consideration (whether stock, cash or other securities or property)
received in the sale of assets or merger by holders of Common Stock for each
share of Common Stock held on the effective date of the transaction (and if such
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in the sale of assets or
merger was not solely common stock of the successor corporation or its parent
(as defined in Section 424(e) of the Code), the Board may, with the consent of
the successor corporation, provide for the consideration to be received upon
exercise of the option to be solely common stock of the successor corporation or
its parent equal in fair market value to the per share consideration received by
holders of Common Stock and the sale of assets or merger.

         The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.

         19.      Amendment or Termination.

                  (a)      The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the

                                       -8-
<PAGE>   9
Company and its stockholders. Except as provided in Section 18 hereof, no
amendment may make any change in any option theretofore granted which adversely
affects the rights of any participant. To the extent necessary to comply with
Rule 16b-3 or under Section 423 of the Code (or any successor rule or provision
or any other applicable law or regulation), the Company shall obtain stockholder
approval in such a manner and to such a degree as required.

                  (b)      Without stockholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the length
of Offering Periods, limit the frequency and/or number of changes permitted in
the amount withheld during an Offering Period, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a participant in order
to adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant's Compensation, and
establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the Plan.

         20.      Notices. All notices or other communications by a participant
to the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.

         21.      Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

         As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

         22.      Term of Plan. The Plan shall become effective upon the earlier
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.

         23.      Automatic Transfer to Low Price Offering Period. To the extent
permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on the
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.

                                       -9-
<PAGE>   10
                                    EXHIBIT A

                             STORMEDIA INCORPORATED
                        1995 EMPLOYEE STOCK PURCHASE PLAN
                             SUBSCRIPTION AGREEMENT

      _____ Original Application                     Enrollment Date: __________
      _____ Change in Payroll Deduction Rate
      _____ Change of Beneficiary(ies)

1.       _____________________________________ hereby elects to participate in
         the StorMedia Incorporated 1995 Employee Stock Purchase Plan (the
         "Purchase Plan") and subscribes to purchase shares of the Company' s
         Common Stock in accordance with this Subscription Agreement and the
         Purchase Plan.

2.       I hereby authorize payroll deductions from each paycheck in the amount
         of ____% of my Compensation (not to exceed 5%) on each payday during
         the Offering Period in accordance with the Purchase Plan. The first
         deduction shall occur on the payday following the first complete pay
         period after the effective date of the Company's initial public
         offering. (Please note that no fractional percentages are permitted.)

3.       I understand that said payroll deductions shall be accumulated for the
         purchase of shares of Common Stock at the applicable Purchase Price
         determined in accordance with the Purchase Plan. I understand that if I
         do not withdraw from an Offering Period, any accumulated payroll
         deductions shall be used to automatically exercise my option.

4.       I have received a copy of the complete Purchase Plan. I understand that
         my participation in the Purchase Plan is in all respects subject to the
         terms of thereof. I understand that the grant of the option by the
         Company under this Subscription Agreement is subject to obtaining
         stockholder approval of the Purchase Plan.

5.       Shares purchased for me under the Purchase Plan should be issued in the
         name(s) of (Employee or Employee and Spouse Only):____________________

6.       I understand that if I dispose of any shares received by me pursuant to
         the Plan within 2 years after the Enrollment Date (the first day of the
         Offering Period during which I purchased such shares), I shall be
         treated for federal income tax purposes as having received ordinary
         income at the time of such disposition in an amount equal to the excess
         of the fair market value of the shares at the time such shares were
         purchased by me over the price which I paid for the shares. I hereby
         agree to notify the Company in writing within 30 days after the date of
         any disposition of shares and I will make adequate provision for
         Federal, state or other tax withholding obligations, if any, which
         arise upon the disposition of the Common Stock. The Company may, but
         shall not be obligated to, withhold from my compensation the amount
         necessary to meet any applicable withholding obligation including any
         withholding necessary to make available to the Company any tax
         deductions or benefits attributable to sale or early disposition of
         Common Stock by me. If I dispose of such shares at any time after the
         expiration of the 2-year holding period, I understand that I will be
         treated for federal income tax purposes as having received income only
         at the time of such disposition, and that such income will be taxed as
         ordinary income only to the extent of an amount equal to the lesser of
         (1) the excess of the fair market value of the shares at the time of
         such disposition over the purchase price which I paid for the shares,
         or (2) 15% of the fair market value of the shares on the first day of
         the Offering Period. The remainder of the gain, if any, recognized on
         such disposition will be taxed as capital gain.

7.       I hereby agree to be bound by the terms of the Purchase Plan. The
         effectiveness of this Subscription Agreement is dependent upon my
         eligibility to participate in the 1995 Purchase Plan.

8.       I hereby authorize the Company to terminate my participation in any
         Offering Period as of the last day of any Purchase Period and enroll me
         in a new Offering Period at the same payroll deduction rate as
         authorized above, if the option price as determined in accordance with
         Section 7 of the Purchase Plan for such new Offering Period is lower
         than the option price calculated on the first date of the Offering
         Period in which my participation is to be terminated.
<PAGE>   11
9.       Share Handling Instructions:

         Broker Related Transactions:
         [ ]      Sell my shares in a Same-Day-Sale transaction on the first
                  business day following the end of the Purchase Period. (Select
                  a Stock Broker below.)

         [ ]      Deposit my shares into my brokerage account. (Select a Stock
                  Broker below.)

                  [ ] Montgomery Securities  [ ] Other:  Name:__________________
                  [ ] Paine Webber                       Address:_______________
                                                            Address:____________
                                                            Ph. No.:____________
         Non-Broker Transaction:
         [ ]      Send a certificate for all shares purchased directly to me.

10.      In the event of my death, I hereby designate the following as my
         beneficiary(ies) to receive all payments and shares due me under the
         Purchase Plan (optional):
  
         NAME: (Please print)_____________________________________________
                               (First)          (Middle)          (Last)

         _________________________      _________________________________
         Relationship                   _________________________________
                                                    (Address)

         NAME: (Please print)_____________________________________________
                               (First)          (Middle)          (Last)

         _________________________      _________________________________
         Relationship                   _________________________________
                                                    (Address)

         Employee's Social
         Security Number:   ___________________________________

      Employee's Address:   ___________________________________
                            ___________________________________
                            ___________________________________

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated: ___________________  __________________________________
                                      Signature of Employee

                                      __________________________________
                                      Spouse's Signature (If beneficiary
                                      other than spouse)
<PAGE>   12
                                    EXHIBIT B


                             STORMEDIA INCORPORATED

                        1995 EMPLOYEE STOCK PURCHASE PLAN

                              NOTICE OF WITHDRAWAL


         The undersigned participant in the Offering Period of the StorMedia
Incorporated 1995 Employee Stock Purchase Plan which began on ___________ 19____
(the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period shall be automatically terminated. The undersigned understands further
that no further payroll deductions shall be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.


                                               Name and Address of Participant:

                                               _______________________________

                                               _______________________________

                                               _______________________________



                                               Signature:

                                               _______________________________


                                               Date: _________________________

<PAGE>   1
                                                                    Exhibit 23.1


                       CONSENT OF INDEPENDENT AUDITORS


        We hereby consent to the use of our report incorporated herein by
reference in the Registration Statement on Form S-8 of our report dated January
17, 1996 appearing on page 42 of the Stormedia Incorporated Annual Report on
Form 10-K for the year ended  December 31, 1995.




                                                   KPMG Peat Marwick LLP

Palo Alto, California
May 24, 1996


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