EXHIBIT A
KOMAG, INCORPORATED
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
ANNUAL OPTION GRANT
RECITALS
A. The Corporation has approved an automatic option grant
program under the Restated 1987 Stock Option Plan (the "Plan") pursuant to which
the non-employee members of the Corporation's Board of Directors (the "Board")
will automatically receive periodic option grants designed to reward them for
services they have rendered to the Corporation and to encourage them to continue
in the service of the Corporation.
B. Optionee is a non-employee member of the Board, and this
Agreement is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant on this day of a stock option to
purchase shares of the Corporation's common stock, $0.01 par value ("Common
Stock"), under the Plan.
C. The granted option is intended to be a non-statutory option
which does not meet the requirements of Section 422 of the Internal Revenue
Code.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. Subject to and upon the terms and
conditions set forth in this Agreement and in the notice of grant accompanying
this Agreement ("Notice of Grant"), there is hereby automatically granted to
Optionee, as of the date of grant specified in the Notice of Grant (the "Grant
Date"), a stock option to purchase up to the number of shares of the
Corporation's Common Stock (the "Option Shares") as is specified in the Notice
of Grant at the price per share (the "Option Price") specified in the Notice of
Grant which is one hundred percent (100%) of the fair market value of the
Corporation's Common Stock on the grant date.
2. Option Term. The automatic option grant shall have a term
of ten (10) years measured from the automatic grant date and shall accordingly
expire at the close of business on the Expiration Date specified in the Notice
of Grant, unless sooner terminated in accordance with Paragraph 5 or 7.
3. Limited Transferability. This option may, in connection
with optionee's estate plan, be assigned in whole or in part during the
optionee's lifetime to one or more members of the optionee's immediate family or
to a trust established exclusively for one or more such family members. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The
terms applicable to the assigned portion shall be the same as those in effect
for the option immediately prior to such assignment and shall be set forth in
such documents issued to the assignee as the administrator of the Plan may deem
appropriate. Should the Optionee die while holding this option, then this option
shall be transferred in accordance with Optionee's will or the laws of
inheritance.
4. Dates of Exercise. The option shall become exercisable for
all the Option Shares upon the Optionee's completion of one (1) year of
continuous service as a Board member, measured from the automatic grant date.
Once the option becomes exercisable for the Option Shares, the option shall
remain so exercisable until the expiration or sooner termination of the option
term.
5. Termination of Board Membership. Should the Optionee's
service as a Board member cease while this option remains outstanding, then the
option term specified in Paragraph 2 shall terminate (and this option shall
cease to remain outstanding) prior to the Expiration Date in accordance with the
following provisions:
(i) Should Optionee cease to be a Board member for
any reason other than death while holding this option, then the period
for exercising this option shall be reduced to a six (6)-month period
commencing with the date of such cessation of Board membership, but in
no event shall this option be exercisable at any time after the
Expiration Date. During such limited period of exercisability, this
option may not be exercised in the aggregate for more than the number
of Option Shares (if any) for which it is exercisable on the date the
Optionee ceased service as a Board member. Upon the expiration of such
six (6)-month period or (if earlier) upon the specified Expiration Date
of the option term, the option shall terminate and cease to be
exercisable.
(ii) Should Optionee die while serving as a Board
member or during the six (6) months following his or her cessation of
Board service, then the personal representative of the Optionee's
estate or the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of
descent and distribution shall have the right to exercise this option
for any or all of the Option Shares for which the option is at the time
exercisable. Such right of exercise shall terminate, and this option
shall accordingly cease to be outstanding, upon the earlier of (A) the
expiration of the twelve (12)-month period measured from the date of
Optionee's death or (B) the specified Expiration Date of the option
term.
2.
6. Adjustment in Option Shares.
A. In the event any change is made to the Common Stock
issuable under the Plan (whether by reason of (i) merger, consolidation or
reorganization or (ii) recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other similar change affecting the
outstanding Common Stock as a class without receipt of consideration), then,
unless such change results in the termination of all outstanding options
pursuant to the provisions of paragraph III of Articles Two and Three of the
Plan, the number and class of securities purchasable under this option and the
Option Price payable per share shall be appropriately adjusted to prevent the
dilution or enlargement of the Optionee's rights and benefits hereunder.
B. If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Option Price,
provided the aggregate Option Price shall remain the same.
7. Corporate Transaction. In the event of any of the following
stockholder-approved transactions (a "Corporate Transaction"):
(i) a merger or acquisition in which the Corporation
is not the surviving entity, except for a transaction the principal
purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Corporation, or
(iii) any reverse merger in which the Corporation is
the surviving entity,
this option, to the extent outstanding at the time, shall
automatically accelerate so that such option shall, immediately prior to the
specified effective date for the Corporate Transaction, become fully exercisable
for all of the Option Shares at the time subject to the option and may be
exercised for any or all of those Option Shares as fully-vested shares.
Immediately following the consummation of the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
3.
8. Change In Control/Hostile Takeover.
A. Immediately prior to the occurrence of a Change in Control
as defined below, this option, to the extent outstanding at the time, shall
automatically accelerate and become immediately exercisable for all of the
Option Shares at the time subject to the option and may be exercised for any or
all of those Option Shares as fully-vested shares. The option shall remain
exercisable for such fully-vested shares until the earlier of (i) the specified
Expiration Date of the option term or (ii) the termination of the option
pursuant to the provisions of Paragraph 5.
B. Upon the occurrence of a Hostile Takeover (as defined
below), this option shall be automatically cancelled in exchange for a cash
payment from the Corporation in an amount equal to the excess of (I) the
Take-Over Price of all the Option Shares at the time subject to the cancelled
option over (II) the aggregate Option Price payable for such shares. The cash
payment shall be made within five (5) days following the consummation of the
Hostile Take-Over.
C. For purposes of this Paragraph 8, the following definitions
shall be in effect:
A Change in Control shall be deemed to occur in the
event:
(i) any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934) of
securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders; or
(ii) there is a change in the composition of the
Board over a period of twenty-four (24) consecutive months or less such
that a majority of the Board members ceases, by reason of one or more
proxy contests for the election of Board members, to be comprised of
individuals who either (A) have been Board members continuously since
the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least two-thirds of
the Board members described in clause (A) who were still in office at
the time such election or nomination was approved by the Board.
4.
A Hostile Take-Over shall be deemed to occur in the
event any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Corporation's outstanding securities pursuant to a
tender or exchange offer which the Board does not recommend the Corporation's
stockholders to accept.
The Take-Over Price per share shall be deemed to be
equal to the greater of (a) the Fair Market Value per share on the date of the
option cancellation or (b) the highest reported price per share paid in
effecting such Hostile Take-Over.
9. Manner of Exercising Option.
A. In order to exercise this option for all or any part of the
Option Shares, Optionee (or in the case of exercise after Optionee's death, the
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
(i) Either provide the Stock Administrator of the
Corporation (or his/her designee) with written notice of the exercise
in which there is specified the number of Option Shares for which the
option is being exercised or initiate the exercise through the
interactive response system established with a Corporation-designated
brokerage firm.
(ii) Pay the aggregate Option Price for the purchased
shares in one or more of the following alternative forms:
1. full payment in cash or check drawn to
the Corporation's order; or
2. full payment in shares of Common Stock
held by the Optionee for the requisite period necessary to avoid a
charge to the Corporation's reported earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date; or
3. full payment through a combination of
shares of Common Stock held by the Optionee for the requisite period
necessary to avoid a charge to the Corporation's reported earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date and cash or check, equal in the aggregate to the Option
Price; or
5.
4. payment effected through a broker-dealer
sale and remittance procedure pursuant to which the Optionee shall
provide irrevocable instructions to (I) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on the
settlement date, an amount equal to the aggregate option price payable
for the purchased shares plus all applicable Federal and State income
and employment taxes required to be withheld by the Corporation by
reason of such purchase and (II) the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option, if
other than Optionee, have the right to exercise this option.
B. For purposes of subparagraph A above and for all other
valuation purposes under this Agreement, the Fair Market Value per share of
Common Stock on any relevant date shall be determined in accordance with the
following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, as such price is reported by the National Association of
Securities Dealers on the Nasdaq National Market or any successor
system. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
(ii) If the Common Stock is at the time listed on
either the New York Stock Exchange or the American Stock Exchange, then
the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on such exchange, as such price is
officially quoted in the composite tape of transactions on that
exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation
exists.
C. The Exercise Date shall be the first date on which there is
compliance with all the terms and conditions of subparagraphs A and B above
applicable to such exercise.
6.
D. As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of the Optionee (or any other person or
persons exercising this option) a certificate or certificates representing the
Option Shares purchased and paid for in accordance herewith.
E. In no event may this option be exercised for any fractional
share.
10. Stockholder Rights. The holder of this option shall not
have any of the rights of a stockholder with respect to the Option Shares until
such individual shall have exercised this option, paid the Option Price for the
purchased shares and been issued one or more certificates for the purchased
shares.
11. No Impairment of Rights. This Agreement shall not in any
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise make changes in its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets. Nor shall this Agreement in any way be construed or
interpreted so as to affect adversely or otherwise impair the Corporation's
right to remove the Optionee from the Board at any time in accordance with the
provisions of applicable law.
12. Compliance with Laws and Regulations. The exercise of this
option and the issuance of the Option Shares upon such exercise shall be subject
to compliance by the Corporation and the Optionee with all applicable
requirements of law relating thereto and with all applicable regulations of any
stock exchange (or the Nasdaq National Market System, if applicable) on which
shares of the Corporation's Common Stock are at the time listed for trading.
13. Successors and Assigns. Except to the extent otherwise
provided in Paragraph 3 or 7, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of Optionee and the successors and assigns of
the Corporation.
14. Discharge of Liability. The inability of the Corporation
to obtain approval from any regulatory body having authority deemed by the
Corporation to be necessary to the lawful issuance and sale of any Common Stock
pursuant to this option shall relieve the Corporation of any liability with
respect to the non-issuance or sale of the Common Stock as to which such
approval shall not have been obtained. However, the Corporation shall use its
best efforts to obtain all such applicable approvals.
15. Notices. Any notice required to be given or delivered to
the Corporation under the terms of this Agreement shall be in writing and
addressed to the Corporation in care of the Stock Administrator at the Corporate
Offices at 0000 Xxxxxxxxxx Xxxxxxx, Xxx Xxxx, Xxxxxxxxxx 00000. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below
7.
Optionee's signature line on the Notice of Grant. All notices shall be deemed to
have been given or delivered upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.
16. Construction/Governing Law. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the Plan.
The interpretation, performance, and enforcement of this Agreement shall be
governed by the laws of the State of California.
8.
