Exhibit 10.18
CTR
Volume Supply Agreement
THIS AGREEMENT is dated May 10, 1999 is made
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BETWEEN:
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Headway Technologies, Inc., a Delaware Corporation having corporate offices at
000 X. Xxxxxxxx Xxxxx, Xxxxxxxx, XX 00000 ("Headway");
SAE Magnetics (H.K.) Ltd., a Hong Kong Corporation whose registered office is at
SAE Tower, 00-00 Xxxx Xxxx Xxxxxxxx, Xxxx Xxxxx, X.X. Xxxx Xxxx ("XXX")
WHEREAS:
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(A) Headway is interested in procuring Slider and HGA subcontracting services
from SAE on a long-term basis and requires a commitment for capacity allocation.
(B) SAE is interested in providing Slider and HGA subcontracting services to
Headway on a long-term basis and requires a commitment of wager supply before
allocating the required capacity.
WHEREBY IT IS AGREED as follows:
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ARTICLE 1 VOLUME COMMITMENT
1.1 Headway commits to supply wafers to SAE, consigned either directly or
indirectly, sufficient for the manufacture of up to Five Million HGAs per
month. SAE has the right to purchase the resulting HGAs.
1.2 SAE commits to allocate slider and HGA capacity to Headway, or its
designee, sufficient for the manufacture of Five Million HGAs per month.
ARTICLE 2 PROGRAM VOLUME, PRICING AND SALES TERMS
2.1 Both parties recognize that specific volumes, pricing and sales terms can
not be agreed upon in advance for the term of this Agreement. Actual
pricing, volume and terms will be reviewed quarterly and agreed to on a
program by program basis. Both parties agree that pricing and terms will be
similar to those outlined in Exhibit A.
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ARTICLE 3 BACKEND SUPPORT
3.1 SAE agrees to assist MRST, Inc., a joint venture between Headway and SFI
Investment Limited to establish a slider manufacturing capability. Such
assistance
[*] -- CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO
THE OMITTED PORTIONS.
shall include the transfer and qualification of SAE 's existing slider
process and the installation of equipment, tooling and facility
improvements sufficient to achieve output of One Million sliders per month.
ARTICLE 4 TERM
4.1 This Agreement will be effective from April 30, 1999 and continue for a
period of three years (the "Initial Period"). At the end of the Initial
Period and each anniversary date thereafter, the Agreement will
automatically renew for an additional year until either party notifies the
other in writing they do not wish to renew this Agreement as of the next
anniversary date.
ARTICLE 5 FORCE MAJEURE
5.1 Neither party shall be liable to the other for its failure to perform its
obligations as a result of circumstances beyond its reasonable control.
ARTICLE 6 GOVERNING LAW
6.1 This Agreement shall be governed by and construed in accordance with the
laws of the State of California, without regard to its conflicts of law
rules.
ARTICLE 7 ENTIRE AGREEMENT
7.1 This Agreement and its Exhibit constitute the entire agreement of the
parties with respect to the subject matter and supersede and replace all
prior oral and written agreements, representations and understandings of
the parties with respect to the subject matter.
APPROVED BY:
________________________________________
Xxxx X. Xxxxx, President & CEO
Headway Technologies, Inc.
________________________________________
Xxxxxxx Xxxxx, Executive Vice President
SAE Magnetics (H.K.) Ltd.
________________________________________
Xxxxxxxxx Xxxxxxxxx, General Manager
TDK Head No. 1 Division
Exhibit A
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Meteor Criteria
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. The Headway pricing model for the Meteor will be [*]% of the selling price
as SAE resale price to Maxtor
. The MRST subcontract fee will be [*]% of the resale price to Headway.
. The above pricing model and demand will be reviewed each quarter, in four
quarter increments with representatives of Headway, SAE and MRST
respectively.
. Pricing effective from NPI build through end of life
. Price and yield reconciliation to be summarized on a quarterly basis, for
ships below 500k, that quantity will be rolled into the next quarter.
. Payment Terms to Start on HSA shipment
HEADWAY Request
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. Payment Terms: July/August - Net 30 days
. Payment Terms: Sept./Oct. - Net 45 days
. Payment Terms: Nov.-Beyond-Net 60 days.
. Headway will allocate and commit up to 5 million HGA wafer equivalents
. SAE will commit equivalent capacity to produce up to 5 million HGA's
. Headway will commit all the HGA's being produced under this agreement will
be solely for SAE turnkey business
. Direct material cost reduction opportunity during the period will be
reviewed quarterly and opportunity savings will be shared as follows:
For BFC and suspensions combined pricing below $[*], Headway and
SAE will share [*] portion of the unyielded cost advantage below
$[*]
. MRST consigned wafer, FOC basis
. SAE to ensure that slider manufacturing will be in accordance with the
expanded row capability (45 slider/row)
. For HSA fallout, Headway to sell up to [*]% of the HGA volume in the form
of wafers at USD$[*] each.
This material to be tracked independently of the standard SAE
production flow.
For excessive HSA fallout, greater than [*]%, extra wafer sales will be
reviewed.
Subcon, Penalty Clause:
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Less than [*]% HGA DP yield will result in a financial penalty calculated as
follows:
Where actual DP is less than [*]%
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Penalty = $[*] - $[*]
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actual DP [*]%
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Example: Actual DP at [*]% ($[*]/[*]%)-($[*]/[*]%)= $[*] per unit adder
to subcontract fee
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
Subcon, Reward Clause:
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Greater than or equal to [*]% HGA DP yield will result in a financial reward
calculated as follows:
Where actual is =[*]%
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Reward = $[*] - $[*]
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Example: Actual DP at [*]% ($[*]/[*]%)-($[*]/[*]%) = $[*] per unit credit to
subcontract fee
[*]=CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
