EXHIBIT 10.3
April 24, 1998
Xx. Xxxx X. Xxxxx
President and CEO
Headway Technologies, Inc.
000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Dear Xxxx,
When fully executed by the parties, this letter will bind Seagate and
Headway to negotiate in good faith for an extension of that certain Cross
License and Know How Transfer Agreement between the parties dated May 19, 1995
("Agreement"), with the following provisions; subject to satisfying the
following conditions precedent:
1. Headway delivering to Seagate a list of unique technology that
satisfies Seagate that Headway's DSMR technology will enable Seagate
to manufacture DSMR heads at the 3.2 and, to the extent available, 4.5
and 6.2Gbit/in2 design points; and
2. A Seagate drive design center designating Headway's 3.2Gbit/in2 DSMR
head for qualification into a current or future Seagate disc drive
product.
NEW OR MODIFIED PROVISIONS
Know How
The know how ("Information" as defined in the above Agreement) transferred
will be sufficient to enable Seagate to make, at the same yields, the same head
or heads as Headway may qualify for any Seagate disc drive product, with the
understanding that Seagate may use the technology to make heads with other
designs and for any product made by Seagate or for sale to third parties.
General
1. The Agreement extension to be negotiated will provide the terms and
conditions for DSMR technology transfer beyond the 6.2Gbit/in2 design
point, to the extent that DSMR technology can be so extended, without
further negotiation.
2. Seagate and Headway will set up a Senior Management team to administer
this project to the mutual benefit of both parties. This team's
duties will be detailed in the formal agreement emanating from this
LOI, but will include guidance on the use of DSMR technology in
Seagate's drive products, the status of technology transfer
[*]=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.
Xx. Xxxx X. Xxxxx
April 24, 1998
Page 2
procedures from Headway to Seagate as part of the process of the
license agreement, the status of defined projects such as yield
improvements and will also include reviewing the status of the wafer
purchase commitment detailed later in this LOI.
3. Until Seagate has qualified its head at the 6.2Gbit/in2 design point
and Seagate yields are at least those of Headway's 6.2Gbit/in2 heads,
Seagate and Headway may each maintain up to 3 engineers full time at
the other's facilities to assist in technology transfer. Information
on technologies not relating to DSMR shall be considered and treated
as each party's trade secrets.
4. Further, during this period, Seagate and Headway will set up a core
team of engineers who will be responsible for DSMR technology
transfer, yield improvement, and other technical matters under this
agreement. Where possible, the members of these core teams should be
considered as occupying long term positions
5. Recognizing that the reasons why a given technical solution was chosen
constitutes critical know how, Headway agrees to include such
information in the know how it transfers and will answer such
questions in writing when propounded in writing. Similarly, if
Seagate improves Headway's technology, the reasons behind the
alteration will be communicated to Headway in the same manner.
6. Headway will identify other head technologies it is developing (SSMR,
XXX MR, GMR) and agrees to negotiate in good faith for a know how
license and transfer to Seagate.
License fees.
-------------
The following license fee amounts will be paid upon successful completion
of the milestone events indicated;
#1). $[*] upon signing the extension of the Agreement and upon
qualification of a Headway 3.2Gbit/in2 DSMR head in a Seagate 10,000 rpm
disc drive product.
#2). $[*] upon qualification in Seagate disc drive product of a
Seagate made DSMR head pursuant to Headway's 3.2Gbit/in2 DSMR know how (as
defined above, i.e., that the qualified Seagate DSMR head is the same as
Headway's qualified DSMR head, at the same yields).
#3). $[*] upon demonstration by Headway of satisfactory drive level
performance of 4.5Gbit/in2 (and at 10,000 rpm spindle speed) DSMR heads,
and upon
[*]=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.
Xx. Xxxx X. Xxxxx
April 24, 1998
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Headway qualifying a 4.5Gbit/in2 DSMR head in a Seagate 10,000 (or higher)
rpm disc drive product.
#4). $[*] upon qualification in a Seagate disc drive product of a
Seagate made DSMR head pursuant to Headway's 4.5Gbit/in2 DSMR know how (as
defined above, i.e., that the qualified Seagate DSMR head is the same as
Headway's qualified DSMR head, at the same yields).
#5). $[*] upon demonstration by Headway of satisfactory drive level
performance of 6.2Gbit/in2 (and at 10,000 rpm spindle speed) DSMR heads,
and upon Headway qualifying a 6.2 Gbit/in2 DSMR head into a Seagate 10,000
(or higher) rpm disc drive product.
#6). $[*] upon qualification in a Seagate disc drive product of a
Seagate made DSMR head pursuant to Headway's 6.2 Gbit/in2 DSMR know how (as
defined above, i.e., that the qualified Seagate DSMR head is the same as
Headway's qualified DSMR head, at the same yields).
Per Unit Royalties
------------------
Notwithstanding anything in the above-referenced Agreement to the contrary,
Seagate's per unit royalties shall be as follows;
1. No per unit royalties shall be due and payable from April 1, 1998 until
March 31, 1999 (this includes royalties on DSMR heads made at existing
design points);
2. On and after April 1, 1999, all heads manufactured from wafer made by
Seagate and shipped by Seagate in a Seagate disc drive, shall bear a
royalty of $[*] per head, provided however, that the parties shall agree
to mutually acceptable terms and conditions associated with the per head
royalty provisions;
3. Such per head royalty shall be capped at [*] dollars ($[*]) per design
point, i.e., all heads made by Seagate after such cap at any design point,
past, present or future inclusive of the design points set forth in the
present Agreement and this LOI, using Headway's DSMR know how transferred
to Seagate for making DSMR heads at such design point shall be royalty
free; and
4. As a consequence of this license extension, the specific section in the
original Agreement relating to Royalty Recovery (Section #8.4 in the
Agreement) will be suspended.
[*]=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.
Xx. Xxxx X. Xxxxx
April 24, 1998
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Wafer Purchase Commitment
-------------------------
Seagate and Headway will negotiate a wafer supply agreement that will commit
Seagate to purchase from Headway at least [*] percent ([*]%) of Seagate's DSMR
die needs for all design points wherein Headway has transferred Seagate the know
how for such design point, up to a cap of [*] ([*]) Headway
candidates per week cumulative with respect to DSMR heads made at all design
points.
This arrangements shall begin no sooner that July 1, 1998, or as soon thereafter
that Headway demonstrates to Seagate's satisfaction that it has the capability
to meet Seagate's needs at the mandated fifty-percent level.
Such a supply agreement shall condition Seagate's purchase requirements on
Headway's continuing ability to support Seagate's specification and quality
requirements, on its ability to meet Seagate's forecasted schedule needs, which
in turn shall be based on the market conditions for such of Seagate drives that
employ DSMR heads, and on Headway's ability to offer pricing, which shall,
beginning on July 1, 1998, be no more than $[*] per 30 series candidate,
provided that such HGA electrical test yields are [*]% (with the understanding
that the supply agreement will detail the situation pertaining to higher or
lower candidate pricing upon the attainment of higher or lower electrical test
yields at HGA). All other pricing shall be negotiated, with the understanding
that pricing shall decline.
This commitment to purchase [*]-percent continues to future design points
provided that Headway transfers to Seagate all necessary know how for Seagate to
manufacture DSMR heads at such design point and provided further that Headway is
in current compliance with Seagate's requirements as specified herein at any
previous design point still in production.
For Headway For Seagate
/s/ Xxxx X. Xxxxx [SIGNATURE ILLEGIBLE]
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Date: April 24, 1998 Date: APRIL 27, 1998
[*]=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.
