Manufacturing Agreement With Taiwan Semiconductor

EXHIBIT 10.19







TAIWAN SEMICONDUCTOR MANUFACTURING



COMPANY, LTD.





QUICKLOGIC CORPORATION







JULY 21, 1997

TABLE OF CONTENTS



1. DEFINITIONS............................................................... 4



2. VOLUME COMMITMENT......................................................... 6



3. OBLIGATION TO TAKE OR PAY FEE............................................. 7



4. FAILURE TO PURCHASE THE TAKE OR PAY CAPACITY.............................. 8



5. PRICING................................................................... 8



6. ROYALTIES................................................................. 9



7. SUPPLY.................................................................... 9



8. SHIPMENT.................................................................. 11



9. ACCEPTANCE................................................................ 12



10. ON-SITE INSPECTION AND VENDOR INFORMATION................................ 12



11. WARRANTY................................................................. 12



12. TECHNOLOGY OWNERSHIP [*]................................................. 13



13. CONFIDENTIALITY.......................................................... 16



14. EXPORT CONTROL........................................................... 17



15. INTELLECTUAL PROPERTY INDEMNITY.......................................... 18



16. PROCESS DEVELOPMENT...................................................... 19



17. SORT, ASSEMBLY AND TEST.................................................. 20



18. TERM AND TERMINATION..................................................... 20



19. RECORDS AND AUDITS....................................................... 21



20. BOARD APPROVAL........................................................... 21



21. ASSIGNMENT............................................................... 21



22. LIMITATION OF LIABILITY.................................................. 21



23. NOTICE................................................................... 22



24. GOVERNING LAW AND ARBITRATION............................................ 22



* An asterisk indicates confidential material that has been omitted from this

document and filed separately with the Securities and Exchange Commission

pursuant to Rule 406 of the Securities Act of 1933, as amended. Confidential

Treatment has been requested with respect to the omitted portions.



25. FORCE MAJEURE............................................................ 23



26. NON-PUBLICITY............................................................ 23



27. ENTIRE AGREEMENT......................................................... 23



28. LIST OF EXHIBITS......................................................... 25





MANUFACTURING AGREEMENT



THIS AGREEMENT is entered into, effective July 21, 1997 (the "Effective Date"), by and between Taiwan Semiconductor Manufacturing Co., Ltd., a company duly incorporated under the laws of the Republic of China, having its principal place of business at No. 121, Park Avenue III, Science Based Industrial Park, Hsin-Chu, Taiwan, R.O.C. ("TSMC"), and QuickLogic Corporation ("QuickLogic") a company duly incorporated under the laws of California having its principal place of business at 1277 Orleans Drive, Sunnyvale, CA 94089-1138.



RECITALS



QuickLogic has conceived of a technology known as QuickLogic's ViaLink(R) technology for programmable integrated circuits, and wishes to have TSMC assist QuickLogic in transferring and/or developing a production process for such technology and desires that TSMC be a manufacturing source for integrated circuits using such technology or such other processes as may be mutually agreed between the parties.



TSMC is in the business of manufacturing integrated circuits, and wishes to assist QuickLogic with the transfer and/or development of a production process for QuickLogic's ViaLink(R) technology and further desires to be a manufacturer of such integrated circuits using such technology for QuickLogic or such other processes as may be mutually agreed between the parties.



AGREEMENT



NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, the parties agree as follows:





1. DEFINITIONS



(a) "Process" shall mean the production process developed by TSMC with

assistance from QuickLogic to produce integrated circuits using

QuickLogic's metal to metal amorphous silicon antifuse ViaLink(R)

Technology, or such process or successor process as may be mutually

acceptable. The Process shall be used to manufacture the Products

defined below.



(b) "Products" used in this Agreement shall mean those integrated circuits

designed by QuickLogic and manufactured for QuickLogic by TSMC under





Agreement. The Products are to be sold in the form of unprobed wafers,

probed wafers, die, or tested packaged die, such form to be the choice

of QuickLogic.



(c) "TSMC Committed Capacity" used in this Agreement shall mean the

capacity that TSMC agrees to supply to QuickLogic in any calendar year

as set forth in Exhibit A.



(d) "Quicklogic Committed Capacity" used in this Agreement shall mean the

minimum capacity that QuickLogic agrees to purchase from TSMC pursuant

to this Agreement in any calendar year. The QuickLogic Committed

Capacity shall be the percentage of the TSMC Committed Capacity as set

forth in Exhibit A.



(e) "Take or Pay Capacity" used in this Agreement shall mean that part of

the QuickLogic Committed Capacity forecasted as specified in Section 2

(e) for a given quarter in any calendar year. The aggregate of the

four quarters of Take or Pay Capacity in any calendar year shall be

equal to the QuickLogic Committed Capacity for that year; for the

purposes of this Agreement this shall mean that the forecasted Take or

Pay Capacity for the fourth quarter of any calendar year shall equal

the QuickLogic Committed Capacity for that year less the sum of the

previous quarters Take or Pay Capacity for such year.



(f) "Take or Pay Fee" used in this Agreement shall mean the fee paid to

TSMC for the difference between the Take or Pay Capacity and the

actual capacity purchased in any given quarter, pursuant to Sections 2

and 3 below.



(g) "Date of Qualification" used in this Agreement shall mean the date of

completion of full qualification of the first QuickLogic Product. Full

qualification at the Effective Date is defined as passing all tests in

the following table. There may be some adjustments made by QuickLogic

to the test condition or criteria considering that this is

QuickLogic's first 3.3V product with 5V tolerant I/Os.



[ * ]



* An asterisk indicates confidential material that has been omitted from this

document and filed separately with the Securities and Exchange Commission

pursuant to Rule 406 of the Securities Act of 1933, as amended. Confidential

Treatment has been requested with respect to the omitted portions.







(g) "ViaLink Technology" used in this Agreement shall mean the metal-to-

metal amorphous silicon antifuse process developed for and by

QuickLogic in TSMC's Fab 4 on a 0.35um feature size process as used to

manufacture the Products.



2. VOLUME COMMITMENT



(a) QuickLogic agrees to purchase from TSMC not less than [*] of the total

number of wafers in any calendar year purchased from all its foundry

sources, excluding (i) wafers purchased from Cypress Semiconductor,

(ii) wafers which do not incorporate an antifuse, (iii) wafers for

which any QuickLogic customer demands in writing an alternative

foundry source, (iv) any other source of wafers that QuickLogic and

TSMC mutually agree to exclude from this calculation. QuickLogic and

TSMC will make a good faith effort to maintain QuickLogic's antifuse

wafer volume as being [*] or greater as provided by TSMC. "Wafers"

used in this paragraph 2(a) refer to 8" wafers or equivalent number of

other sizes of wafers.



(b) QuickLogic agrees to purchase from TSMC the QuickLogic Committed

Capacity, and subject to the payment of the Take or Pay Fee by

QuickLogic under Section 3 below, TSMC agrees to provide to QuickLogic

the TSMC Committed Capacity, as set forth in Exhibit A.



(c) QuickLogic will provide annually, by October 31, a forecast of the

total number of wafers that QuickLogic expects to purchase from TSMC

for [*] or for the remaining term of the Agreement, such forecast

being for one (1) year periods commencing on January 1 of the next

calendar year. The first calendar year of each such forecast is the

QuickLogic Committed Capacity. QuickLogic will make a firm commitment

to purchase the number of wafers for [*] excepting any forecast prior

to the Date of Qualification. For the year in which the Date of

Qualification occurs, the QuickLogic Committed Capacity, for the

purpose of determining the Take or Pay Capacity shall mean the

aggregate of that volume of wafers forecast, [*] pursuant to paragraph

2(e), following the Date of Qualification. The Take or Pay Fee shall

not be applied to any quarter preceding and including the Date of



(d) QuickLogic will provide TSMC a [*] forecast commencing on the calendar

quarter following the Date of Qualification. Such forecast shall be

binding for the purposes of determining the date of [*].



* An asterisk indicates confidential material that has been omitted from this

document and filed separately with the Securities and Exchange Commission

pursuant to Rule 406 of the Securities Act of 1933, as amended. Confidential

Treatment has been requested with respect to the omitted portions.





(e) On or before the last day of each calendar quarter QuickLogic agrees

to provide to TSMC a forecast by technology of the Take or Pay

Capacity for the next [*] that QuickLogic will

purchase of the QuickLogic Committed Capacity. The first binding such

forecast shall be provided for the quarter following the Date of

Qualification. The forecast for the Take or Pay Capacity for the first

quarter shall thereafter be binding (i.e. QuickLogic agrees to

purchase [*] for the shipment in the first

quarter of the forecast). The forecast for the second quarter Take or

Pay Capacity shall be binding within a deviation not to exceed plus or

minus [*] of the number of wafers forecast, providing

that the above forecasts shall not be less than the QuickLogic

Committed Capacity in any calendar year.



(f) All forecasts must be based on wafers out of fab and must include

quantities of wafers from previous forecasts that are currently in



(g) TSMC agrees to ship, and QuickLogic agrees to accept, wafers out at a

linear weekly rate in any quarter unless specifically agreed otherwise

by mutual negotiation.



3. OBLIGATION TO TAKE OR PAY FEE



(a) QuickLogic agrees to pay to TSMC the Take or Pay Fee as set forth in

this Section 3 and illustrated in Exhibit B, except as provided in

paragraph 7(c) below. The Take or Pay Fee for any calendar quarter,

once paid, shall be non-refundable for any cause nor shall it be

credited against any payments due in any subsequent calendar

quarter(s) except as provided in paragraph 3(b) and 4 below.



(b) If, in any calendar quarter, QuickLogic is required to pay a Take or

Pay Fee and in the next subsequent calendar quarter QuickLogic exceeds

the Take or Pay Capacity then that Take or Pay Fee will be credited

against such next subsequent calendar quarter for the cost of those

actual wafers purchased in excess of the Take or Pay Capacity, on a

per wafer basis, at a rate of [*] percent [*] of the per wafer

Take or Pay Fee.



(c) The Take or Pay Fee for any calendar quarter will be based on the

shortfall in numbers of wafers between the Take or Pay Capacity and

the actual purchased capacity multiplied by [*] of the average

purchase price of wafers purchased by QuickLogic from TSMC under this

Agreement in that quarter (as shown in Exhibit B), provided that the

total number of wafers purchased exceeds [*] of the QuickLogic

Committed Capacity. If the number of wafers falls below [*] of the

QuickLogic Committed Capacity the Take or Pay Fee wafer price will be

based on [*] of the average



* An asterisk indicates confidential material that has been omitted from this

document and filed separately with the Securities and Exchange Commission

pursuant to Rule 406 of the Securities Act of 1933, as amended. Confidential

Treatment has been requested with respect to the omitted portions.





price of wafers purchased under this Agreement in the last quarter in

which the total number of wafers purchased exceeded [*] of the

QuickLogic Committed Capacity.



(d) Unless otherwise agreed upon by the parties, payments shall be due

thirty (30) days after the date of TSMC's invoice. Any payment made

under this Agreement shall be in U.S. dollars.



4. FAILURE TO PURCHASE THE TAKE OR PAY CAPACITY



If in any calendar quarter, for any reason, QuickLogic does not intend

to use or purchase all or a portion of the Take or Pay Capacity for

that calendar quarter, QuickLogic shall promptly notify TSMC of such

in writing. QuickLogic shall remain liable for the Take or Pay Fee (as

illustrated in Exhibit B) for the remaining term of this Agreement

under Section 3 above. TSMC is entitled to sell or use any such unused

capacity for such calendar quarter. If TSMC sells such unused

capacity, verified by third party audit as per Section 19, QuickLogic

will receive [*] reimbursement, per wafer used by TSMC, of the Take or

Pay Fee paid for that quarter pursuant to paragraph 3(b) above.



5. PRICING



(a) Provided that QuickLogic purchases from TSMC not less than [*] percent

[*] of the total number of wafers in any calendar year purchased from

all QuickLogic's foundry sources, excluding sources as stated in

paragraph 2(a) and excluding wafers obtained from sources as a result

of TSMC's failure to deliver as defined in paragraph 7(a), QuickLogic

will receive [*] for the Products. This shall be interpreted as

follows: QuickLogic pricing shall be in the [*] of prices for wafers

sold to TSMC customers for the same TSMC Fab, for similar quantities

and like technology, [*]. Such pricing may be verified by QuickLogic

though a third party audit as per Section 19. [*].



(b) The parties shall negotiate in good faith each year prices for the

QuickLogic Committed Capacity of the following year, and if no

agreement is reached by the parties before October each year, the

parties agree to submit the dispute to the binding arbitration

pursuant to Section 24 below, and under such circumstances,



* An asterisk indicates confidential material that has been omitted from this

document and filed separately with the Securities and Exchange Commission

pursuant to Rule 406 of the Securities Act of 1933, as amended. Confidential

Treatment has been requested with respect to the omitted portions.





neither party shall have the right to terminate this Agreement under

Section 18 below.



(c) The prices quoted in this Agreement are based upon the New Taiwan

Dollar/US Dollar closing exchange rate according to the Bank of Taipei

at the Effective Date. If the closing exchange rate at the date of

shipment exceeds plus or minus 5% the quoted exchange rate at the

Effective Date, the exchange rate will be re-quoted to this value. Any

payment made under this Agreement shall be made in U.S. dollars.



(d) TSMC agrees to offer die pricing quotations after [*] production

wafers have been processed for each Product. The die pricing will be

based on current yields, yield trends and yield improvement plans that

are in accordance with TSMC's internal yield improvement plans.



6. ROYALTIES



In consideration of the [*] agrees to pay royalties in the amount of

[*] of the gross revenue based on the [*] may change this royalty

amount and [*] not less than one hundred and twenty (120) days notice

in writing prior to implementing such change. If [*] does not agree

with such change, the parties agree to submit the dispute to binding

arbitration pursuant to Section 24 below, and under such

circumstances, neither party shall have the right to terminate this

Agreement under Section 18 below or to terminate the existing royalty

payment under this Section 6.



(a) Reporting and Payment For the purpose of reporting on and paying the

royalties under this Section 6, [*] a written report stating the total

gross revenue based on [*] during the period ending December 31 of

each year. Such revenues can be verified by a third party audit as per

Section 19. Each such report shall be given within sixty (60) days

following the end of the calendar year, and shall be accompanied by a

check in full payment of all royalties due for such period.



7. SUPPLY



(a) QuickLogic reserves the right to obtain an alternative source ("Second

Source"), for up to a maximum of [*] of its total number of wafers



* An asterisk indicates confidential material that has been omitted from this

document and filed separately with the Securities and Exchange Commission

pursuant to Rule 406 of the Securities Act of 1933, as amended. Confidential

Treatment has been requested with respect to the omitted portions.





all its foundry sources excluding sources as stated in paragraph 2(a)

in any one year. In the event that TSMC fails to meet the TSMC

Committed Capacity or QuickLogic's market requirements defined as (i)

market capacity, (ii) Product quality as per Exhibit E and F or (iii)

average Product yields as per TSMC's predicted yield model for any

Product, then QuickLogic shall have the right to Second Source the

Products without regard to quantity limitations until such time as

TSMC can supply such committed capacity or such QuickLogic market



(b) If TSMC is aware of any reason that will cause a delay in meeting its

commitment to supply Products to QuickLogic, TSMC shall be required to

immediately notify QuickLogic in writing.



(c) If TSMC fails to deliver Products ordered by QuickLogic within the

TSMC Committed Capacity, including a failure to deliver due to low

Product or process yields, and such failure to deliver results in a

failure by QuickLogic to take delivery of the Take or Pay Capacity,

then QuickLogic shall not be liable for the Take or Pay Fee for any

shortfall in Products resulting from TSMC's failure to deliver.



(d) If TSMC fails to meet its delivery dates on two or more successive

deliveries by more than fourteen (14) days, a senior officer of

QuickLogic will discuss the cause of the delay with the President of

TSMC, USA and discuss the means to correct the failures and TSMC shall

take specific steps to prevent similar events in the future, thus

ensuring that TSMC meets its commitments. If the corrective action has

not remedied the delays in delivery within sixty (60) calendar days,

the president of QuickLogic shall call the president of TSMC, Ltd.,

Taiwan and TSMC shall use its best efforts to remedy the failure to

meet its commitments in the shortest possible time. Failure of TSMC to

use its best efforts at such time will constitute a breach of



(e) QuickLogic shall place purchase orders ("Purchase Orders") for such

quantities of the wafers as and when it requires. The Purchase Orders

shall be open purchase orders for a fixed quantity of the wafers, and

shall normally cover a [*] period commencing one quarter after the

placement of the Purchase Order. QuickLogic shall issue release orders

for quantities and mix of Products as and when it requires, against

this Purchase Order. Such Purchase Orders constitute firm purchase

obligations on the part of QuickLogic and shall only be final subject

to acceptance by TSMC. TSMC may accept the Purchase Order either by

written acknowledgment or by shipment of the Products ordered. Any

such written acknowledgment or shipment by TSMC may vary the terms of

Purchase Orders consistent with the terms and conditions of this

Agreement. Notwithstanding the above, the average cycle time per

masking step for QuickLogic Products shall b ...