Exhibit 10.42

MANUFACTURING AGREEMENT

This Manufacturing Agreement (the “Agreement”) is entered into as of
February 15, 2010, and is effective November 1, 2009 by and between RF
Monolithics, Inc., a corporation duly organized under the laws of the State of
Delaware, having its principal place of business at 4441 Sigma Road, Dallas, TX,
75244, U.S.A. (hereinafter referred to as “Company”) and Tai-Saw Technology Co.,
Ltd. a corporation duly organized and existing under the laws of the Taiwan with
its principal place of business at No. 3, Industrial 2nd Rd., Ping-Chen
Industrial District, Taoyuan, 324, Taiwan, R.O.C. (hereinafter referred to as
“Contractor”). This Agreement covers the period of time between October 31, 2009
and, November 1, 2010 and automatically renews on October 31 of each year
thereafter for the succeeding twelve (12) month period unless one of the parties
provides a written notice of termination under the provisions of Section 18 of
this Agreement.

RECITALS

WHEREAS, Company and Contractor desire to enter into an agreement for certain
manufacturing and production services for Die and Product (defined below),
whereby Contractor will Manufacture (defined below) for Company certain Die and
Product at the Factory (defined below) in accordance with the Specifications and
instructions of Company;

NOW THEREFORE, in consideration of the premises and mutual promises, covenants
and agreements hereinafter set forth, the parties hereto agree as follows:

1. General Definitions. The terms set forth below in this Section 1 shall have
the meanings ascribed to them below, or as ascribed in the paragraph referenced:

Affiliate: with respect to any Person, shall mean any Person that directly or
indirectly controls, is controlled by or is under common control with such
Person.

Annual Review Process: shall mean the process conducted by Company and
Contractor to review commitments for the coming year concerning Product pricing,
production levels, inventory levels, Product quality and reliability, and
service levels. This process normally occurs during Company’s first fiscal
quarter (the three months ending November 30), to review the previous year’s
performance.

Approved Vendor: see paragraph 2.4 of this Agreement

Approved Vendor List: see paragraph 2.4 of this AgreementBest Efforts: a party’s
reasonable and prudent efforts in accordance with the commercial practice of
Manufacture.

 

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Consignment: property, including but not limited to equipment, Die and
Materials, that is owned by the Company that is used by the Contractor to
fulfill the purposes of this Agreement.

Control Plan: A representation of Contractor’s process flow, process parameters
and controls, and action responses to out-of-control situations associated with
each Product Family, Product or SAW Die, which is used by Contractor to support
Die and Product Manufacture for Company. Company shall approve Contractor’s
Control Plans, and such Control Plans shall be consistently maintained by
Contractor as long as Contractor manufactures Product and Die for Company.

Critical Processing Supplies: those consumable supplies used in Manufacture of
Die or Product that have been found by Company to have a direct impact on the
yield, quality, reliability or performance of Die or Product, and are thus
required to be used in Manufacture of Die and Product by Contractor by virtue of
inclusion on the Approved Vendor List.

Defective Unit: Product or Die returned from Company’s customers or Company’s
other contractor(s) that do not meet specification due to fabrication or
assembly processing problems. Reference paragraph 2.8

Delivery Date: the date on which the finished Die or Product is delivered to the
freight forwarder designated or approved by Company.

Die: individual unpackaged SAW devices, inductors, or custom integrated circuit
devices, either in diced or wafer form whether purchased or fabricated by
Contractor.

Electrical Test: a verification of the electrical functions of Die or Product.

Engineering Change Procedure: Company’s documented and controlled procedure for
making revisions to drawings, process procedures, test specifications and other
official documents used to Manufacture Die and Product.

FCA: Free Carrier as defined in Incoterms 2000 as published by the International
Chamber of Commerce.

Factory: the Contractor’s manufacturing facility for Die or Product located at
either Taoyuan, Taiwan or Wuxi, China.

Final Lot Acceptance Test: the series of electrical and physical performance
tests and visual inspections performed by Company representatives as the last
step in the manufacturing process to ensure compliance to Company Specifications
and Die or Product’s fitness for use or sale.

 

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Finished Goods: any Die or Product that is 100% complete, inspected, tested, and
either stored in Contractor’s warehouse facilities, or packed in a shipping
container awaiting shipment.

Finishing Materials: shipping tubes, reels, waffle packs, gel packs and similar
items, labels, tickets and shipping cartons used to ship Finished Goods per
Company Specifications

Improvements: shall mean any invention, information, development, technology or
modification, of any nature or form, and any part or combination of parts, or
method of using or manufacturing such part or combination of parts, developed
during the term of this Agreement by either Company or Contractor, which would
improve a Die or Product, including, without limitation, any development the use
of which affects the Die or Product in any of the following ways:

 

  •  

Reduces costs;

 

  •  

Improves performance;

 

  •  

Improves handling, yields or productivity in the manufacturing process;

 

  •  

Broadens applicability;

 

  •  

Increases marketability, or

 

  •  

Improves appearance.

Indirect Materials: any and all Materials which are used and consumed during the
practice of Manufacture but which do not become, and are not identifiable, as a
physical part of Product or Die (e.g., solvents, adhesives, gloves, etching
fluids, photoresist, etc.)

Manufacture: the complete process of Die fabrication or assembly and test of
Product into Finished Goods, using one or more Piece Parts such as Die or
Package(s), as required under this Agreement.

Manufacturing Data: all data prepared or collected in connection with the
performance of services under this Agreement, including, but not limited to, any
reports, compilations of data, drawings, sketches, formulas, designs, analyses,
graphs, notes, memoranda and notebooks.

Manufacture Defect: any defect that is attributable to the Manufacture of Die or
Product by Contractor under this Agreement.

Materials: all raw materials, Critical Processing Supplies (as defined above)
Finishing Materials and Die/wafers required by Contractor to Manufacture Die or
Products.

 

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New Products: new items or variations of current Die or Product that the Company
and the Contractor have agreed in writing to be covered by this Agreement.

Package: with reference to Manufacture of Product, a container for a designated
and specified set of Piece Parts that upon completion of Manufacture can become
a Unit of Product.

Person: any individual, firm, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization,
government or agency or subdivision thereof or any other entity.

Piece Parts: the individual components that are used to make up a Product such
as headers, Package(s), lids, substrates and Die. Piece Parts are Materials.

Product: the Product(s) manufactured pursuant to this Agreement and according to
process and test flows provided from time-to-time or otherwise agreed-to by
Company. From time-to-time the description of and Specifications for Product(s)
may be amended by change requests and the introduction of New Products in
accordance with paragraphs 2.2 and 2.3 of this Agreement.

Product Family: different part numbers of Finished Goods comprising Die or
Products fabricated or manufactured by the same process and test sequence as
governed by Contractor’s Control Plan for the Product Family.

Production Start Up: the time of initial shipments, in accordance with a
published production plan furnished to the Contractor by the Company, of a
specific Die or Product, or a Product Family, after qualification testing for a
specific Die, Product or a Product Family has been successful.

Provided Equipment: any equipment, including but not limited to, manufacturing
and Electrical Test equipment, including test fixtures, supplies, Materials, and
documentation which Company provides to Contractor for use in providing services
under this Agreement and for which Company retains title of ownership.

Purchased Materials: Materials purchased and used by Contractor to fabricate Die
or Manufacture Product for Company. Examples of Purchased Materials are Critical
Processing Supplies, Die, wafers, Package(s), and lids.

Purchase Order: document issued and used by the Company to authorize Contractor
to Manufacture Die or Product. This is the only document used by Company to
authorize Contractor to Manufacture Die or Product. (See Section 6 of this
Agreement)

 

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Quality Standards: the body of information contained in Company quality
documents and procedures such as the Company’s “Workmanship and Quality
Standards” that describe Product’s fitness for sale or the quality and
reliability of Die.

Quarterly Operations Reviews: the process conducted by Company and Contractor to
review such items as yields, cycle times, delivery performance, quality metrics,
inventory levels and cost reduction roadmaps. This process normally occurs
within 3 weeks of the end of the Company’s fiscal quarter (Nov. 30, Feb.
28, May 31, and Aug. 31).

SAW: Surface Acoustic Wave device.

Specifications: drawings, criteria, and documented specifications including but
not limited to process flow chart, test flow chart, test specification, bills of
materials, mount-bond diagram, process procedures, Approved Vendor List, marking
diagrams, packaging and shipping specifications and Materials specifications.
Additional Specifications may be issued from time-to-time by Company as New
Products are introduced into Manufacture.

Structured Wafer: a Wafer featuring a series of metallized patterns, each of
which ultimately comprise Die upon completion of Manufacture.

Technical Information: any information which relates to the design, structure,
functions, operation, fabrication, Manufacture, use, lease, sale or other
disposition of Die, Product or Provided Equipment, and which is owned,
developed, discovered or otherwise acquired by Company at any time prior to the
expiration or termination of the term of this Agreement, and which is disclosed
or transferred by Company to Contractor, or which Contractor has access to or
obtains, or which becomes known to Contractor, under or pursuant to this
Agreement.

Technical Data: any tangible medium embodying Technical Information, which is
owned, developed, discovered or otherwise acquired by Company at any time prior
to the expiration or termination of the term of this Agreement, including but
not limited to plans, Specifications, material lists (bills of materials),
machine drawings, software and instructions, whether in human or machine
readable form.

Tools and Fixtures: holding, locating or interfacing aids that are necessary to
facilitate the fabrication, assembly, testing, inspection, packing and shipping
of Die and/or Product. Typical Tools and Fixtures include, but are not limited
to test fixtures, sealing fixtures, wire bonding fixtures and Die mounting
fixtures.

Unit: in reference to a Die or Product successfully completing Manufacture, a
single individual Die or Product that is indistinguishable from any other
individual Die or Product by virtue of it having passed all inspections and
performance tests. In reference to Die or Product just starting into
Manufacture, a Unit is an individual segment of a Structured Wafer, or a single
Package, which can become an individual Die or Product upon completion of
Manufacture.

 

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Value Added: the price for Materials that Contractor provides and Manufacture
(including Die fabrication) that Contractor performs for Die or Product supplied
by Contractor.

Wafer: in relation to Manufacture of SAW Die, a thin slice of a piezoelectric
crystal such as quartz, lithium tantalate or lithium niobate.

Workweek: the seven (7) calendar days beginning on Monday and ending on Sunday.

2. Services.

2.1 Manufacturing Services

2.1.1 General. Contractor covenants and agrees to Manufacture the Die and
Products that Company requests it to Manufacture at the Factory utilizing
Materials and any Provided Equipment the Company consigns to Contractor and/or
Materials purchased by Contractor, and Tools and Fixtures, machinery, equipment,
and computer systems of Contractor. Contractor agrees that the Manufacture of
Die and Product hereunder shall be carried out in a good and workmanlike manner
in compliance with the Specifications and instructions of Company provided to
Contractor in writing from time-to-time as specified herein. Contractor agrees
to provide fabrication, manufacturing and production services to meet Company’s
Manufacture requirements in accordance with Section 6 of this Agreement. Changes
to forecast shall not affect Die or Product pricing, unless mutually agreed in
writing by the parties hereto. Contractor shall have available to Manufacture
Die and Product all facilities, employees, owned equipment, spare parts for
owned equipment and Provided Equipment, computer systems and any other items
required to Manufacture the Die and Product ordered by Company. Company shall
provide to Contractor all Specifications, manuals and other relevant
documentation, any special equipment, Tools and Fixtures, etc., necessary to
Manufacture Die and Product.

2.1.2 Use of Contractor Processes: Contractor may use its standard processes, so
long as they conform to the Company’s Specifications and quality requirements
and are approved in writing by the Company prior to their being used to
Manufacture Die and/or Product.

2.1.3 Materials: Contractor shall Manufacture Die and Product using Materials
and Critical Processing Supplies procured from suppliers on the Company’s
Approved Vendor List or provided on Consignment from Company, and using
manufacturing processes approved by Company.

 

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2.1.4 Tools and Fixtures: Company may provide sufficient quantities of Company
developed Tools and Fixtures necessary to Manufacture a limited quantity of Die
or Product and provide insight to Contractor regarding the use of Tools and
Fixtures in the Manufacture of Die or Product. The exact quantity of Tools and
Fixtures necessary for Manufacture of such limited quantity of Die or Product
will be determined through discussion between Company and Contractor. Contractor
has the responsibility to procure or fabricate at Contractor’s sole expense,
additional Tools and Fixtures needed to support increasing volumes of Die or
Product required by Company Purchase Order(s). Contractor also has the
responsibility to maintain, at Contractor’s sole expense, any and all Tools and
Fixtures used, whether consigned by Company or procured or fabricated by
Contractor.

2.2 Changes and Revisions

Contractor agrees that any change to any manufacturing process used by
Contractor to Manufacture Die and/or Product, Critical Processing Supplies,
Specifications, Tools and Fixtures, or outsourcing services affecting
Manufacture of Die or Products shall be approved in writing by Company prior to
implementation by Contractor.

2.2.1 Company Requested Changes: Company shall have the right at any time to
make changes in drawings, designs, Specifications, Materials, packaging,
quantities of Die and/or Product ordered (except as restricted by the Table in
Section 7), time and place of delivery and method of transportation. Company
will request changes by submitting an Engineering Change Notice using the
Company’s Change Procedure, a request for change(s) in Delivery Date(s), revised
shipping information or similar document. Submission must be in writing and can
be transmitted using electronic means such as facsimile or electronic mail.
Contractor has five (5) working days to review and reject Company requested
changes. If Contractor does not provide timely notice of rejection of any
changes, it shall be deemed to have accepted all changes not so rejected,
subject to reasonable price adjustments attributable solely to such change.
There will be no change in manufacturing or production service until accepted,
in writing, or by failure to provide timely notice of rejection, by Contractor.
If any such changes cause an increase or decrease in the cost or the time
required for performance of Company’s Purchase Order, Contractor shall notify
Company in writing (stating the amount of the increase or decrease) within five
(5) working days, after receipt of such notice. If such notice concerning an
adjustment to cost or time required for performance is timely given, an
equitable adjustment shall be made. Contractor agrees to proceed with the
performance of this Agreement in accordance with Company Purchase Order(s) with
regard to Die and Product not affected by the request for change.

2.2.2 Specification Change Procedure: Changes to Specifications by Company will
be made according to Company’s Engineering Change Procedure (RFM Procedure
000-0101-001) (the “Change Procedure”). Contractor will be notified of the
revision to Specifications by transmission of a revised Specification

 

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document by facsimile or electronic mail. The Contractor shall provide
acknowledgment of receipt of the revised Specification document by facsimile or
electronic mail within 3 working days after receipt. Simultaneously, Contractor
shall inform Company if Contractor cannot implement the revision as required. If
Contractor does not provide timely notice of its inability to implement the
required revisions, it shall be deemed to have agreed to such revisions, subject
to reasonable price adjustments attributable solely to such change.

2.2.3 Contractor Requested Specification Changes: If Contractor proposes to
change the Specifications with respect to any Product, it shall provide the
Company written notice thereof and shall implement such changes only upon
written consent from the Company. In no event shall Contractor Manufacture Die
or Product other than strictly in accordance with the Specifications or
amendments thereto, which the Company has approved in writing. Company will not
unduly withhold approval of requested changes, but Contractor recognizes that
approval for Contractor requested changes to Specifications may require
significant investigation and possibly interactions with Customers, all of which
may take considerable time to accomplish. Company will endeavor to keep
Contractor informed regarding the status of requested changes.

2.3 New Products

Company may from time to time request Contractor to Manufacture, and perform
prototype and pilot testing for any future versions of Die or Product developed
after the date of this Agreement by Company (each a “New Product”). Such request
shall be accompanied by all Specifications and other relevant documentation
necessary to Manufacture the New Product. Upon receipt of such information,
Contractor shall provide to Company the price to perform prototype and pilot
Manufacture for such New Product and the estimated time schedule required to
implement the Manufacture of the New Product. Contractor shall not be obligated
to Manufacture or perform any services hereunder with respect to such price and
time schedule for implementation until Contractor and Company agree to such
price and time schedule.

2.4 Approved Vendor List

With respect to each component part comprising Materials and Critical Processing
Supplies Company shall maintain and provide to Contractor a list of suppliers
approved by Company to supply such part (the “Approved Vendor List”). Company
may remove any supplier from or add any supplier to the Approved Vendor List
with respect to any component part comprising Materials by giving notice thereof
to Contractor. A supplier or vendor not on the Approved Vendor List shall not
provide Materials or services for the Manufacture of Die and Product without the
Company’s written authorization. Contractor may request removal or addition of a
supplier to Approved Vendor List at any time by submitting a written request
thereof to Company.

 

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Copies of Company pricing agreements shall be supplied to Contractor for
Purchased Materials unless prohibited by agreement with the vendor or applicable
law. Company will request Approved Vendors to offer Contractor the same pricing
and payment terms as provided to Company for Purchased Materials

2.5 Yield

Both parties understand and agree that production yield is a primary driver for
manufacturing cost effectiveness and agree to strive to continually improve
yields for Die and Product.

Incoming test and inspection, or an equally effective method, shall be used by
Contractor to ensure that acquired Die, Package(s), Critical Processing Supplies
and Materials conform to Specifications prior to their introduction into
Contractor’s Factory.

2.5.1 Yield Responsibility: Optimization and stability of fabrication, assembly
and test yield for Product and Die shall be the responsibility of Contractor.

2.5.2 Failure Analysis Due to Yield Loss: Should Company encounter unacceptable
yield loss at Final Lot Acceptance Testing, Company may request that Contractor
institute containment actions to reduce the unacceptable yield loss at Final Lot
Acceptance Testing and perform a test, a series of tests, or take other
appropriate actions to determine the root cause of the unacceptable yield loss,
and to institute corrective actions to prevent further occurrences of
unacceptable yield loss at Final Lot Acceptance Testing. All such containment
actions, tests performed and corrective actions will be paid for by Contractor.
However if it is determined that the unacceptable yield loss at Final Lot
Acceptance Testing is directly attributable to the actions of the Company,
Contractor may request reimbursement from Company.

2.6 Annual Review Process

Company and Contractor shall meet annually to review performance under this
Agreement (Annual Review Process). Such review shall include, but not be limited
to, review of Contractor’s performance to Company’s Specifications and quality
and service standards, inventory levels, Product pricing, and actual and
potential cost reductions which would impact prices charged to Company for
Manufacture of Product.

2.7 Quarterly Operations Review Process

Company and Contractor shall conduct Quarterly Operations Reviews. Such meetings
shall include, but not be limited to, review of Contractor’s Product cycle
times, delivery performance, quality metrics, inventory levels and cost
reduction roadmaps and results. The meeting may be scheduled to combine with
other reviews, such as the annual review, or may be held via conference
telephone call or video conference.

 

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2.8 Return Services

2.8.1 Contact With Third Parties: Company will be the recognized source for
Product and will be the sole contact with Company’s customers. Company will
issue all warranties to third parties for Product, but will be entitled to
exercise its rights under paragraph 2.8.2 against Contractor as to any defects
therein.

2.8.2 Authorization for Returns: Product returns from third parties will be
authorized by Company in accordance with Company’s written procedures. Company
may perform the initial failure analysis on returned Product. Those units
indicating a defect due to assembly processing (Defective Unit) will be shipped
to Contractor for confirmation or performance of failure analysis at
Contractor’s expense. Contractor is responsible for defining and implementation
of containment actions, if any, and corrective actions to prevent future
occurrences of the defect at his sole expense. Company shall approve of
containment and corrective actions prior to implementation by Contactor.
Contractor’s liability as a result of any such defect shall be to provide a well
performing and reliable replacement Unit for each Defective Unit or compensation
to Company for the amount charged to Company for each Defective Unit.

3. Technical Assistance

Contractor may, either orally or in writing, request technical assistance from
Company at any time. Such assistance can be in the form of telephone, e-mail,
facsimile correspondence or in-person interaction at either Company’s facilities
in Dallas or at Contractor’s Factory. If Contractor requests technical
assistance outside Company’s facility, Company agrees to make available to
Contractor the consulting services of engineering, quality and manufacturing
specialists (hereinafter referred to as “Engineers”) that it has to assist
Contractor in the Manufacture of Die and/or Product. Should Contractor request
technical assistance from Company outside Company’s facility, both parties will
agree in writing on compensation amounts, if any, and payment terms for the
technical assistance prior to initiation of the technical assistance. Company
agrees to dispatch Engineers in a timely fashion to provide requested assistance
to Contractor after such agreement has been reached. Contractor agrees to remit
payment, if any, for technical assistance of Company Engineers within thirty
(30) days after submission of a proper invoice by Company to Contractor, or in
accordance with agreed-to amounts and terms as indicated above.

4. Other Support Services.

From time-to-time during the term of this Agreement, Company may request
Contractor to perform other support services. In connection with the performance
of any other support services, Company shall specify the services that Company
desires

 

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Contractor to perform. Contractor shall notify the Company within five
(5) working days after receipt of Company’s request of their intent to provide
the requested service. If Contractor intends to provide the requested service,
Contractor shall furnish Company the estimated time schedule to implement or
complete the services and the estimated cost to the Company. All prices and
scheduled delivery quantities and times will be detailed in a Purchase Order
issued by Company to Contractor.

5. Data.

Contractor will periodically supply Company with reasonably requested data
including, but not limited to, electrical performance of Die and Product,
process parameter variation, inventories and production status. The frequency
and format of the reporting will be agreed upon by Company and Contractor.

6. Purchase Orders.

Company shall provide Contractor with a Purchase Order for Manufacture of Die or
Product. Such Purchase Order is the Contractor’s sole authorization for
Manufacture of Die and Product and invoicing Company for Die and Product
delivered. Contractor assumes full risk and responsibility, and Company shall
not be required to share risk in any case where Contractor manufactured Product
for which no Purchase Order(s) was placed by Company to Contractor. Contractor
agrees to immediately cease manufacturing of Product in each case where Company
is forced to cancel Purchase Order(s) for Die and/or Product as a result of one
or more Company customer Purchase Order cancellations. Contractor agrees to
acknowledge Company’s Purchase Order within three (3) business days from receipt
by e-mail or other electronic means, or notify Company that it needs a longer
period of time to accept Company’s Purchase Order. The Purchase Order shall come
into force and effect from the date of Contractor’s acknowledgment of Company’s
Purchase Order. Contractor, as well as Company, shall be bound by all terms and
conditions set forth in the Purchase Order consistent with the terms and
conditions herein agreed upon. The Purchase Order will specify the Die or
Product, respective quantities and Delivery Date(s). In the event of any
disagreement between a Purchase Order and this Agreement, the terms of this
Agreement shall prevail.

6.1 Release of Work Orders to Manufacture Die and Product: Company Purchase
Order(s) provide Contractor with authorization to release Contractor internal
work orders for Manufacture of Die and Product. Contractor agrees not to release
internal work orders that result in greater quantities of Die or Product being
manufactured than authorized by Company Purchase Order(s), factoring in normal
yield and line losses. Contractor also agrees to take into account residual
quantities of Die or Product remaining from completion of previous internal work
orders for the same Die or Product when deciding on the quantity of Die or
Product to be released into manufacturing to fulfill new Company Purchase
Order(s).

 

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6.2 Production and Delivery Dates: The Purchase Order shall specify a Delivery
Date that is reasonably acceptable to Contractor. Contractor agrees to allocate
sufficient capacity for Manufacture of Product and Die to meet Company’s
required Delivery Date(s). If applicable, Company agrees to supply Materials a
minimum of one day prior to the associated starts at the Contractor.

7. Forecasts: Company shall endeavor to provide monthly a six (6) month, rolling
forecast of Product(s) to be manufactured by Contractor under this Agreement
(the “Six-Month Forecast”). Contractor shall acknowledge in writing acceptance
of each Six-Month Forecast or provide notice to Company of limited Factory
capacity within five (5) working days after receipt of each Six-Month Forecast.
Contractor acknowledges that the specific and summary information contained in
Company’s forecasts reflect Company’s best, full and complete knowledge of
potential future quantities of Product needed by Company at the point in time
when the forecast is prepared, and are subject to substantial and possibly
dramatic change over the period of time the forecast covers. Contractor
acknowledges and agrees that such forecasts are provided for planning purposes
only, and are not in any way an authorization by Company for Contractor to
Manufacture Die or Product.

The following Table shows the purpose of Company Purchase Order(s) and
forecasts, as well as the allowable variations of the forecasts and the
responsibilities of the parties in providing or using these documents.

 

Schedules

  

Purpose of Schedule

  

Variations

Purchase Order   

Defines quantity of Die and/or Product Company will purchase from Contractor,

Authorizes Contractor to Manufacture Die or Product,

Authorizes Shipment (Contractor), Receiving (Company),

Invoicing (Contractor) and Payment (Company)

   Only by changes, in writing, from Company Six-Month Forecast    Provided for
capacity, equipment, labor planning and Materials preparation purposes only.   
First month total volume is fixed by Company Purchase Order(s), but line items
may change. Second and subsequent months may change in total and line item
amounts in accordance with fluctuations in customer demand as reflected in
Company Order(s)

7.1 Forecast and Demand Changes: In the case where demand for ordered Company
Product suddenly and significantly drops, forcing Company to cancel existing
Purchase Order(s), Contractor agrees to take any and all actions to return
and/or

 

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cancel his orders for, and purchases of, Materials for the cancelled portion of
Company Purchase Order(s). Contractor agrees to make any reasonable effort to
use and/or plan to use Materials affected by the cancellation of Company
Purchase Order(s) to Manufacture its own or other companies’ products.
Contractor agrees to immediately cease Manufacture of all Die and/or Product
affected and only complete Manufacture of the quantities of Die and/or Product
not affected by the canceling of Company Purchase Order(s).

In the case where Company’s forecast suddenly and significantly increases due to
unexpected increases in customer demand, Company and Contractor agree that any
purchases of Materials to cover such demand will be handled in accordance with
Section 8 of this Agreement.

8. Inventory Risk Sharing: Company will provide inventory support to Contractor
on the terms and conditions set forth in this Section 8 (which for the sake of
clarity includes all of paragraphs 8 through 8.7).

8.1 Exclusions: Notwithstanding anything in this Section 8 to the contrary,
Company shall not provide financial support for excess inventory caused by:

(i) cancellations of orders by other customers of Contractor or,

(ii) Contractor purchasing or manufacturing inventory when it knows, or through
the exercise of reasonable care should know, that such action will result in
excess inventory for any reason, including without limitation improved yields,
lower line losses or reduced forecasts by Company or any other customer.

8.2 Inventory Management and Control: Contractor agrees to use its Best Efforts
to conduct its operations so as not to have excess inventory entitled to support
by Company under this Section 8, consistent with prudent business practices.

8.3 Limitations of Support: In the case where Company elects to reimburse
Contractor for 50% of the value of the excess inventory, Company’s total
liability for all categories of excess inventory reimbursement shall be a
maximum of USD 30,000 per quarter, except in the case where excess inventory is
a consequence of Company and Contractor having jointly agreed to the speculative
purchase of Materials per paragraph 8.4.1 or to the speculative Manufacture of
Die and/or Product under the provisions of paragraphs 8.5.4 and 8.6.4,
respectively, of this Agreement.

8.4 Excess Materials Inventory

8.4.1 Excessive Materials Purchases: Contractor agrees to consult with Company
and obtain agreement regarding the purchase of any quantity of Materials in
excess of that required to fulfill Company Purchase Order(s) and Company’s
Six-Month Forecast (factoring in normal yield and line losses), including excess

 

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Materials that would result from a minimum order requirement being imposed by
one or more suppliers, prior to Contractor transacting the purchase of such
Materials. Company agreement shall be provided in writing through electronic
mail or facsimile. Company agrees to prompt dispatch of notification once
agreement has been reached. Contractor agrees not to submit purchase orders to
suppliers for such Materials until agreement as to quantity is received in
writing from Company.

8.4.2 Timing and Factors to be Considered in the Determination of Excess
Materials Inventory: Excess Materials inventory shall be determined at the end
of each fiscal quarter of the Company. Company and Contractor agree that the
actual risk of excess Materials inventory is governed by the lead times to
acquire Materials to Manufacture the quantities of Product to fulfill Company
Purchase Order(s). Company and Contractor also agree that certain other factors
such as actual yield versus forecasted yield, line loss, minimum order
quantities and the existence of additional Company Purchase Order(s) and/or
other Contractor demand shall be considered in the determination of excess
Materials inventory.

8.4.3 Determination of Excess Materials Inventory: The amount of excess
Materials inventory at the end of each Company fiscal quarter will be the amount
of Materials inventory actually on hand that has been idle for six months or
more, adjusted as provided in paragraphs 8.4.3.1 and 8.4.3.2 of this Agreement.

8.4.3.1 Exclusions: Contractor agrees not to include in the calculation of such
excess Materials inventory the following items:

 

  (i) Any such Materials that were determined to be excess at the end of any
previous period.

 

  (ii) That quantity of Materials which has pending Company Purchase Orders
which will consume it within 30 days after Company and Contractor agree that
excess Materials inventory exists and have jointly determined the amount of the
excess Materials inventory.

 

  (iii) Any Materials that Contractor could consume to fulfill his own or other
customers’ requirements or orders.

 

  (iv) Any amount of safety or buffer stock (that amount of Materials inventory
Contractor customarily keeps on hand to cover unanticipated Company or
Contractor’s other customer(s)’ Purchase Order increases or changes in
purchasing lead times for Materials or Piece Parts) that is in excess of
Company’s Six-Month Forecast and has not been agreed to by Company in accordance
with the provisions of paragraph 8.4.1 of this Agreement.

 

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  (v) Any amount of Materials resulting from Improvements made to the
manufacturing process that would have otherwise been consumed by Company and
other Contractor’s customer(s)’ Purchase Order(s).

 

  (vi) Any amount of Materials Contractor purchased to obtain price breaks,
preferential treatment, etc.

 

  (vii) Any amount of Materials common to Company’s and Contractor’s products
purchased which were over and above the amount of Materials required to
Manufacture Die and Product to comply with the Company’s Six-Month Forecast and
Contractor’s other customers’ forecasts (taking into consideration inventory on
hand at the start of the fiscal quarter), plus normal Contractor yield losses
and line shrinkage, without advance authorization per paragraph 8.4.1 above.

 

  (viii) Any amount of Materials for which no Purchase Order(s) were placed nor
Six-Month Forecast was provided by Company to Contractor for Die and/or Product
that would have consumed such Materials.

 

  (ix) Excess Materials inventory resulting from actions described in paragraph
8.1 above.

8.4.3.2 Inclusions: Company agrees to include the following items in the
calculation of excess Materials inventory:

 

  (i) That amount of Materials over and above that required to fulfill Company
Purchase Order(s) during the six (6) month period prior to the end of a
particular Company fiscal quarter, and which were purchased by Contractor under
the circumstance where supplier imposed a minimum order quantity, and no Company
Purchase Orders or Contractor’s other customer(s)’ purchase orders exist which
would consume such Materials; so long as the requirements of paragraph 8.4.1 of
this Agreement were met regarding such Materials.

 

  (ii) That amount of Materials purchased by Contractor for potential
consumption during the six (6) month period prior to the end of a particular
Company fiscal quarter and not consumed by Company Purchase Order(s) that were
purchased in accordance with the provisions of paragraph 8.4.1 above, and which
do not have pending Company Purchase Orders or Contractor’s other customer(s)’
purchase orders which will consume such Materials at some point in time in the
future.

8.4.4 Indirect Materials: Contractor agrees to not include any Indirect
Materials in the determination of excess Materials inventory.

 

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8.4.5 Determination of the Value of Excess Materials Inventory: The value of
such excess Materials inventory will be determined by multiplying the quantities
of each type (part number) of Materials so determined to be excess pursuant to
paragraph 8.4.3 above by the actual price(s) paid by Contractor for the
Materials.

8.4.6 Consumption Report: Company and Contractor agree to the creation of a
monthly Consumption Report that compares the actual amount of Materials consumed
to the planned amount of Materials to be consumed to fulfill Company Purchase
Order(s) and other Contractor’s other customer(s)’ requirements for such
Materials. Such reports shall separately display safety stock (buffer stock)
amounts, and will be used to minimize the effort required in determination of
excess Materials inventory and to forecast the need for Contractor and Company
accounting reserves.

8.4.7 Subsequent Demand for Excess Materials Inventory: If demand for
Contractor’s products (including but not limited to Company’s Purchase Orders)
develops during the subsequent six-month period following the determination that
excess Materials inventory exists which would consume all or a portion of the
excess Materials, Contractor shall use the excess Materials inventory to fulfill
such product demand. In this case, Contractor agrees to purchase back Company
owned excess Materials needed to fulfill the new demand at the same price
Company paid Contractor as defined in paragraph 8.4.5 above before placing its
purchase orders for new Materials with suppliers.

Contractor understands and agrees that Company has the right to develop and
institute special sales programs that are designed to create demand for such
excess Materials during the subsequent six-month period.

If no demand develops for any or all of the excess Materials during the
subsequent six (6) month period after the determination that excess Materials
inventory exists, Contractor, with Company’s approval, shall take steps to sell
the excess Materials inventory or reclaim any precious metals from the excess
Materials inventory owned in total by Company and Contractor. Contractor shall
seek Company’s approval of the sale or reclamation of such inventory, and
Company must agree in writing prior to the sale or reclamation activity. In the
case where Contractor sells or reclaims the precious metals from the excess
Materials inventory, Contractor will reimburse Company for 50% of the proceeds
from such sale or reclamation activity.

8.4.8 Company Election to Manufacture Product from Excess Materials Inventory:
In the case where Company elects to have Contractor Manufacture finished goods
from the excess Materials inventory, Company will issue Purchase Order(s) to
Contractor specifying the exact part numbers, quantities and requested Delivery
Date(s) for Die and/or Product(s) to be made using the excess Materials
inventory.

 

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8.5 Excess Die Inventory

8.5.1 Timing and Factors to be Considered in the Determination of Excess Die
Inventory: Excess Die inventory shall be determined at the end of each Company
fiscal quarter. Company and Contractor agree that certain factors such as actual
yield versus forecasted yield, actual line loss versus estimated line loss,
safety stocks, and the existence of Company Purchase Orders for future delivery
of Die shall be considered in the determination of excess Die inventory.

8.5.2 Determination of Excess Die Inventory: The amount of excess Die inventory
at the end of each particular Company fiscal quarter will be equal to the amount
of Die actually in Contractor’s inventory that has been idle for six months or
more, adjusted as provided in paragraphs 8.5.2.1, 8.5.2.2 and 8.5.4.1.

8.5.2.1 Exclusions: Contractor agrees not to include in the calculation of such
excess Die inventory the following items:

 

  (i) Any amounts of such Die which were determined to be excess at the end of
any previous period.

 

  (ii) That quantity of any Die which has pending Company Purchase Orders which
will consume it within 30 days after Company and Contractor agree that excess
Die inventory exists and have jointly determined the amount of the excess Die
inventory.

 

  (iii) Any amount of Die safety or buffer stock (that amount of Die inventory
which Contractor perpetually keeps on hand to cover unanticipated Company or
Contractor’s other customer(s)’ Purchase Order increases).

 

  (iv) Any amount of Die inventory resulting from Improvements made to the
manufacturing process that would have otherwise been consumed by Company or
other Contractor’s customer(s)’ Purchase Order(s).

 

  (v) Any amount of Die inventory for which no Purchase Order(s) for such Die
were placed by Company to Contractor.

 

  (vi) Any amount of die that exist in the form of Structured Wafers at the end
of a particular Company fiscal quarter.

 

  (vii) Any amount of Die resulting from actions or inactions of Contractor
pursuant to paragraph 8.1 (ii) of this Agreement.

 

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8.5.2.2 Inclusions: Company agrees to include the following items in the
calculation of excess Die inventory:

 

  (i) That amount of Die inventory manufactured by Contractor during the six
(6) month period prior to the end of a particular Company fiscal quarter in
accordance with the provisions of paragraph 8.5.4 below and not consumed by
Company or Contractor’s other customer(s)’ Purchase Order(s) during this period,
and for which no pending Company or Contractor’s other customer(s)’s Purchase
Orders exist that will consume such Die Inventory at some point in the future.

8.5.3 Determination of the Value of Excess Die Inventory: The value of any
excess Die inventory shall be determined by multiplying the quantity of each
different part number of non-inked Die (electrically good Die) remaining on each
diced Structured Wafer that was used by Contractor to Manufacture Product to
fulfill Company Purchase Order(s) by the actual cost of each Unit of each
different part number of Die. The total value of the excess Die inventory shall
be calculated by summing the values so determined of the individual part numbers
of Die.

8.5.4 Excessive Die Manufacture: Contractor agrees to consult with Company and
obtain agreement regarding the Manufacture of any quantity of Die in excess of
that required to fulfill Company Purchase Order(s) and forecast (factoring in
normal yield and line losses) prior to the initiation of such Manufacture.
Company agreement shall be provided in writing through electronic mail or
facsimile. Company agrees to prompt dispatch of notification once agreement has
been reached.

8.5.4.1 Structured Wafers: Company agrees that additional Structured Wafers over
and above that required to Manufacture Die to fulfill Company Purchase Order(s)
may result during Manufacture of Die due to the necessity of introducing more
than one Wafer into the initial stage of Manufacture. However, Contractor agrees
not to dice (convert into individual Die) additional Structured Wafer(s) over
and above the minimum quantity of Structured Wafers needed to fulfill Company
Purchase Order(s), and to store any such additional Structured Wafer(s) in an
appropriate controlled environment indefinitely until needed to fulfill
subsequent Company Purchase Order(s).

8.5.5 Indirect Materials: Contractor agrees not to include any quantity of
indirect materials used in the manufacture of Die in the calculation of excess
Die inventory.

8.5.6 Subsequent Demand for Excess Die Inventory: If demand for Company or
Contractor’s other customer(s)’ Product(s) develops during the subsequent
six-month period following the determination that excess Die inventory exists
which would consume all or a portion of the excess Die, Contractor shall use the
excess Die inventory to fulfill such demand for Product. In this case,
Contractor agrees to purchase back Company owned excess Die needed to fulfill
the new demand at the same price Company paid Contractor as defined in paragraph
8.5.3 above before manufacturing new Die to fulfill Company Purchase Order(s).

 

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If no demand develops for any or all of the excess Die inventory during the
subsequent six (6) month period after the determination that excess Die
inventory exists, Contractor, with Company’s approval, shall take steps to
recover Wafers from Structured Wafers, and used such recovered Wafers to
Manufacture any Die or Product for which the use of such recovered Wafers is
approved.

8.5.7 Company Election to Manufacture Product from Excess Die Inventory: In the
case where Company elects to have Contractor Manufacture finished goods from the
excess Die inventory, Company will issue Purchase Order(s) to Contractor
specifying the exact part numbers, quantities and requested Delivery Date(s) for
Product(s) to be made using the excess Die inventory.

Contractor understands and agrees that Company has the right to develop and
institute special sales programs that are designed to create demand for such
excess Die during the subsequent six-month period.

8.5.8 Consumption Report: Company and Contractor agree to the creation of a
monthly Consumption Report that compares the actual amount of Die manufactured
to the planned amount of Die to be manufactured to fulfill Company and
Contractor’s other customer(s)’ Purchase Order(s) for Die and Product. Such
reports shall separately display safety stock (buffer stock) amounts, and will
be used to minimize the effort required in determination of excess Die inventory
and to forecast the need for Contractor and Company accounting reserves.

8.6 Excess Product Inventory:

8.6.1 Timing and Factors to be Considered in the Determination of Excess Product
Inventory: Excess product inventory shall be determined at the end of each
Company fiscal quarter. Company and Contractor agree that certain factors such
as actual yield versus forecasted yield, actual line loss versus estimated line
loss, safety stocks, and the existence of Company Purchase Orders for future
delivery of Product shall be considered in the determination of excess Product
inventory.

8.6.2 Determination of the Quantity of Excess Product Inventory: The amount of
excess Product inventory will be to the quantities of Product Contractor has on
hand in inventory and idle for six months or more, adjusted as provided in
paragraphs 8.6.2.1 and 8.6.2.2 of this Agreement.

8.6.2.1 Exclusions: Contractor agrees not to include in the calculation of
excess Product inventory the following items:

 

  (i) Any amount of Product that was determined to be excess at the end of any
previous period.

 

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  (ii) That quantity of any Product which has pending Company Purchase Orders
which will consume it within 30 days after Company and Contractor agree that
excess Product inventory exists and have jointly determined the amount of the
excess Product inventory.

 

  (iii) Any amount of Product safety or buffer stock (that amount of Product
inventory Contractor customarily keeps on hand to cover unanticipated Company
Purchase Order increases).

 

  (iv) Any amount of Product resulting from Improvements made to the
manufacturing process which would have otherwise been used to fulfill Company
Purchase Orders.

 

  (v) Any amount of Product for which no Purchase Order(s) were placed by
Company to Contractor for such Product(s). Contractor agrees not to release any
work order for Product in quantities larger than prudent planning methods would
require to fulfill a particular Company Purchase Order.

 

  (vi) Any amount of Product resulting from actions or inactions of Contractor
pursuant to paragraph 8.1 (ii) of this Agreement.

8.6.2.2 Inclusions: Company agrees to include the following items in the
calculation of excess Product inventory:

 

  (i) That amount of Product inventory manufactured by Contractor during the six
(6) month period prior to the end of a particular Company fiscal quarter, and
not consumed by Company Purchase Order(s), that were manufactured in accordance
with the provisions of paragraph 8.6.4 below, and for which no pending Company
Purchase Orders exist that will consume it at some point in the future.

8.6.3 Determination of the Value of Excess Product Inventory: The value the
excess Product inventory so determined in paragraph 8.6.2 above shall be
calculated by multiplying the excess inventory quantity of each Unit of Product
by the price paid by Company to Contractor for each Product (Unit price), and
summing the results.

8.6.4 Excessive Product Manufacture: Contractor agrees to consult with Company
and obtain agreement regarding the Manufacture of any quantity of Product in
excess of that required to fulfill Company Purchase Order(s) and forecast
(factoring in normal yield and line losses) prior to initiation of such
Manufacture. Company agreement shall be provided in writing through electronic
mail or facsimile. Company agrees to prompt dispatch of notification once
agreement has been reached.

 

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8.6.5 Indirect Materials: Contractor agrees not to include any quantity of
indirect materials used in the manufacture of Product in the calculation of
excess Product inventory.

8.6.6 Subsequent Demand for Excess Product Inventory: If demand for Contractor’s
Product(s) develops during the subsequent six-month period following the
determination that excess product inventory exists which would consume all or a
portion of the excess Die, Contractor shall use the excess Product inventory to
fulfill such demand for Product. In this case, Contractor agrees to purchase
back Company owned excess Product needed to fulfill the new demand at the same
price Company paid Contractor as defined in paragraph 8.6.3 above before
manufacturing new product to fulfill Company Purchase Order(s).

8.6.7 Consumption Report: Company and Contractor agree to the creation of a
monthly Consumption Report that compares the actual amount of Product
manufactured to the planned amount of Product to be manufactured to fulfill
Company Purchase Order(s) for Product. Such reports shall separately display
safety stock (buffer stock) amounts, and will be used to minimize the effort
required in determination of excess Product inventory and to forecast the need
for Contractor and Company accounting reserves.

8.7 Purchase of 50% of Excess Inventory: In the case where excess inventory has
been identified pursuant to this Section 8, Contractor will perform a physical
inventory of the excess Materials, Die and/or Product, sequester the excess
Materials, Die and/or Product in a separate and secure area in such a manner as
to preserve its quality and integrity, prepare an accounting of the excess
Materials, Die and/or Product indicating Company part number, type, quantity and
value, and submit a statement reflecting such accounting to Company in writing
through normally acceptable methods of physical or electronic transmission.
Company has five (5) business days to review and accept Contractor’s excess
inventory document unless additional information is required from Contractor.
Both Company and Contractor agree to support each other and diligently work
toward settlement for excess inventory. Once settlement is reached, Company will
place a Purchase Order with Contractor for fifty percent (50%) of such
inventory; subject to the limitation set forth in paragraph 8.3 of this
Agreement entitled “Limitations of Support.” Contractor will prepare and submit
a corresponding proper invoice to Company, and Company will reimburse Contractor
in accordance with the invoice submitted under payment terms then existing, or
as negotiated between Company and Contractor at that time.

 

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9. Deliveries

9.1 Notification of Late Delivery: Contractor shall Manufacture Die and Products
as required by this Agreement and each Company Purchase Order. In the event that
Contractor cannot deliver the Die or Products by the Shipping Date, Contractor
will notify Company, a minimum of one Workweek prior to the Shipping Date.

9.2 Delivery Point: Once Manufacture of Die and/or Products has been completed,
Contractor shall be responsible for delivering the Finished Goods FCA, (as
defined in Incoterms (2000) published by the International Chamber of Commerce)
to a freight forwarder specified by Company in its Purchase Order, or otherwise
approved by Company. “Delivery Point” as used in this Agreement shall mean the
specific time and location that the Product is delivered to the Company
specified freight forwarder.

9.3 Time of Essence: Contractor acknowledges and agrees that time is of the
essence and delivery performance is crucial in Company’s evaluation of
Contractor’s performance. No partial shipments are allowed unless expressly
authorized in advance by Company on a case-by-case basis. Late deliveries will
be a subject of the Quarterly Review Process and may be subject to compensation
discussions.

9.4 Packaging for Delivery: Contractor agrees to package Die and Product for
delivery and shipment in accordance with Company specifications, or if none are
specified, to package Die and Product for delivery and shipment in accordance
with industry standards and his own best practices.

9.5 Risk of Loss: Company will insure Company consigned Materials against any
risk of loss during transit to and from Contractor and while located in
Contractor’s facility. Company will insure against risk of loss of any Provided
Equipment during transit to and from and while located in Contractor’s facility.

9.6 Delivery of Materials: Company will properly pack all Materials provided by
Company to facilitate safe transport to Contractor.

10. Price and Payment

10.1 Price and Payment of Manufacturing Services: During the term of this
Agreement, Company shall pay for the services provided by Contractor under
Section 2 hereof for the Manufacture of Die and Products in accordance with the
Purchase Order(s) issued by Company to Contractor and proper invoice(s)
submitted by Contractor to Company. The quantities and prices shown on
Contractor’s invoice must match those shown on Company Order(s) unless both
parties agree in writing to such variation.

10.2 Invoice Amount Determination: Invoice pricing will be determined by the
unit price of Die and Products as specified on the Purchase Order multiplied by
the actual quantity of Die or Product delivered to satisfy such Purchase Order.

 

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10.3 Invoices and Payment

10.3.1 Invoices: With each shipment, Contractor will send Company an invoice for
all services provided by Contractor under Section 2 hereof for Die and
Product(s) Manufactured by Contractor and delivered to the Delivery Point.
Company shall pay Contractor the amount invoiced within thirty (30) days
following the issuance of such invoice unless additional time is required to
resolve any discrepancies.

10.3.2 Payment for Other Support Services: Payment for technical assistance to
Contractor by Company shall be invoiced in accordance with Section 3 of this
Agreement. Payment for Other Support Services described in Section 4 of this
Agreement will be according to paragraph 10.1 hereof. Payment for Other Support
Services associated with New Products will be invoiced separately according to
negotiated parameters as described in paragraph 2.3 and reflected in the
Purchase Order(s) issued by the Company for New Products.

10.4 General Payment Terms: All invoicing for Die, Products and services shall
be F.O.B. Taiwan, and payments due hereunder shall be denominated in United
States of America dollars, payments shall be made by wire transfer, and all bank
fees for such wire transfers shall be paid by the Company.

11. Inspection and Access by Company

11.1 Inspection: Contractor hereby agrees to allow Company’s personnel access at
any time to the Factory, or other facilities at which the Die or Products are
being manufactured or warehoused, during regular business hours in order for
Company’s personnel to ascertain compliance on the part of Contractor with the
terms and conditions of this Agreement and Specifications provided by Company in
connection with the process of Manufacture. Contractor shall provide competent
personnel to perform inventories of Materials, work in process inventory and
Finished Goods located at the Factory or other facilities where Die or Product
is being manufactured or warehoused, and to otherwise support inspections by
Company.

11.2 Acceptance: All shipments of Finished Goods are subject to Company’s
workmanship inspection, Electrical Test using Company Specifications and
procedures and quality audit upon receipt of Finished Goods in accordance with
Company’s Quality Standards. Acceptance of Products in no event constitutes a
waiver of any of Company’s rights or remedies arising from or related to
warranty requirements (including those set forth in paragraph 14.5),
nonconforming Products, or any other breach of this Agreement.

 

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12. Rejection

12.1 Manner of Rejection: Company may reject any Die or Product manufactured by
the Contractor if such Die or Product fails to meet the Specifications or
contains a Manufacture Defect when inspected by the Company. The Company shall
notify the Contractor within five (5) days of receipt of the Die or Product if
the Die or Product is rejected. The Company may, at its option, (i) return the
Die or Product to the Contractor for rework, (ii) rework the Product, and charge
any labor cost, not to exceed Contractor’s Value Added, to the Contractor, or
(iii) scrap the Die or Product if it cannot be reworked. If the Die or Product
is scrapped, the Contractor shall, at the request of Company, replace the Die or
Product so scrapped, or reimburse the Company for the amount charged to Company
for the Die or Product so scrapped.

12.2 Restrictions on Disposal of Rejected Products: Contractor may not, under
any circumstances or for any reason, sell or offer for sale, or otherwise
dispose of in any manner, any Die or Products rejected hereby, without the
express written consent of Company.

13. Representations, Warranties and Covenants of Company: The Company represents
and warrants to Contractor, and covenants as follows:

13.1 Corporate Status and Good Standing: Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority under its
articles of incorporation and bylaws to own and lease its properties and to
conduct its business as the same exists. Company is duly qualified to do
business as a foreign corporation in all states or jurisdictions in which the
nature of its business requires such qualification, except where the failure to
be so qualified would not have an adverse effect on such party.

13.2 Authorization: Company has full corporate power and authority under its
articles of incorporation and bylaws, and its managers and members have taken
all necessary action to authorize it to execute and deliver this Agreement and
any exhibits and schedules hereto, to consummate the transactions contemplated
herein and to take all actions required to be taken by it pursuant to the
provisions hereof, and each of this Agreement and any exhibits hereto
constitutes the valid and binding obligations of Company, enforceable in
accordance with its terms, except as enforceability may be limited by general
equitable principles, bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors’ rights generally.

13.3 Non-Contravention: Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated herein or therein, does or
will violate, conflict with, result in breach of or require notice or consent
under any law, the articles of incorporation or bylaws of Company or any
provision of any agreement or instrument to which Company is a party.

 

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13.4 Validity: There are no pending or threatened judicial or administrative
actions, proceedings or investigations which question the validity of this
Agreement or any action taken or contemplated by Company or in connection with
this Agreement.

14. Representations and Warranties of Contractor: Contractor represents and
warrants to Company the following:

14.1 Corporate Status and Good Standing: Contractor is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, with full corporate power and authority under its
certificate or articles of organization and regulations to own and lease its
properties and to conduct its business as the same exists. Contractor is duly
qualified to do business as a foreign corporation in all states or jurisdictions
in which the nature of its business requires such qualification, except where
the failure to be so qualified would not have an adverse effect on such party.

14.2 Authorization: Contractor has full corporate power and authority under its
certificate or articles of organization and regulations, and its board of
directors and stockholders have taken all necessary action to authorize it to
execute and deliver this Agreement and the exhibits and schedules hereto, to
consummate the transactions contemplated herein and to take all actions required
to be taken by it pursuant to the provisions hereof or thereof, and each of this
Agreement and exhibits hereto constitutes the valid and binding obligation of
Contractor, enforceable in accordance with its terms, except as enforceability
may be limited by general equitable principles, bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors’ rights generally.

14.3 Non-Contravention: Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated herein or therein, does or
will violate, conflict with or result in breach of, or require notice or consent
under any law, the certificate or article or regulations of Contractor or any
provision of any agreement or instrument to which Contractor is a party.

14.4 Validity: There are no pending or threatened judicial or administrative
actions, proceedings or investigations which question the validity of this
Agreement or any action taken or contemplated by Contractor in connection with
this Agreement.

14.5 Warranty: Contractor warrants that (i) for a period of twelve (12) months
after the date of delivery to the Delivery Point (as defined in paragraph 9.2),
the Die or Products it manufactures and delivers to Company will not contain any
Manufacture Defect, and (ii) Contractor has complied in all material respects
with all applicable local, foreign, domestic and other laws, rules, regulations
and requirements. THE FOREGOING WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ALL
OTHER EXPRESS AND IMPLIED WARRANTIES WHATSOEVER, INCLUDING

 

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BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
PARTICULAR PURPOSE. In the event of any breach by Contractor of the warranties
contained herein, Contractor’s liability shall be limited to an amount equal to
the amount charged to Company for the units delivered pursuant to this
Agreement.

Notwithstanding the foregoing, the parties recognize that Materials may be
supplied by Company for use in the Manufacture of products. Contractor makes no
warranty to Company as to the quality or functionality of the Materials supplied
by Company.

15. Labor

During the term of this Agreement, Contractor agrees that it shall be solely
responsible for the payment of all wages, fringe benefits, social security,
unemployment and similar expenses and taxes in respect of Contractor’s employees
and applicable to the Manufacture of Die and Products and the performance of any
procurement services and support services contemplated under this Agreement. As
required by any applicable law, Contractor warrants and agrees that it has
produced and shall maintain in effect full statutory coverage for workers’
compensation, employers’ liability and disability insurance for all of its
employees. Contractor further agrees and warrants that it has and shall comply
with all applicable Taiwan national and local labor laws and other applicable
wage and hour and other labor laws, including without limitation, all child
labor, minimum wage, overtime and safety related laws.

16. Ownership of Provided Equipment

16.1 Ownership: Contractor understands and acknowledges that it shall under no
circumstances be considered to have any ownership or proprietary interest in
Provided Equipment during the term of this Agreement and until after Contractor
obtains a bill of sale from Company for Provided Equipment. Contractor agrees to
segregate any and all Provided Equipment on its company books, and label each
piece of Provided Equipment to conspicuously indicate Company’s ownership.
Contractor agrees that it will not mortgage, pledge, assign or borrow against
such Provided Equipment during the term of this Agreement and until after
Contractor obtains a bill of sale from Company for Provided Equipment.

16.2 Storage/Use: Contractor shall: (a) take delivery, store and use at the
Factory the Provided Equipment using the same degree of care as Contractor
exercises in respect of its own similar property; and (b) inform Company of the
exact location of the Provided Equipment if it is located outside the
Contractor’s principal manufacturing or storage facilities. Contractor agrees to
comply with Company’s reasonable instructions as to the performance of any
preventive maintenance on any Provided Equipment. Said preventative maintenance
shall be at Contractor’s sole expense. All repairs will be the responsibility of
Contractor and at it-s sole expense.

 

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17. Indemnification

17.1 Contractor’s Indemnification: Contractor shall indemnify Company and its
Affiliates (including their officers, directors, employees and agents) against,
and hold harmless from and against, any and all claims, actions, causes of
action, arbitrations, proceedings, losses, damages, liabilities, judgments and
expenses (including without limitation, reasonable attorneys’ fees)
(“Indemnified Amounts”) incurred by Company or any of its Affiliates as a result
of (i) any material error, inaccuracy, breach or misrepresentation in any of the
representations and warranties made by Contractor in this Agreement; (ii) any
claim or allegation that Contractor or any of its contractors, representatives
and agents, have not fully discharged all obligations under labor laws as set
forth in Section 15; (iii) any dispute with a subcontractor, employee,
independent contractor, manufacturer, agent or supplier; (iv) the operation by
Contractor of the Factory during the term of this Agreement; and (v) any
Manufacture Defect. Company shall be entitled to recover its reasonable and
necessary attorneys’ fees and litigation expenses incurred in connection with
successful enforcement of its rights under this paragraph 17.1. Any liability
under this paragraph 17.1 of the Contractor shall be limited in the aggregate to
a maximum amount equal to (i) with respect to claims based on a Manufacture
Defect, the price paid by Company to Contractor for the Finished Goods (Value
Added) subject to such claim and (ii) with respect to claims based on the
performance of any services hereunder (as covered in Section 4), the price paid
by Company for such services.

17.2 Company’s Indemnification: Company shall indemnify Contractor and its
Affiliates (including their officers, directors, employees and agents) against,
and hold harmless from and against, any and all Indemnified Amounts incurred by
Contractor or any of its Affiliates as a result of; (i) any material error,
inaccuracy, breach or misrepresentation in any of the representations and
warranties made by Company in this Agreement; (ii) any dispute with a
subcontractor, employee, independent contractor, agent or supplier (including
Approved Vendors) related in any way to this Agreement; and (iii) any Die or
Products and its design (other than a Manufacture Defect). Contractor shall be
entitled to recover its reasonable and necessary attorneys’ fees and litigation
expenses incurred in connection with successful enforcement of its rights under
this paragraph 17.2.

17.3 Limitation On Claims: In no event shall either party be liable to the other
on any claims arising under or related to this Agreement for consequential,
exemplary or punitive damages.

18. Termination

18.1 Early Termination: Subject to paragraph 18.2, this Agreement may be
terminated as follows:

18.1.1 Material Breach: Either party may terminate this Agreement by giving
notice in writing to the other party in the event the other party is in material
breach of this Agreement and shall have failed to cure such breach within ninety
(90) days after receipt of written notice thereof from the first party.

 

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18.1.2 Bankruptcy: Either party may terminate this Agreement at any time by
giving notice in writing to the other party, which shall be effective upon
dispatch, should the other party file a petition at any time as to its
bankruptcy, be declared bankrupt, become insolvent, make an assignment for the
benefit of creditors, go into liquidation or receivership or otherwise lose
control of its business. In the case of any such proceeding that is involuntary,
the right to terminate shall arise only if the other party fails to have such
proceeding terminated within sixty (60) days after it is filed.

18.1.3 Termination Without Cause – Company: Company may terminate this Agreement
without cause upon 360 days prior written notice to Contractor.

18.1.4 Termination without Cause – Contractor: Contractor may terminate this
Agreement without cause upon 360 days prior written notice to Company.

18.1.5 Change In Control: Company may terminate, if the Contractor at any time
has a change in control. For purposes of this paragraph 18.1.5, a “change in
control” shall be deemed to have occurred at such time ownership of not less
than 50% of the equity securities of Contractor undergo a change in ownership
during the term of this Agreement, excluding from such calculation transfers
that do not change the Person in ultimate control of Contractor.

18.2 Rights and Obligations on Termination

In the event of termination of this Agreement pursuant to any part of paragraph
18.1 above, the parties shall have the following rights and obligations:

18.2.1 No Release of Obligation: Termination of this Agreement shall not release
either party from the obligation to make payment of all amounts then due and
payable.

18.2.2 Inventory Disposition: In the event of termination under any part of
paragraph 18.1, Company will purchase from Contractor all Finished Goods and
Materials inventory necessary to fulfill Company Purchase Order(s) up to the
effective date of termination (e.g., 360 days after written notice if
termination is without cause). Contractor agrees, in the event of termination
to, (i) not place purchase orders for Materials to be delivered later than the
effective date of termination, (ii) terminate all open purchase orders for
Materials for more than the quantity of Die and/or Product authorized by Company
Purchase Order(s) for delivery up to the effective date of termination,
(iv) pursue the return for refund or credit of Materials already received but

 

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not in Manufacture that will not be needed, and (v) follow all reasonable
instructions to minimize the cost of such termination to Company, including
instructions concerning the minimization of any excess inventory remaining at
the effective date of termination.

18.2.2.1 Excess Inventory Disposition – Contractor Termination Without Cause: If
Contractor terminates this Agreement without cause, Contractor will receive no
reimbursement for excess inventory that exists on the effective date of
termination.

18.2.2.2 Excess Inventory Disposition – Company Termination Without Cause: If
Company terminates this Agreement without cause, Company will purchase all
Materials (except Indirect Materials), Die and Finished Goods inventory deemed
to be excess on the effective date of termination at actual invoice cost for
Materials or historical prices paid by Company to Contractor for Die and
Product. Contractor agrees to work diligently with and follow instructions from
Company and/or agreed-to procedural changes during the 360-day period leading up
to the date of termination to minimize excess inventory at the effective date of
termination.

18.2.2.3 Excess Inventory Disposition – Material Breach: In the case of
termination due to a material breach of this Agreement that is not corrected in
accordance with paragraph 18.1.1 above, both Contractor and Company agree to
negotiate in good faith the disposition of any excess inventories that exist at
the effective date of termination.

18.2.2.4 Excess Inventory Disposition – Bankruptcy: in the case of bankruptcy by
either party that is not corrected in accordance with paragraph 18.1.2 above,
disposition of excess inventory that exists on the effective date of termination
shall be treated as a termination by the party that is the subject of the
bankruptcy proceeding.

18.2.2.5 Excess Inventory Disposition – Change of Control: In the event of
termination due to a change in control of Contractor, both Contractor and
Company agree to negotiate in good faith the disposition of any excess inventory
existing on the effective date of termination.

18.2.3 Return of Company Assets: In the event of termination under paragraph
18.1, Contractor shall return all of Company’s Materials, documents, Provided
Equipment and supplies via ship method requested by Company. The shipping cost
will be at the expense of the Company.

18.2.4 Warranties: Contractor’s obligation under paragraph 14.5 will still be
enforced notwithstanding termination of this Agreement.

 

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19. Remedies

In the event either party breaches in any material respect any representations,
warranties or covenants hereunder or fails to comply in any material respect
with any term or requirement of this Agreement, in addition to any other
remedies the non-breaching party shall be entitled to (a) terminate this
Agreement in accordance with paragraph 18.1.1; (b) recover any and all actual
costs, expenses and damages, (including reasonable attorneys’ fees); and/or
(c) offset any amounts due to the non-breaching party by any actual costs and
expenses incurred by the non-breaching party as a result of such breach or
failure to comply. Remedies herein shall not be exclusive but shall be
cumulative of any other remedy herein or under any other statute or law. Upon
such termination, none of the parties or any other Person shall have any
liability or further obligation arising out of this Agreement except for any
liability resulting from its breach of this Agreement prior to termination,
except that the provisions of Sections 20, 21, 22, and paragraphs 23.1 and 23.15
shall continue to apply.

20. Confidentiality

20.1 Non-Disclosure: Neither Contractor nor its Affiliates will, directly or
indirectly, disclose or provide to any other Person any non-public information
of a confidential nature concerning the business or operations of Company or its
Affiliates, including without limitation, any trade secrets or other proprietary
information of Company or its Affiliates, known or which becomes known to
Contractor or its Affiliates as a result of the transactions contemplated hereby
or Contractor’s operation of the Factory, except as is required in governmental
filings or judicial, administrative or arbitration proceedings. In the event
that Contractor or any of its Affiliate becomes legally required to disclose any
such information in any governmental filings or judicial, administrative or
arbitration proceedings, Contractor shall, and shall cause any Affiliate to,
provide Company with prompt notice of such requirements so that Company may seek
a protective order or other appropriate remedy. In the event that such
protective order or other remedy is not obtained, Contractor shall, and shall
cause any Affiliate to, furnish only that portion of the information that
Contractor or its Affiliate, as the case may be, is advised by its counsel as
legally required, and such disclosure shall not result in any liability
hereunder unless such disclosure was caused by or resulted from a previous
disclosure by Contractor or any of its Affiliates that was not permitted by this
Agreement.

21. Intellectual Property/Data Rights

21.1 Contractor Owned Intellectual Property: All intellectual property owned by
Contractor before October 1, 2001 (the effective date of the original Agreement
between Company and Contractor) shall remain the sole property of Contractor,
and any intellectual property developed solely by the Contractor during the term
of this Agreement shall be the sole property of Contractor.

21.2 Company Owned Intellectual Property: All intellectual property owned by
Company before October 1, 2001 (the effective date of the original Agreement
between Company and Contractor) shall remain the sole property of Company, and
any intellectual property developed solely by the Company during the term of
this Agreement shall be the sole property of Company.

 

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21.3 Reverse Engineering: Contractor shall not alter, enhance or otherwise
modify the Technical Information or Technical Data, except as agreed by the
parties in writing. Contractor shall not disassemble, decompile or reverse
engineer any of the Technical Data or prepare derivative works of any of the
Technical Data except for use in Manufacture of Die and/or Product. Contractor
shall not sell, distribute, cause or allow to pass from control of Contractor to
a third party, or offer any Die or Product or Technical Information or Technical
Data of a Die or Product, pursuant to this Agreement, without written prior
approval from the Company.

21.4 Jointly Developed Intellectual Property: All intellectual property that is
jointly developed by Contractor and Company during the term of this Agreement
shall be jointly owned (the “Joint Intellectual Property”). Contractor and
Company agree to take such actions and sign such agreements as may be necessary
to protect or perfect the other’s individual intellectual property or its joint
interest in Joint Intellectual Property and to allow the other party to exploit
the Joint Intellectual Property in a manner not inconsistent with this
Agreement.

21.5 Contractor Patent Support: Contractor agrees to execute all papers and
provide requested assistance, at Company’s request and expense, during and
subsequent to its work for Company, to enable Company or its nominees to obtain
patents, copyrights, and legal protection for Joint Intellectual Property in any
country.

21.6 Company Patent Support: Company agrees to execute all papers and provide
requested assistance, at Contractor’s request and expense, during and subsequent
to its work at Contractor, to enable Contractor or its nominees to obtain
patents, copyrights, and legal protection for Joint Intellectual Property in any
country.

21.7 Use of Manufacturing Data: Contractor agrees that Company shall be entitled
to receive copies of and use all Manufacturing Data for its own benefit. Company
affirms that Manufacturing Data that constitutes Contractor’s solely owned
intellectual property shall remain Contractor’s property, subject only to
Company’s right of use provided in the preceding sentence, and shall not be
disclosed to any third party without prior written consent of Contractor.

21.8 Return of Documents, Data and Records Upon Termination: Upon termination of
this Agreement, whether by expiration, cancellation, or otherwise, Contractor
agrees to promptly deliver to a proper Company representative all data,
documents, and other records which relate to the business activities of Company,
and all other Materials and badges which are the property of Company.

21.9 License: Contractor hereby grants and agrees to grant to Company a
worldwide, non-exclusive right and license to use financial data related to
services

 

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under this Agreement, Manufacturing Data, sales data, tracking data, reports,
and other information transferred to or otherwise provided to or for Company for
its business purposes. Company agrees that all right, title and interest in such
data shall remain the property of Contractor.

22. Intellectual Property Infringement and Indemnification

Company shall hold Contractor harmless against any expense or loss resulting
from a claim of infringement of patents, trademarks, copyrights or other
intellectual property rights arising from compliance with Company’s designs,
Specifications or instructions and Contractor shall hold Company harmless
against any expense or loss resulting from infringement of patents, trademarks,
copyrights or other intellectual property rights arising from Contractor’s
actions not necessitated by Company’s designs, Specifications or instructions.

23. General Provisions.

23.1 Expenses: Each party shall pay its own expenses, including the fees and
disbursements to and of its counsel in connection with the negotiation,
preparation and execution of this Agreement and the consummation of the
transactions contemplated herein, except as otherwise provided herein.

23.2 Entire Agreement: This Agreement, including all Schedules and Exhibits
hereto, constitutes the entire Agreement of the parties and supersedes all
previous proposals, oral or written, and all negotiations, conversation or
discussions heretofore and between the parties with respect to the subject
matter hereof, and may not be modified, amended or terminated except by a
written instrument specifically referring to this Agreement signed by all the
parties hereto.

23.3 Waivers and Consents: All waivers and consents given hereunder shall be in
writing. No waiver by any party hereto of any breach or anticipated breach of
any provision hereof by any other party shall be deemed a waiver of any other
contemporaneous, preceding or succeeding breach or anticipated breach, whether
or not similar.

23.4 Notices: All notices, requests, demands, claims, and other communications
hereunder will be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:

 

If to Contractor, to:

   Jason Liu    Tai-Saw Technology Co., Ltd.    No. 3, Industrial 2nd Rd.   
Ping-Chen Industrial District    Taoyuan, 324, Taiwan, R.O.C.    Facsimile:
(866) 3-469-7532    E-Mail: jasonliu@mail.taisaw.com

 

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If to Company, to:

   Jon S. Prokop    R F Monolithics    4441 Sigma Road    Dallas, TX 75244   
USA    Facsimile: (972) 404-9476    E-Mail: jprokop@rfm.com

Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.

23.5 Successors and Assigns: This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors,
legal representatives and assigns. No third party shall have any rights
hereunder. No assignment shall release the assigning party.

23.6 Choice of Law: This Agreement is performable, in part, in Dallas County,
Texas, USA and, in part, in Taiwan, R.O.C., and shall be governed by and
construed in accordance with laws of the State of Texas, U.S.A., without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Texas or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Texas. The United Nations Convention
On Contracts For The International Sale Of Goods shall not apply to this
Agreement.

23.7 Headings: The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.

23.8 Severability: If any term or provision of this Agreement or the application
thereof to any Person or circumstance shall be deemed invalid, illegal or
unenforceable to any extent or for any reason, such provision shall be severed
from this Agreement and the remainder of this Agreement and the application
thereof shall not be affected and shall be enforceable to the fullest extent
permitted by law. A provision which is valid, legal and enforceable shall be
substituted for the severed provision.

 

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23.9 Construction: The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to a paragraph, section, exhibit or schedule shall
mean a paragraph, section, exhibit or schedule hereof, unless the context
otherwise requires. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.

23.10 Force Majeure: Neither party shall be liable for loss or damage or deemed
to be in breach of this Agreement if its failure to perform its obligations
results from (i) compliance with any law, ruling, order, regulation,
requirement, or instruction of any federal, state, foreign, or municipal
government or any department or agency thereof; (ii) acts of God; or
(iii) fires, strikes, embargoes, war, or riot. The party experiencing such cause
or delay shall immediately notify the other party of the circumstances which may
prevent or significantly delay its performance hereunder and shall use its Best
Efforts to alleviate the effects of such cause or delay. Any delay resulting
from any of these causes shall extend performance accordingly or excuse
performance, in whole or in part, as may be reasonable.

23.11 Counterparts: This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.

23.12 Agency: Contractor is an independent contractor. Nothing in this Agreement
shall be construed to constitute either party the agent of the other party and
neither party shall represent to any third party that it has any right or
authority to act as the agent for or otherwise to represent the other party.

23.13 Bankruptcy: If during the term of this Agreement a petition in bankruptcy
is filed by or against Contractor, or if Contractor, as a debtor, seeks or takes
the benefit of any insolvency or debtor’s relief proceeding, or if Contractor
shall file or attempt to file an assignment for the benefit of creditors, or if
Contractor shall apply to its creditors to compound its debts, then in any such
event, Company shall have the right to decline to take further deliveries
hereunder or Company may, without prejudice to any other lawful remedy,
terminate this Agreement, and in either case, Contractor shall upon demand
deliver to Company all Provided Equipment, Materials, Finished Goods, Tools, and
Fixtures and other property of Company in Contractor’s custody. If during the
term of this Agreement a petition in bankruptcy is filed by or against Company,
or if Company, as a debtor, seeks or takes the benefit of any insolvency or
debtor’s relief proceeding, or if Company shall file an assignment for the
benefit of creditors, or if Company applies to its creditors to compound its
debts, then in any such event, Contractor may without prejudice to any other
lawful remedy, terminate this Agreement.

 

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23.14 Assignment of Obligations: Neither party may assign its rights or
obligations under this Agreement without the prior written consent of the other
party; provided that either Contractor or Company may assign this Agreement to
any Person acquiring all or substantially all of the assignor’s assets and,
provided further, that either Contractor or Company may enter into a collateral
assignment and transfer of all its rights and remedies hereunder to any party
providing secured financing to the assignor. In addition, Company may assign
some or all of its rights under this Agreement, with recourse to Company, to any
one or more of Company’s customers to assure performance by Company of its
obligations to such customers.

23.14.1 Supply Chain Agreements: Contractor agrees to negotiate in good faith
and execute any supporting contracts necessary that relate to Company’s supply
chain agreements with its customers should any such agreements exist or come
into force during the term of this Agreement. Such support shall include,
without limitation, confirming in writing to Company’s customers the provisions
of paragraphs 23.14 and 23.14.1.

23.15 Export & Import Laws/Regulations: The parties shall comply with all
applicable Taiwan and International Export and Import laws and regulations in
the execution of this Agreement. Contractor shall execute such other agreements
and documents as Company requests, from time to time, in order to ensure
compliance with said laws.

23.16 Dispute Resolution

23.16.1 Negotiation: In the event of any dispute or disagreement between parties
as to the interpretation of any provision of this Agreement (or the performance
of obligations hereunder), the matter, upon written request of either party,
shall be referred to representatives of the parties for decision, each party
being represented by a senior executive officer who has no direct operational
responsibility for the matters contemplated by this Agreement. The
representatives shall promptly meet in a good faith effort to resolve the
dispute. If the representatives do not agree upon a decision within 30 calendar
days after reference of the matter to them, each of the parties shall be free to
exercise all other remedies available to it.

23.16.2 Arbitration: Any controversy, dispute or claim arising out of or
relating in any way to this Agreement or the other agreements contemplated
hereby or the transactions arising hereunder or thereunder that cannot be
resolved by negotiation pursuant to paragraph 23.16.1 above shall be settled
exclusively by binding arbitration in Hong Kong and in accordance with the then
current Commercial Arbitration Rules of the International Chamber of Commerce.
The parties shall endeavor to select a mutually acceptable arbitrator
knowledgeable about issues relating to the subject matter

 

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of this contract. In the event the parties are unable to agree upon an
arbitrator, each party will select an arbitrator and the arbitrators in turn
shall select a third arbitrator. The language of the arbitration will be in
English. The fees and expenses of the arbitrator(s) shall be shared equally by
the parties and advanced by them from time to time as required; provided that at
the conclusion of the arbitration, the arbitrator(s) may award costs and
expenses (including the costs of the arbitration previously advanced and the
fees and expenses of attorneys, accountants and other experts) plus interest, to
the prevailing party to the extent that in the judgment of the arbitrator(s) it
is fair to do so. No pre-arbitration discovery shall be permitted, except that
the arbitrator(s) shall have the power in his or her sole discretion, on
application by any party, to order pre-arbitration examination solely of those
witnesses and documents that any other party intends to introduce in its
case-in-chief at the arbitration hearing. The arbitrator(s) shall render his or
her award within 90 days of the conclusion of the arbitration hearing.
Notwithstanding anything to the contrary provided in paragraphs 23.16.1 and
23.16.2 and without prejudice to the above procedures, either party may apply to
any court of competent jurisdiction for temporary injunctive or other
provisional judicial relief if such action is necessary to avoid irreparable
damage or to preserve the status quo until such time as the arbitration panel is
convened and available to hear such party’s request for temporary relief. The
award rendered by the arbitrator shall be final and not subject to judicial
review and judgment thereon may be entered in any court of competent
jurisdiction. Any monetary award will be made and payable in U.S. dollars free
of any tax or other deduction.

23.17 English Controlling: For purposes of convenience, this Agreement may be
translated, but the English version of this Agreement (and any schedules and
exhibits hereto) will control for all purposes. In case of a conflict in meaning
between the two versions, the parties are responsible for performing in
accordance with the English version hereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first above written.

 

RF MONOLITHICS, INC.     TAI-SAW TECHNOLOGY CO., LTD.

Jon S. Prokop

   

Jason Liu

(Printed Name)     (Printed Name)

/s/ Jon S. Prokop

   

/s/ Jason Liu

(Signature)     (Signature)

VP Operations

   

Executive Vice President

(Title)     (Title)

February 15, 2010

   

February 10, 2010

(Date)     (Date)

 

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