10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended November 30, 2002

Commission File No. 0-24414

RF Monolithics, Inc.

(Exact name of registrant as specified in its charter)

Delaware	75-1638027
(State or other jurisdiction of	(I.R.S. Employer
incorporation of organization)	Identification)
4347 Sigma Road, Dallas, Texas	75244
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (972) 233-2903

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  x  Yes    ¨  No

As of December 31, 2002: 7,131,869 shares of the Registrant’s Common Stock, $.001 par value, were outstanding.

RF MONOLITHICS, INC.

FORM 10-Q

QUARTER ENDED NOVEMBER 30, 2002

TABLE OF CONTENTS

Item Number		Page
Part I.    CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1.	Condensed Consolidated Financial Statements:
	Condensed Consolidated Balance Sheets November 30, 2002 (Unaudited), and August 31, 2002	2
	Condensed Consolidated Statements of Operations—Unaudited          Three Months Ended November 30, 2002 and 2001	3
	Condensed Consolidated Statements of Cash Flows—Unaudited          Three Months Ended November 30, 2002 and 2001	4
	Notes to Condensed Consolidated Financial Statements	5
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
3.	Quantitative and Qualitative Disclosures About Market Risk	21
4.	Controls and Procedures	21
	PART II.    OTHER INFORMATION
6.	Exhibits and Reports on Form 8-K	21
	SIGNATURES
	CERTIFICATIONS
	INDEX TO EXHIBITS

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PART I.  CONDENSED CONSOLIDATED FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

RF MONOLITHICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
	November 30, 2002			August 31, 2002
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	94		$	273
Trade receivables—net		6,593			7,374
Inventories		10,799			10,642
Prepaid expenses and other		417			429
Total current assets		17,903			18,718
PROPERTY AND EQUIPMENT—Net		10,436			11,353
OTHER ASSETS—Net		363			439
TOTAL	$	28,702		$	30,510
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	2,600		$	3,600
Accounts payable—trade		1,630			2,238
Accrued expenses and other current liabilities		1,656			1,603
Total current liabilities		5,886			7,441
LONG-TERM DEBT—Less current portion		2,471			2,844
OTHER LIABILITIES		235			216
STOCKHOLDERS’ EQUITY:
Common stock: 7,132 and 7,131 shares issued		7			7
Additional paid-in capital		32,940			32,969
Common stock warrants		800			800
Treasury stock, 36 common shares at cost		(227	)		(227	)
Accumulated deficit		(13,155	)		(13,209	)
Unearned compensation		(255	)		(331	)
Total stockholders’ equity		20,110			20,009
TOTAL	$	28,702		$	30,510

See notes to condensed consolidated financial statements.

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RF MONOLITHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS—UNAUDITED

(In Thousands, Except Per-Share Amounts)

	Three Months Ended
	November 30,
	2002			2001
SALES	$	10,628		$	11,680
COST OF SALES		7,752			9,201
GROSS PROFIT		2,876			2,479
OPERATING EXPENSES:
Research and development		788			740
Sales and marketing		1,220			1,181
General and administrative		665			730
Total operating expenses		2,673			2,651
INCOME (LOSS) FROM OPERATIONS		203			(172	)
OTHER INCOME (EXPENSE):
Interest income		3			2
Interest expense		(177	)		(383	)
Other expense		31			(12	)
Total		(143	)		(393	)
INCOME (LOSS) BEFORE INCOME TAXES		60			(565	)
INCOME TAX EXPENSE		6			—
NET INCOME (LOSS)	$	54		$	(565	)
EARNINGS PER SHARE
Basic	$	0.01		$	(0.08	)
Diluted	$	0.01		$	(0.08	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic		7,132			7,068
Diluted		7,177			7,068

See notes to condensed consolidated financial statements.

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RF MONOLITHICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS—UNAUDITED

(In Thousands)

	Three Months Ended November 30,
	2002			2001
OPERATING ACTIVITIES:
Net income (loss)	$	54		$	(565	)
Noncash items included in net (loss) income:
Depreciation and amortization		1,042			1,366
Provision for trade receivable allowance		2			9
Amortization of unearned compensation		47			68
Gain on disposal of property and equipment		(14	)		—
Net income (loss) adjusted for noncash transactions		1,131			878
Change in working capital:
Trade receivables		779			(256	)
Inventories		(157	)		982
Prepaid expenses and other		12			37
Accounts payable—trade		(608	)		(661	)
Accrued expenses and other liabilities		72			(232	)
Net cash provided by (used in) working capital		98			(130	)
Net cash provided by operating activities		1,229			748
INVESTING ACTIVITIES:
Acquisition of property and equipment		(106	)		(16	)
Proceeds from disposition of property and equipment		14			174
Change in other assets		57			(4	)
Net cash provided by (used in) investing activities		(35	)		154
FINANCING ACTIVITIES:
Borrowings on notes payable		10,393			10,909
Repayments of notes payable		(11,766	)		(11,976	)
Repayments of capital lease obligations		—			(16	)
Repayments of accounts payable—construction and equipment		—			(37	)
Proceeds from common stock and warrants issued		—			—
Net cash provided by (used in) financing activities		(1,373	)		(1,120	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(179	)		(218	)
CASH AND CASH EQUIVALENTS:
Beginning of period		273			332
End of period	$	94		$	114
SUPPLEMENTAL INFORMATION:
Interest paid	$	115		$	236
Income taxes paid	$	—		$	—

See notes to condensed consolidated financial statements.

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RF MONOLITHICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—UNAUDITED

1.    INTERIM FINANCIAL STATEMENTS

The accompanying condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments and accruals, that in the opinion of the management of RF Monolithics, Inc. (the “Company” or “RFM”) are necessary for a fair presentation of the Company’s financial position as of November 30, 2002, and the results of operations and cash flows for the three months ended November 30, 2002 and 2001. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements of the Company and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2002, filed with the Securities and Exchange Commission.

Operating results for the three months ended November 30, 2002, are not necessarily indicative of the results to be achieved for the full fiscal year ending August 31, 2003.

2.    RECENT ACCOUNTING PRONOUNCMENTS

In December 2002, the FASB issued Statement of Financial Accounting Standards No. 148 Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123 (“SFAS 148”). SFAS 148 amends SFAS 123 to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. Management currently does not plan to transition to the fair value method of accounting for employee stock options. Accordingly, management does not believe that portion of SFAS 148 will impact the Company. However, management will provide the new disclosures as required in their interim filing for the quarter ended May 31, 2003.

3.    INVENTORIES

Inventories consist of the following (in thousands):

	November 30,		August 31,
	2002		2002
Raw materials and supplies	$	3,711	$	3,312
Work in process		3,029		3,475
Finished goods		4,059		3,855
Total	$	10,799	$	10,642

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4.    PROPERTY AND EQUIPMENT

Property and equipment includes construction in progress of $133,000 at November 30, 2002, and $28,000 at August 31, 2002, which is composed of equipment and other assets not yet placed in service.

5.    CREDIT FACILITIES

On December 8, 2000, the Company entered into a Security and Loan Agreement (Agreement) consisting of (i) a revolving line-of-credit facility of up to $13,500,000, limited to an available borrowing base, which is based on the levels of eligible accounts receivable and inventory, as defined in the Agreement and (ii) a term note of $3,000,000. The Agreement calls for an interest rate of bank prime plus 2% (6.25% on November 30, 2002).

At November 30, 2002 and August 31, 2002, the balance outstanding on the revolving line of credit was $3,833,000 and $5,063,000 respectively. The revolving credit facility borrowing base at November 30, 2002, had an additional $3,508,000 available to borrow. An additional $6,159,000 may become available under the revolving credit facility if the Company’s borrowing base were to increase sufficiently to support the increased borrowing.

At November 30, 2002 and August 31, 2002, the balances outstanding on the term note were $1,266,000 and $1,416,000 respectively. The term note requires monthly principal payments of $50,000 plus interest, which began January 2001. The term note also requires additional principal payments equal to the appraised value of any equipment either being sold or moved to support the offshore manufacturing initiative since the equipment serves as collateral for the term note.

The Agreement will expire in December, 2004. In connection with the Agreement, the Company entered into a warrant purchase agreement with the lender and issued warrants to purchase 30,000 shares of the Company’s common stock at an exercise price of $5.00 per share. The warrants expire 10 years from date of issuance and the fair value assigned to these warrants of $85,000 was accounted for as a debt discount and is being amortized over the period of the Agreement. At November 30, 2002 and August 31, 2002, the balance of unamortized debt discount was $28,000 and $35,000 respectively.

The Agreement contains financial covenants relating to various matters, including but not limited to minimum net worth, quarterly and monthly earnings, limitations on changes in corporate structure, and restrictions on dividends and capital spending. The Company was in compliance with all covenants as of November 30, 2002. Although the Company believes that it will be able to continue to meet the covenants, there is no assurance that this will occur. Should there be a covenant violation without a waiver or amendment, the maturity of the Company’s debt could be accelerated and other sources of cash would be needed.

6.    CAPITAL STOCK

During the first quarter of the fiscal year, the Company granted to officers Incentive Stock Options to purchase 58,000 shares of the Company’s Common Stock at an exercise price ranging between $2.90 and $3.23, which was the fair market value on the date of the grants. These options were granted in accordance with the 1997 Equity Incentive Plan. The Company also granted to certain employees Non-qualified Stock Options to purchase 48,500 shares of common stock. These options were granted in accordance with the Company’s 1999 Equity Incentive Plan at an exercise price of $3.17, which was the fair market value on the

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dates of the grants. The Company also granted to its non-employee directors Non-gualified Stock Options to purchase 20,000 shares of common stock. These options were granted in accordance with the Company’s 1997 Equity Incentive Plan at an exercise price of $3.23, which was the fair market value on the date of the grants. See Item 2 Management Discussion and Analysis of Financial Condition and Results of Operations for additional discussion of the Company’s stock option plans.

7.    SALES REVENUE

The following table sets forth the components of the Company’s sales and the percentage relationship of the components to sales by product area for the periods ended as indicated (in thousands, except percentage data):

	Quarter Ended
	November 30,				November 30,
	2002				2001
	Amounts		% of Total		Amounts		% of Total
Low-power Products Group:
Low-power components	$	6,514	61	%	$	7,567	65	%
Virtual Wire® radio products		2,098	20			1,824	15
Subtotal		8,612	81			9,391	80
Communications Products Group:
Frequency control modules		389	4			527	5
Filters		1,434	13			1,579	13
Subtotal		1,823	17			2,106	18
Total product sales		10,435	98			11,497	98
Technology development sales		193	2			183	2
Total sales	$	10,628	100	%	$	11,680	100	%

International sales were approximately 48% or $5,075 and 51% or $5,900 during the current quarter and the comparable quarter of the prior year, respectively. The Company considers all product sales with a delivery destination outside of North America to be international sales.

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ITEM  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion may be understood more fully by reference to the financial statements, notes to the financial statements, and management’s discussion and analysis contained in the Company’s Annual Report on Form 10-K for the year ended August 31, 2002 filed with the Securities and Exchange Commission.

General

RFM designs, develops, manufactures and markets a broad range of radio frequency components and modules. The Company’s products are organized into two Product groups: the Low-power Products Group and the Communications Products Group. The Low-power Products Group includes Low-power Components, as well as Virtual Wire^® Short-range Radio products. The Communications Products Group includes frequency control modules and filter products. The Company’s products are based on SAW technology, and the Company’s strategy is to leverage its radio frequency design skills and its packaging technology to provide SAW-based solutions to the current and emerging needs of the electronics industry. The Company sells to original equipment manufacturers and distributors in the automotive, consumer, industrial and telecommunications market segments worldwide.

Results of Operations

The following discussion relates to the financial statements of the Company for the three months ended November 30, 2002 (current quarter and current year-to-date period), of the fiscal year ending August 31, 2003, in comparison to the three months ended November 30, 2001 (comparable quarter of the prior year and prior year-to-date period). In addition, certain comparisons with the three months ended August 31, 2002 (previous quarter), are provided where management believes it is useful to the understanding of trends. Also, there are some forward-looking statements that refer to the Company’s subsequent quarter ending February 28, 2003 (next quarter or second quarter).

The selected financial data for the periods presented may not be indicative of the Company’s future financial condition or results of operations.

The following table sets forth, for the three months ended November 30, 2002 and 2001, (i) the percentage relationship of certain items from the Company’s statements of operations to sales and (ii) the percentage change in these items between the current period and the comparable period of the prior year.

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	Percentage of Total Sales Quarter Ended November 30,				Percentage Change From Quarter Ended November 30, 2001 to Quarter Ended November 30, 2002
	2002		2001
Sales	100	%	100	%	(9	)%
Cost of sales	73		79		(16	)
Gross profit	27		21		16
Research and development	7		7		6
Sales and marketing	12		10		3
General and administrative	6		6		(9	)
Total operating expenses	25		23		1
Income (loss) from operations	2		(2	)	218
Other expense, net	(1	)	(3	)	(64	)
Income (loss) before income taxes	1		(5	)	111
Income tax (benefit) expense	—		—		—
Net(loss) income	1	%	(5	)%	110	%

Sales

Total sales decreased 9% in the current quarter compared to the comparable quarter of the prior year and decreased 6% compared to the previous quarter. The decrease was primarily due to a reduction in the number of units shipped of several of the Company’s product lines, primarily as a result of the general economic downturn that has occurred. The Company is receiving only limited visibility from its customers in the form of order backlog, due to uncertainties in sales to their customers. As a result, the Company may have to rely heavily on business that is booked and shipped within a given quarter. This makes forecasting Company sales very difficult. However, recent weaknesses in the Company’s bookings for new orders leads management to believe that sales for the next quarter may be 5% to 7% less than the current quarter. Also, because of various seasonal factors, the Company’s second quarter sales are typically the lowest of the fiscal year. Because of the lack of visibility from its customers, the Company cannot make an estimate of sales beyond the next quarter.

Low-power Components sales declined 14% from the comparable quarter of the prior year and 10% from the previous quarter. The decrease was primarily due to a decreased number of units sold of both the older style TO-39 products and the newer style surface mount products. The reduction in number of units sold from the comparable quarter of the prior year was due to a reduction in sales to both consumer and automotive customers, reflecting weaker economic conditions in those markets. The reduction in the number of units sold from the previous quarter was most significant for European distributors, reflecting their efforts to reduce inventories. While sales to automotive customers for the current quarter were similar to sales in the previous quarter, the Company has experienced fluctuations in sales to those customers in the past as a result of fluctuations in production rates at those customers and will continue to do so in the future. The Company has noted a reduction in some automotive production schedules for the next quarter. While average selling prices for Low-power Components in the current quarter did not change from the previous

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quarter, the Company has negotiated long-term contracts that call for lower selling prices. These reduced prices will impact its margins beginning in the next quarter. The Company believes the market for Low-power Components is extremely price competitive, so there is no assurance that stable pricing will continue or that the Company can maintain its market share at current prices. As a result, sales for Low-power Components are unlikely to increase and may decline.

Virtual Wire^® Short-range Radio products sales in the current quarter increased 15% in comparison to the comparable quarter of the prior year and decreased 14% from the previous quarter. Both changes in sales were primarily due to changes in the number of units sold. The increase in number of units sold from the comparable quarter of the prior year resulted from an increase in market acceptance of these relatively new products, particularly in consumer and industrial applications. The decrease in number of units sold from the previous quarter primarily resulted from an inventory reduction effort by the Company’s distributors. The Company has devoted significant capital, technical, sales and marketing resources to the Virtual Wire^® Short-range Radio products, has experienced a general increase in sales for these products in recent years and believes that acceptance of these products will grow in future periods. However, the recent economic downturn appears to have delayed many customer programs for which these products were designed. There is no assurance that the relatively new demand for these products will continue to increase, or even be maintained at the current levels.

Sales of filter products decreased 9% from the comparable quarter of the prior year and increased 31% from the previous quarter. The decrease in sales from the comparable quarter of the prior year was due to a decrease in average selling prices as a result of changes in product mix. In the current quarter, the number of units sold of relatively high priced filters for telecommunications applications declined due to a severe downturn in economic conditions in that market. This was partially offset by an increase in sales for new relatively low-priced filters for automotive satellite radio applications, consumer Global Position Satellite (GPS) applications and telecommunications Code Division Multiple Access (CDMA) 2000 and Wide Band CDMA applications. The increase in sales over the previous quarter was primarily due to an increase in the number of units sold for those new applications. The Company has devoted significant resources to developing and supporting the growth of its filter products and believes that acceptance of these products will grow in future periods. However, the product development and introduction cycle for filter products is six to eighteen months to complete with the timing largely under the customers’ control. As a result, it is difficult to predict whether or not the focus on filter products will continue to have a significant impact on the Company’s sales.

Sales of frequency control products decreased 26% from the comparable quarter of the prior year and increased 9% from the previous quarter. The decrease in sales from the comparable quarter of the prior year was due to a decrease in average selling prices as a result of changes in product mix. The Company experienced decreased sales of relatively high priced products to customers in optical timing markets as a result of a continuing economic downturn in that market, partially offset by an increase in sales of relatively lower priced products to customers in computer markets. The Company believes its new line of optical timing oscillators may provide a significant sales opportunity, but the depressed economic conditions in that market make it uncertain as to when or if that will occur.

The Company’s top five customers accounted for approximately 43%, 34% and 39% of the Company’s sales in the current quarter, the comparable quarter of the prior year and the previous quarter, respectively. Distribution related customers accounted for approximately 25%, 17% and 30% of the Company’s total sales in the current quarter, the comparable quarter of the prior year and the previous quarter, respectively. Only one customer, Insight Electronics, accounted for more than 10% of sales for the current quarter at 14% of total sales, compared to 16% in the previous quarter. No customer accounted for

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more than 10% of total sales for the comparable quarter of the prior year. The Company’s sales strategy is to seek diversification in its customer base; however, due to the very competitive nature of the markets in which it competes, the Company is not certain it will be able to continue to achieve this diversification.

International sales were approximately 48%, 51% and 46% of the Company’s sales during the current quarter, the comparable quarter of the prior year and the previous quarter, respectively. The Company considers all product sales with a delivery destination outside of North America to be international sales. These sales are currently denominated primarily in U.S. currency, with a small amount of sales denominated in Euros. The Company intends to continue its focus on international sales in the future and expects that international sales will continue to represent a significant portion of its business. However, international sales are subject to fluctuations as a result of local economic conditions and competition. Therefore, the Company cannot predict whether it will continue to derive similar levels of its business from international sales in future periods.

While the Company has achieved sales increases in prior years, there can be no assurance that this can be achieved in future periods. The Company’s success is highly dependent on achieving technological advances in its product design and manufacturing capabilities, as well as its ability to sell its products in a competitive marketplace that can be influenced by outside factors such as economic and regulatory conditions. Competition includes alternative technologies and competitors duplicating the Company’s technologies that may adversely affect selling prices and market share.

Gross Profit

The current quarter gross margin of 27.1% increased from 21.2% in the comparable quarter of the prior year and decreased from 28.8% in the previous quarter. The almost six margin point improvement from the comparable quarter of the prior year was due to the large amount of cost reduction achieved as a result of the Company’s restructuring program. Most of the Company’s assembly production has been moved offshore and there has been a large reduction in the Company’s Dallas workforce as a result.

The reduction in gross margin was a result of the fact that the previous quarter included a favorable mix within its product lines that did not recur. In the next quarter, the Company believes it will experience some effect due to lower average selling prices for its Low-power Components products. Offsetting this will be continuing Company efforts to reduce costs, including reductions in prices from its suppliers and improvements in yield and productivity. While it is uncertain whether the cost reduction efforts will be sufficient to offset the impact of lower average selling prices, the Company believes it will be able to maintain its gross margins in the 26% to 27% range in the next quarter.

The Company has in the past experienced sudden increases in demand, which have put pressure on its manufacturing facilities to increase capacity to meet this demand. In addition, some new products require different manufacturing processes than the Company currently possesses. As previously mentioned, the Company has transitioned the majority of its assembly capability to offshore contractors. The Company may not be able to continue to increase its manufacturing capacity, the manufacturing capacity of its assembly contractors, or improve its manufacturing processes in a timely manner so as to take advantage of increased market demand. Failure to do this would result in a loss of potential sales. However, the Company believes that having multiple approved offshore assemblers does provide some level of backup for contingencies.

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Research and Development Expense

Research and development expenses in the current quarter increased approximately $48,000, or 6%, from the comparable quarter of the prior year. This was primarily due to a decreased amount of costs related to technology development contracts to be included in Cost of Sales that caused a corresponding increase in research and development expenses. The Company believes that the continued development of its technology and new products is essential to its success and is committed to continue to devote significant resources to research and development. The Company expects that research and development expenses may increase or stay approximately the same in absolute dollars over the next several quarters.

Sales and Marketing Expense

Current quarter sales and marketing expenses increased approximately $39,000, or 3% from the comparable quarter of the prior year. This was primarily due to increased spending to increase contacts with existing and potential customers. The Company expects to incur comparable or slightly increased sales and marketing expenses in absolute dollars over the next several quarters, with the exception of sales commission expenses that will fluctuate in line with sales levels.

General and Administrative Expense

General and administrative expenses for the current quarter decreased approximately $65,000, or 9%, from the prior comparable period. This was a result of the decreased spending for legal support, executive compensation programs and other administrative expenses. The Company expects to incur comparable or slightly increased general and administrative expenses in absolute dollars over the next several quarters.

Total Operating Expenses

The Company continued its program to control operating expenses. Total operating expenses were approximately $22,000 higher in the current quarter than in the comparable quarter of the prior year resulting in a 1% overall increase. This was a 12% decrease over the previous quarter, partially due to the fact that the previous quarter included $229,000 of restructuring and impairment charges that did not recur this quarter. The Company believes it has the resources in place to execute its operating plan. Therefore, it does not expect operating expenses to change materially over the next several quarters, other than changes related to sales volume and the resulting impact on sales commission expense.

Income from Operations

Income from operations was $203,000, in comparison to a $172,000 loss from operations in the comparable quarter of the prior year. The improvement in income from operations primarily resulted from an improvement in gross margin.

Other Income (Expense)

Total other expenses were $143,000 in the current quarter, compared to $393,000 for the comparable quarter of the prior year. The decrease in total other expenses primarily results from decreased interest expenses as a result of decreased borrowings, lower interest rates and lower fees associated with the Company’s line of credit. In the current quarter, the company paid down $1.4 million in bank debt. Total bank debt has decreased $5.2 million, or approximately 50%, in the twelve months ended November 30, 2002. The Company’s plan is to continue to pay down its bank debt in coming periods.

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Income Before Income Taxes

Current quarter income before taxes was $60,000, compared to a $565,000 loss in the comparable quarter of the prior year. The improvement in income before income taxes results from an improvement in gross margin and a reduction of other expenses such as interest expense.

Income Tax Expense

Due to losses as well as the general economic environment, the Company continues to maintain a full valuation allowance on its deferred tax assets. The Company retains the tax benefits involved and will realize the benefits in future periods to the extent the Company is profitable. As of the end of last fiscal year, the Company has income tax carry forwards of $15,821,716, $122,365, $576,911 and $35,341 related to net operating losses, alternative minimum federal income tax benefits, general business credits and foreign tax credits, respectively, available to reduce future federal income tax liabilities. The net operating loss carryforward begins to expire August 31, 2020. The Company expects to continue to record relatively small state income tax provisions in future periods.

Net Income

Net income was $54,000, or $0.01 per diluted share, in the current quarter, compared to net loss of $565,000, or $0.08 per diluted share, for the comparable quarter of the prior year.

Financial Condition

Financing Arrangements

In December 2000, the Company entered into an agreement with a commercial bank for a credit facility consisting of a $13.5 million revolving credit facility and a $3.0 million term note. Included in the revolving credit facility is a $5.0 million loan that is supported by the Export/Import bank (Exim bank). Both facilities terminate on December 31, 2004. The interest rate for both facilities is 2% over prime rate. As part of the agreement, the bank was given a ten-year warrant to purchase 30,000 shares of the Company’s common stock at $5.00 per share.

The structure of the banking agreement ties amounts borrowed under the agreement to a borrowing base consisting of certain receivables, inventory, and fixed assets. Essentially all the assets of the Company, tangible and intangible, are pledged as collateral under both facilities. The term loan requires equal monthly payments of principal totaling $50,000 plus interest. The term note also requires the Company to pay off a portion of the term note in relation to the equipment either being sold or moved offshore, since the equipment is collateral for the term note. The portion to pay off is equal to appraised value of the equipment being moved. There is no assurance that this can be accomplished on favorable terms. Should that not occur, there could be a slowdown in the Company’s plans to sell off excess assets or expand offshore production.

This credit facility contains financial covenants relating to various matters, including but not limited to, minimum net worth, quarterly and monthly earnings, and limitations on changes in corporate structure, and restrictions on dividends and capital spending. On five occasions, the Company has amended the banking arrangements to adjust those covenants or make other changes for one-time fees in the aggregate amount of $205,000. As of November 30, 2002, the Company was in compliance with its covenants. Although the Company believes that it will be able to continue to meet the covenants, there is no assurance that this will occur. Should the Company experience significant shortfalls in sales or margins, a covenant violation could occur. Should there be a covenant violation without a waiver or amendment, the maturity of the Company’s debt could be accelerated and other sources of cash would be needed.

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Cash Flows

The major source of liquidity at November 30, 2002, consisted of $94,000 of cash and $3.5 million available under the banking agreement. Net cash provided by operating activities was $1.2 million for the current year-to-date period as compared to $748,000 for the comparable period of the prior year, an improvement of $481,000. The increased operating cash flow was primarily due to improvement in net income adjusted for noncash transactions which was $1.1 million in the current year, compared to $878,000 for the prior year. This is a $253,000 improvement and is a result of the Company’s various cost reduction programs and other efforts to improve operating results.

In the current year, $98,000 was provided by working capital, while in the previous year $130,000 was used in working capital. The cash provided by working capital in the current year was primarily $779,000 in reduced trade receivables resulting from reduced sales and improved collections, partially offset by paying down accounts payable by $608,000. Cash used in working capital in the prior year resulted from an increase of $256,000 in receivables and an $893,000 reduction in trade payables and accrued expenses, partially offset by a $982,000 inventory reduction.

The Company’s plan is to maintain its positive operating cash flow from operations for fiscal year 2003. The Company has been able to do this for six consecutive fiscal quarters. Since capital expenditures are expected to be relatively low, this should allow the Company to operate in a normal manner during the current fiscal year, despite a relatively low amount of cash reserves. However, there can be no assurance that this will be achieved.

Cash used in investing activities was $35,000 for the current year-to-date period, as compared to cash provided from investing activities of $154,000 for the prior year-to-date period. This was primarily due to the fact that the Company used $106,000 to pay for capital expenditures in the current quarter, compared to generating proceeds of $174,000 from disposing of equipment in the comparable quarter of the prior year. The Company expects to spend up to $3.0 million for capital additions by the end of fiscal year 2003, consisting primarily of the purchase of a building it currently rents and related improvements to its facilities to consolidate its operations. A portion of this will be financed by a loan secured by the property acquired.

Net cash utilized in financing activities was $1.4 million in the current year-to-date period and $1.1 million in the prior year-to-date period. In the current quarter, $1.4 million was used to pay down bank debt, compared to approximately $1.1 million in the comparable quarter of the prior year. Under the Company’s banking agreement, all receipts on trade receivables are applied to the loans that are outstanding and the Company borrows funds to support its activities according to its borrowing base. As a result, repayments on debt and borrowings are large relative to sales.

As of November 30, 2002, the Company had approximately $3.5 million available in cash under its banking arrangement based upon the borrowing base at that time. In addition, approximately $6.2 million may become available under the Revolving Credit facility if the Company’s borrowing base were to increase sufficiently to support the increased borrowing. Approximately $1.0 million of this will become available in the next quarter because of a recent amendment to the Company’s borrowing agreement to include shipments made from offshore locations as part of the borrowing base.

While the Company has reached profitability in its last two quarters, a reduction in sales or gross margins could occur due to economic or other factors. The Company believes that cash generated from operations, if any, its cash balances, and the amounts available under its credit facility will be sufficient to meet the Company’s operating cash requirements through the next twelve months. To the extent that these sources of funds are insufficient to meet the Company’s capital or operating requirements, the Company may be required to raise additional funds or reduce spending. No assurance can be given that additional financing

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will be available or, if available, that it will be available on acceptable terms. Should that occur, there could be significant adverse impact on the Company’s operations.

Stock Options

(a)    Stock Option Program Description

The Company’s stock option program is a broad-base, long-term retention program that is intended to attract and retain talented personnel and align stockholder and employee interests. The Company currently has four plans (1999 Plan, 1997 Plan, 1986 Plan and Director Plan) under which it grants stock options to employees, directors or consultants. The options generally vest at a rate of one forty-eighth each month beginning the first day of the month following the date of grant. The exercise price of each option equals the market price of the Company’s stock on the date of grant and each option generally expires ten years after the date of grant. The 1986 Plan expired for future grants according to its terms in November 2002.

The Company currently accounts for its option plans under APB 25 and accordingly does not recognize compensation expense for at-the-money options granted to employees and directors. Options granted to consultants are accounted for under SFAS 123 and are valued using the Black-Scholes model. Compensation expense of such options is recognized over the vesting life of the options, which is aligned with the consulting service life.

The 1997 Plan is also used by the Company to grant restricted stock. The grants are considered issued stock when granted and presented to the grantee as vesting occurs. The Company records unearned compensation based on the share price on the date of grant and expenses that amount over the vesting period.

(b)    Distribution and Dilutive Effect of Options

Employee and Executive Option Grants

As of First Quarter Ended November 30, 2002 of Fiscal 2003

The following table summarizes the options granted to employees and the Named Executive Officers of the Company during the first quarter ended November 30, 2002. The Named Executive Officers represent the Company’s Chief Executive Officer and its other four most highly compensated executive officers at August 31, 2002, whose total annual salary and bonus exceeded $100,000 during the fiscal year ended August 31, 2002 as reported in the Company’s most recent Proxy Statement filed with the Securities and Exchange Commission.

	YTD 1st Qtr FY2003
			FY2002		FY2001
Net grants during the period as % of outstanding shares.	1.8	%	3.9	%	8.5	%
Grants to Named Executive Officers during the period as % of total options granted.	31.7	%	14.6	%	20.2	%
Grants to Named Executive Officers during the period as % of outstanding shares.	0.6	%	0.6	%	1.7	%
Cumulative options held by Named Executive Officers as % of total options outstanding.	26.4	%	26.0	%	26.2	%

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(c)    General Option Information

Summary of Option Activity

As of First Quarter Ended November 30, 2002 of Fiscal Year 2003

The following is a summary of stock option activity for the first quarter ended November 30, 2002:

				Options Outstanding
		Shares Available for Options (#)		Number of Shares (#)		Weighted Average Exercise Price ($)
Balance	August 31, 2001	429,713		1,612,287		$	7.02
	Grants	(273,500	)	273,500		$	2.97
	Exercises	—		(41	)	$	0.60
	Cancellations	102,946		(102,946	)	$	6.23
	Restricted stock (issues)/cancels-net	(2,884	)	—			—
	Additional shares reserved	100,000		—			—
Balance	August 31, 2002	356,275		1,782,800		$	6.45
	Grants	(126,000	)	126,000		$	3.18
	Exercises	—		—		$	0.00
	Cancellations	600		(600	)	$	7.50
	Restricted stock (issues)/cancels-net	—		—			—
	Additional shares reserved	—		—			—
Balance	November 30, 2002	230,875		1,908,200		$	6.23

In-the-Money and Out-of-the-Money Option Information

As of First Quarter Ended November 30, 2002 of Fiscal Year 2003

The following table compares the number of shares subject to option grants with exercise prices below the closing price of the Company’s common stock at November 30, 2002 (referred to as “In-the-Money”) with the number of shares subject to option grants with exercise prices equal to or greater than the closing price of the Company’s common stock at November 30, 2002 (referred to as “Out-of-the-Money”). The closing price of the Company’s common stock at November 30, 2002 was $2.76 per share.

	Exercisable			Unexercisable			Total
As of End of Quarter	Shares (#)	Wtd. Avg. Exercise Price ($)		Shares (#)	Wtd. Avg. Exercise Price ($)		Shares (#)	Wtd. Avg. Exercise Price ($)
In-the-Money	37,791	$	2.02	114,709	$	2.11	152,500	$	2.09
Out-of-the-Money	1,084,468	$	7.69	671,232	$	4.82	1,755,700	$	6.59
Total Options Outstanding	1,122,259	$	7.50	785,941	$	4.42	1,908,200	$	6.23

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(d)    Executive Options

Options Granted to Named Executive Officers

As of First Quarter Ended November 30, 2002 of Fiscal Year 2003

The following table sets forth a summary of the stock options granted to the Named Executive Officers of the Company during the first quarter ended November 30, 2002. Named Executive Officers are those executive officers described in the table above under the heading “Employee and Executive Option Grants”. The following table does not contemplate status of granted options relative to the Company’s exchange traded stock price.

	Individual Grants
	Number of Securities Underlying Options Per Grant (#)	Percent of Total Options Granted to Employees Year to Date (%)		Exercise or Base Price ($/Share)		Expiration   Date	Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term ($)
							5%		10%
David M. Kirk	15,000	11.90	%	$	3.23	10-21-12	$	30,442	$	77,145
Darrell L. Ash	5,000	3.97	%	$	3.23	10-21-12	$	10,147	$	25,715
	5,000	3.97	%	$	2.90	11-06-12	$	9,119	$	23,109
David Crawford	5,000	3.97	%	$	3.23	10-21-12	$	10,147	$	25,715
Robert J. Kansy	5,000	3.97	%	$	3.23	10-21-12	$	10,147	$	25,715
Jon Prokop	5,000	3.97	%	$	3.23	10-21-12	$	10,147	$	25,715

The percentage of total options granted to employees is based on an aggregate of 126,000 options granted to employees of, consultants to and directors of the Company during the year to date period ended November 30, 2002, including the Company’s Chief Executive Officer and four most highly compensated executive officers. The exercise price per share of each option is equal to the fair market value of the common stock on the date of grant.

The potential realizable value is calculated based on the term of the option at its time of grant (ten years). It is calculated by assuming that the stock price on the date of grant appreciates at the indicated annual rate compounded annually for the entire term of the option, and that the option is exercised and sold on the last day of its term for the appreciated stock price. No gain to the optionee is possible unless the stock price increases over the option term, which will benefit the stockholder.

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Options Exercises and Remaining Holdings of Named Executive Officers

As of First Quarter Ended November 30, 2002 of Fiscal Year 2003

The following table sets forth information concerning stock options exercised during the first quarter ended November 30, 2002 and the number of shares of the Company’s common stock subject to both exercisable and unexercisable stock options as of November 30, 2002 for each of the Company’s Named Executive Officers as described in the table above under the heading “Employee Executive Option Grants”. The value of unexercised in-the-money options is based on the fair market value of the Company’s common stock as of November 30, 2002, of $2.76 per share, minus the exercise price, multiplied by the number of shares underlying the option.

	Shares Acquired on Exercise (#)	Value Realized ($)	Number of Securities Underlying Unexercised Options at End of Quarter (#)		Values of Unexercised In-the- Money Options at End of Quarter ($)
Name			Exercisable	Unexercisable	Exercisable		Unexercisable
David M. Kirk	0	0	126,982	78,018	$	3,751	$	11,248
Darrell L. Ash	0	0	53,666	25,000	$	937	$	2,813
David Crawford	0	0	44,666	35,334	$	937	$	2,813
Robert J. Kansy	0	0	56,318	18,182	$	937	$	2,813
Jon Prokop	0	0	34,713	30,087	$	937	$	2,813

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(e) Equity Compensation Plan Information

The following table summarizes the Company’s equity compensation plans as of the first quarter ended November 30, 2002:

	(a)	(b)		(c)
Plan category	Number of securities to be issued upon exercise of outstanding options	Weighted- average exercise price of outstanding options		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	1,236,737	$	7.10	213,208
Equity compensation plans not approved by security holders*	671,463	$	4.63	17,667
Total	1,908,200	$	6.23	230,875

*The Company’s 1999 Incentive Stock Option Plan has not been approved by the stockholders. Neither the Chief Executive Officer nor any of the other four highest compensated officers of the Company is eligible to receive stock options, bonuses or restricted stock under the plan. Other officers are only eligible to receive awards that are an inducement essential to such individual entering into an employment agreement with the Company or any of its affiliates.

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Contractual Obligations

The following represent the Company’s contractual obligations as of November 30, 2002 (in thousands):

	Payments Due Within
	Total		1 Year		2 Years		3 Years
Contractual Obligations:
Bank debt (1)	$	5,099	$	600	$	600	$	3,899
Operating leases (2)		443		435		8
Unconditional purchase obligations (3)		3,632		3,632
Total contractual cash obligations	$	9,174	$	4,667	$	608	$	3,899

(1) Total amounts are included in the November 30, 2002 consolidated balance sheet.

(2) Includes minimum lease payment obligations for noncancelable equipment and real-estate leases in affect as of November 30, 2002.

(3) These purchase obligations are for inventory items to be sold in the ordinary course of business. Reported amount is value of three-month commitment required by contracts with four manufacturers for product assembly costs. Amount does not include open purchase orders for raw material.

Forward-looking Statements

This report and other presentations made the Company contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such statements involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed or implied by such statements. Although the Company believes that in making any such statements its expectations are based on reasonable assumptions, any such statement involves uncertainties and is qualified in its entirety by reference to the following important factors, among others, that could cause the actual results of the Company to differ materially from those statements: (i) timely development, acceptance and pricing of new products; (ii) timely implementation of manufacturing processes and transition to offshore manufacturing; (iii) availability of sufficient materials, labor and assembly capacity to meet product demand; (iv) the potential transition to value-added products; (v) the impact of competitive products and pricing; (vi) the impact of competing technologies, including the obsolescence of existing products; (vii) general economic conditions as they affect the Company’s customers and manufacturing contractors; (viii) availability of required financing on favorable terms; and (ix) other factors disclosed in this report and on Form 10-K for the year ended August 31, 2002 filed with the Securities and Exchange Commission.

Any forward-looking statement speaks only as of the date on which such statement was made, and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement was made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for the Company to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor or combination of factors may cause results to differ materially from those contained in any forward-looking statement.

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ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk primarily due to fluctuations in interest rates. As of November 30, 2002, with all other variables held constant, a hypothetical one percentage point increase in interest rates would result in an increase in interest expense of approximately $51,000 on an annual basis due to the variable rate borrowings currently in place.

A significant portion of the Company’s products has a manufacturing process in foreign jurisdictions and is sold in foreign jurisdictions. The Company manages its exposure to currency exchange fluctuations by denominating most transactions in U.S. dollars. However, the Company may facilitate a minor portion of its sales in Euros. The Company considers the amount of its foreign currency exchange rate risk to be immaterial as of November 30, 2002.

ITEM 4.     CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in the Company’s periodic SEC filings.

Since the date of the evaluation, there have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls, nor were any corrective actions required with regard to significant deficiencies and material weaknesses.

PART II.    OTHER INFORMATION

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits. The Company hereby incorporates by reference all exhibits filed in connection with Form 10-K for the year ended August 31, 2002.

(b) Exhibits included:

Exhibit	Description
10.73	Amended and Restated Manufacturing Assembly Agreement between Registrant and Tai-Saw Technology Co., Ltd. dated November 21, 2002. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The text has been filed separately with the Commission
10.74	Amended and Restated Equipment Lease Agreement between Registrant and Tai-Saw Technology Co., Ltd. dated November 21, 2002. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The text has been filed

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Exhibit	Description
	separately with the Commission
99.1	Certificate Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 for CEO.
99.2	Certificate Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 for CFO.

(c)    The Company did not file any reports on Form 8-K during the quarter ended November 30, 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RF MONOLITHICS, INC.
Dated: January 13, 2003	By:	/s/ David Kirk
		David Kirk CEO, President and Director
	By:	/s/ Harley E Barnes III
		Harley E Barnes III Chief Financial Officer

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CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, David M. Kirk, certify that:

1. I have reviewed this quarterly report on Form 10-Q of RF Monolithics, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: January 13, 2003	/s/ David M. Kirk
	David M. Kirk
	Chief Executive Officer and President

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CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Harley E Barnes III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of RF Monolithics, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: January 13, 2003
	/s/ Harley E Barnes III
	Harley E Barnes III Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit	Description
10.73	Amended and Restated Manufacturing Assembly Agreement between Registrant and Tai-Saw Technology Co., Ltd. dated November 21, 2002. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The text has been filed separately with the Commission. (1)
10.74	Amended and Restated Equipment Lease Agreement between Registrant and Tai-Saw Technology Co., Ltd. dated November 21, 2002. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The text has been filed separately with the Commission. (1)
99.1	Certificate Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 for CEO. (1)
99.2	Certificate Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 for CFO. (1)

(1) Filed as an exhibit to this Form 10-Q.

EX-10.73

Exhibit 10.73

AMENDED AND RESTATED

MANUFACTURING ASSEMBLY AGREEMENT

This Amended and Restated Manufacturing Assembly Agreement (the “Agreement”) is entered into as of November 21, 2002, 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 4347 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 2^nd Rd., Ping-Chen Industrial District, Taoyuan, 324, Taiwan, R.O.C. (hereinafter referred to as “Contractor”). This Agreement amends, restates and supersedes that certain Manufacturing Assembly Agreement between the parties hereto dated as of October 31, 2001, the “Original Agreement” and all amendments thereto that have been made between then and the date of this signing. However, the current period that this Agreement is in force is not changed by this Amended and Restated Agreement.

RECITALS

WHEREAS, Company heretofore has to entered into an agreement with Contractor for certain manufacturing and production services for Products (defined below), whereby Contractor has Manufactured and will Manufacture (as defined below) for Company certain Products at the Factory (as defined below) in accordance with the Specifications and instructions of Company; and

WHEREAS, Company and Contractor desire to amend and restate the Original Agreement in its entirety to more clearly and completely set forth their agreements.

NOW THEREFORE, in consideration of the premises and mutual promises, covenants and agreements hereinafter set forth, the parties hereto agree as follows which amend, restate and supersede in their entirety the provisions of the Original Agreement:

1.    General Definitions.    The terms set forth below in this Section 1 shall have the meanings ascribed to them below, or is 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, quality and service levels. This process normally occurs during Company’s first fiscal quarter (the three months ended November 30), to review the previous year’s performance.

Page 1 of 42

Approved Vendor:  see paragraph 2.4

Approved Vendor List:  see paragraph 2.4

Assembly Outs:  the number of units of a specified Product, which pass from the last operation of the assembly process, as set forth in Schedule B, Typical Process Flow Chart, to the first operation of the test portion of the manufacturing process as set forth in, Schedule C, Typical Test Flow Chart or any similar Schedules that are amended to this Agreement. If the parties agree to add any additional inspection or testing operations to the assembly flow at any time, whether addressed in this Agreement or not, any defective units of the specified Product found at these additional steps will also be deducted in the determination of Assembly Outs.

Assembly Yield (AY):  the ratio, expressed as a percentage, of the number of Assembly Outs to the number of Units of a specified Product started in the assembly flow (typically at Die mount or Wafer Sawing).

AY = AO/AS

Where:

“AY” is the Assembly Yield;

“AS” is the number of products started in the assembly flow;

“AO” is the number of Assembly Outs;

Best Efforts:  a party’s efforts in accordance with reasonable commercial practice and/or consistent with its past practice.

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.

Defective Unit:  Products returned from Company’s customers that do not meet specification due to assembly processing problems. Reference paragraph 2.8

Die:  the individual SAW devices, inductors, or custom integrated circuit devices that Company provides Contractor, either in diced or wafer form.

Electrical Test:  a verification of the electrical functions of Products.

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 Product.

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

Page 2 of 42

Factory:  the Contractor’s manufacturing facility for Products located at Ping-Chen Industrial District, Taoyuan, Taiwan.

Final Electrical Test:  the last Electrical Test defined in the test flow to determine the electrical performance of a specific unit of Product to Specifications, such as that set forth as part of Schedule C or any similar Schedule amended into this Agreement.

Fine Leak and Gross Leak Test:  a test to determine the hermeticity of a specific unit of Product to Specifications, such as that set forth as part of Schedule C or any similar Schedule amended into this Agreement.

Finished Goods:  any Product that is 100% complete, tested, and packed in a shipping container awaiting shipment to Company.

Finishing Materials:  shipping tubes, tape-and-reel, labels, tickets and shipping cartons used to ship Finished Goods per Company Specifications

Generic Product Family:  all Products assembled by the same process and test sequence, as depicted in the typical process flow of Schedule B and as depicted in the typical test flow chart of Schedule C (typically referred to as “Product Family” in this Agreement).

Guaranteed Minimum Order:  see Section 8

Guaranteed minimum Order Quantity:  see Section 8

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 Product, including, without limitation, any development that use of which affects the Product in any of the following ways:

- Reduces Product costs;

- Improves Product performance;

- Improves handling, yields or productivity in the manufacturing process;

- Broadens Product applicability;

- Increases Product marketability, or

- Improves Product appearance.

Manufacture:  the complete process of assembly and test of the Products into Finished Goods, using one or more Piece Parts such as Die or Packages supplied by Company, as required under this Agreement.

Page 3 of 42

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

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

Materials:  all raw materials, Finishing Materials and Die/wafers required by Contractor to Manufacture the Products.

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

Opens:  units of Product that have undergone electrical performance testing and have been found to have no response and infinite AC and/or DC resistance.

Order:  purchase order issued by the Company.

Other Support Services:  see Section 4.

Overall Yield (OY):  the ratio, expressed as a percentage, of the number of Test Outs to the number of units of a specific Product started in the assembly flow (typically at die mount or wafer sawing).

OY = TO/AS

Where:

“OY” is the overall process yield;i

“TO” is the number of units that successfully pass all performance tests and inspections as defined in the test flow (example, Schedule C attached), and

“AS” is the number of units started into the assembly flow

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, packages, lids, substrates and Die. Piece Parts are Materials.

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Product:  the Products manufactured pursuant to this Agreement and according to process and test flows provided from time-to-time by Company and similar to the typical flows of Schedule B and Schedule C. From time-to-time the description of Products may be amended by change requests and New Products agreed to by Company and Contractor in accordance with paragraphs 2.2 and 2.3 of this Agreement.

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

Products, Volume and Price Schedule:  for each Product or Product Family, a schedule is attached to this Agreement setting forth the name of the Product(s) to be subject hereto, and its price per unit. Such Schedules may include additional information, such as volume estimates, special pricing, and specifications. When approved by both parties as provided herein, such Schedule shall become part of, and constitute an amendment to, this Agreement.

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 that were initially consigned by Company and were subsequently purchased by Contractor. Examples of Purchased Materials are package lids, bases, and substrates. Materials not included in Purchased Materials are Die, adhesives, wire, solvents and other chemicals and gasses and marking ink used to Manufacture Product.

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.

Quarterly Operations Reviews:  the process conducted by Company and Contractor to review yields, cycle times, delivery performance, quality metrics 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, Aug. 31).

SAW:  surface acoustic wave device.

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

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Shorts:  units of Product that have undergone electrical performance testing and that have been shown to have an AC or DC resistance, either by direct or indirect measurement means, lower than the maximum allowed by Specifications.

Specifications:  drawings, criteria, and documented specifications including but not limited to Process Flow Chart, Test Flow Chart, test specification, bill of materials, mount-bond diagram, process procedures, Product marking, Product packaging and shipping specifications and materials specification. Additional Specifications will be issued by Company in similar form as additional Products are added to this Agreement.

Substrate:  with reference to Manufacture of Product, a single, thin, flat, cofired ceramic piece that contains a multiplicity of replicated circuit patterns arranged in rows and columns on its two planar surfaces.

Technical Information:  any information which relates to the design, structure, functions, operation, manufacture, use, lease, sale or other disposition of Product or of 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, machine drawings, software and instructions, whether in human or machine readable form.

Test Final Visual Inspection:  a quality control visual inspection that is part of the test flow, as depicted in the typical test flow, reference Schedule C.

Test Outs:  the number of Units of a specific Product that successfully pass all electrical and other performance tests, including Test Final Visual Inspection, that are defined in the test flow for the Product Family. If any additional inspection or testing operations are added to the test flow at any time, whether addressed in this Agreement or not, any defective units of a specific Product found at these additional operations will also be counted in the determination of Test Outs.

Test Yield (TY):  the ratio, expressed in percentage, of the number of units of a specific Products meeting Specifications after Electrical Test and all further inspections and performance tests as depicted in the typical test flow set forth in Schedule C, to the number thereof introduced into the Electrical Test process (Assembly Outs).

TY = (AO – S – O –TR – FI)/AO

Where:

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“TY” is the Test Yield;

“AO” is the number of Assembly Outs;

“S” is the number of units found to be shorted during electrical test;

“O” is the number of units found to be open during electrical test;

“TR” is the number of units found to be non-conforming to electrical performance specifications during electrical testing that are defective for reasons other than being shorted or open (no response), and

“FI” is the number of units failing Test Final Visual Inspection.

If any additional inspection or testing operations are added to the test flow at any time, any defective Product units found at these additional steps, whether addressed in this Agreement or not, will also be counted in the determination of Test Yield.

Tooling and Fixturing:  holding, locating or interfacing aids that are necessary to facilitate the assembly, testing, inspection, packing and shipping of Product. Typical Tooling and Fixturing includes, but is not limited to test fixtures, sealing fixtures, wire bonding fixtures and Die mounting fixtures.

Unit:  in reference to Product successfully completing Manufacture, a single individual Product that is indistinguishable from any other individual Product by virtue of it having passed all inspections and performance tests. [RFM 001 – Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.            

Value Added:  the price for Materials that Contractor provides and Manufacture that Contractor performs for the Product supplied by Contractor.

WIP Inventory:  the work-in-progress inventory of Product at the Contractor.

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

2.    Services.

2.1    Manufacturing Services

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2.1.1    General.  Contractor covenants and agrees to Manufacture the Products that Company requests it to Manufacture at the Factory utilizing Materials the Company consigns to Contractor and/or material purchased by Contractor, tools, machinery, equipment, fixtures and computer systems of Contractor and any other Provided Equipment. Contractor agrees that the Manufacture of Products 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 manufacturing and production services to meet Company’s Manufacture requirements in accordance with Section 6 of this Agreement. Changes to forecast shall not affect Product pricing, unless mutually agreed in writing by parties hereto. Contractor shall have available to Manufacture the Products all facilities, employees, equipment, spare parts, computer systems and any other items required to Manufacture the Products. Company shall provide to Contractor all Specifications, manuals and other relevant documentation necessary to Manufacture the Products.

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 introduction into the manufacturing process.

2.1.3    Materials:  Contractor shall assemble and test Product using Materials procured from suppliers on the Approved Vendor List or provided on a Consignment basis from Company, and Die provided on a Consignment basis from Company, and under manufacturing processes approved by Company. During the initial period of Product qualification and production, Company will consign certain critical Materials to Contractor. Six months following the date of this Agreement, or an amendment to this Agreement involving additional Product manufacturing services, Company and Contractor will review the opportunity to have Contractor procure all Materials except Die.

2.1.4    Tooling and Fixturing:  Company will provide sufficient quantities of Company developed Tooling and Fixturing necessary to Manufacture a limited quantity of Product and provide insight to Contractor regarding the use of Tooling and Fixturing in the Manufacture of Product. The exact quantity of each tool and fixture necessary for Manufacture of such limited quantity of Product will be determined through discussion between Company and Contractor. Contractor has the responsibility to fabricate at Contractor’s sole expense, additional Tooling and Fixturing needed to support increasing volumes of Product required by Company in accordance with published production schedules. Contractor also has the responsibility to maintain, at Contractor’s sole expense, any and all Tooling and Fixturing used, whether consigned by Company or procured or fabricated by Contractor.

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2.2    Changes and Revisions

Any change to Manufacturing processes, Specifications, Tooling and Fixturing, or outsourcing services directly affecting 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 Product under Order (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 revised production schedule, 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 and production service until accepted, in writing, or by failure to provide timely notice of rejection, by the Contractor. If any such changes cause an increase or decrease in the cost or the time required for performance of the 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, and Schedule A shall be modified in writing accordingly. Contractor agrees to proceed with the performance of this Agreement and in accordance with the accepted production schedule with regard to 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 002—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.] (the “Change Procedure”). Contractor will be notified of the revision to Specifications by transmission of a revised Specification document by Facsimile or electronic mail. The Contractor must provide acknowledgement of receipt of the revised Specification document by Facsimile or electronic mail within 3 working days after receipt. Simultaneously, Contractor must 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 the Contractor ship other than

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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 a 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 assembly and test 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 and this Agreement is amended to reflect such agreement. Company and Contractor agree to modify this Agreement by amending the Schedules attached to this Agreement, or by attaching a new Product, Price and Volume Schedule to reflect the New Product and the price of the New Product agreed upon by Company and Contractor to this Agreement.

2.4    Approved Vendor List

With respect to each component part comprising Materials, 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 material or services for the Manufacture of the Product without the Company’s written authorization. Contractor may request removal or addition of a supplier to Approved Vendor List.

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    Yields

Both parties understand and agree that production yields are a primary driver for Manufacturing cost effectiveness. Company shall provide Die, which are consistent with Specifications established by Company, in sufficient quantity to meet

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Manufacturing requirements. Both Company and Contractor will work together to increase production yields. Contractor yield improvement and cost reduction goals will be established and evaluated at the Quarterly Operations Reviews.

Company outgoing testing and inspection of Materials supplied by Company and incoming test and inspection by Contractor will be in place to ensure the Die, packages and assembly Materials conform to Specifications as they are introduced to the Contractor’s assembly Factory.

2.5.1    Assembly Yield:  The Assembly Yield shall be the responsibility of Contractor.

2.5.2    Test Yield:  Except as provided in paragraphs 2.5.3 and 10.2.1, the Contractor shall be responsible for Test Yield. Test Yield will include Fine Leak and Gross Leak Testing, Electrical Test, and Test Final Visual Inspection, unless otherwise specified in the Schedule for the particular Product Family incorporated into this Agreement.

2.5.3    Shared Electrical Test Yield Responsibility Option:  Anything herein to the contrary notwithstanding, if Product is priced appropriately, an option is available for the Electrical Test portion of Test Yield to be a shared responsibility of Contractor and Company during the first three months of Manufacture following successful qualification or evaluation testing of Product. If Company and Contractor jointly agree to exercise this option in writing, Company will be responsible during the three-month option period for electrical yield loss that is not attributable to assembly induced defects. This option exists to allow Company to revise certain aspects of Die fabrication to positively impact Overall Yield, if necessary. If this option is exercised, beginning at the fourth month following successful qualification or evaluation testing of a Product and continuing through all subsequent months of Manufacture of such Product, Contractor shall be solely responsible for yield at Electrical Test.

2.5.4    Failure Analysis Due to Yield Loss:  Should either party incur unacceptable yield loss (Assembly Yield loss or Test Yield loss), based on monthly average yield, either party may request a failure analysis to determine the cause of such failures. The requesting party shall bear the cost of the analysis. However, if the analysis establishes that the unacceptable yield loss is due primarily to the non-requesting party, the non-requesting party shall reimburse the requesting party for the cost of the analysis.

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, review of Product pricing, and actual and potential cost reductions which would impact prices charged to Company for Manufacture of Product.

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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 yields, cycle times, delivery performance, quality metrics and cost reduction roadmaps. 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. Production yield improvement and cost reduction goals will be established and progress toward these goals will be reviewed quarterly.

2.8    Return Services

2.8.1    Contact With Third Parties:  Company will be the recognized source for the Product and will be the sole contact for third parties with Product problems related to Company’s customers. Company will issue all warranties to third parties for the Product, but will be entitled to exercise its rights under paragraph 2.8.2 against Contractor as to any defects specified 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 will perform the initial failure analysis on the units. Those units indicating a defect due to assembly processing (Defective Unit) will be transmitted to Contractor for confirmation of failure analysis at Contractor’s expense and corrective action by the Contractor. Contractor’s sole responsibility and liability as a result of any such defect shall be to provide compensation to Company for the amount charged to Company for each Defective Unit. If the defect is not confirmed by Contractor to be caused by Manufacturing or Materials, Company must reimburse Contractor for reasonable failure analysis and shipping costs related to the Defective Unit.

3.    Training

Company shall provide training, if necessary, regarding New Products to ensure that processes, procedures and equipment used to build New Products are understood by Contractor, and that New Products Manufactured by Contractor can pass Company’s qualification testing or other evaluation prior to Production Start Up. The decision as to the necessity of the training will be made jointly by Company and Contractor.

3.1    Cost of Training:  If Training is deemed necessary, Contractor and Company shall agree to a price for such Training, and Contractor shall pay Company the agreed to price for training. If Training is to be done at Contractor’s facility, Company agrees to pay transportation costs to Contractor’s facility from Dallas, and return, and lodging for trainers and other support personnel in his employ necessary to facilitate Training. Contractor agrees to reimburse Company for, or otherwise pay local

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transportation and food costs for trainers and other necessary support personnel in the employ of the Company while they are at Contractor’s location to perform Training. If Training is to be done at a mutually agreed to site, Contractor and Company will pay their own transportation, lodging and food costs for personnel that are temporarily located at the agreed to site. If there is a cost associated with the use of a facility at the agreed to site, Contractor and Company will share expenses for facility rental, A/V and other services necessary to facilitate Training.

3.2    Location of Training: Training may be done at either Company’s facility, Contractor’s facility, or at a mutually agreed to location.

3.3    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 Company’s facilities in Dallas. If Contractor requests technical assistance outside Company’s facility over and above that addressed in paragraph 3.1, Company agrees to make available to Contractor the consulting services of engineering, quality and manufacturing specialists (hereinafter called “Engineers”) assist Contractor in the Manufacture of Company’s Products. Company also agrees to dispatch Engineers outside Company’s facility to provide requested assistance to Contractor in a timely fashion. Company further agrees that it will provide 5 person-days outside Company facility support each year per Product Family to Contractor to provide assistance in regard to the Manufacture of Company’s Products. (One person-day is equivalent to eight consecutive hours.) Contractor agrees to reimburse Company for all travel, meals lodging expenses plus per diem of US $5,000 for each Engineer for assistance over and above the 5 person-days per year per Product Family support allocated by Company.

4.    Other Support Services.

From time-to-time during the term of this Agreement, Company may request Contractor to perform Other Support Services such as, but not limited to, the purchase of assembly Materials, previously consigned by Company, and the drop shipment of Product to Company customers. In connection with the performance of any Other Support Services, Company shall specify the services that Company desires Contractor to perform. Contractor shall notify the Company within five (5) working days 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, which, if a modification to the cost of the Product, will be a change to Schedule A, Schedule A1, or any other appropriate Schedule. All prices and deliverables to be furnished by the Contractor with respect to such services shall be mutually agreed to in writing by Company and Contractor prior to the initiation of the Other Support Services.

5.    Data.

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Contractor will periodically supply the Company with reasonably requested data including, but not limited to Assembly Yield, Test Yield, inventories and production status. The frequency and format of the reporting will be agreed upon by the Company and Contractor. As a minimum, Contractor will supply the Company with a detailed inventory and a periodic physical inventory of all consigned Materials on hand as of the last day of the prior month on the first working day of each month.

6.    Orders.

Company shall provide Contractor with an Order for Manufacture of Product. Subject to such limitations as are imposed by paragraph 7.1 regarding Factory capacity, Contractor agrees to acknowledge Company’s Order within two (2) business days from receipt by e-mail or other electronic means. Thereafter, the Order shall come into force and effect from the date of such acknowledgement. If Contractor fails to acknowledge Company’s Order within two (2) business days from receipt, Order will be deemed to have been accepted by Contractor on the third business day after transmission by Company to Contractor. Contractor, as well as Company, shall be bound by all terms and conditions set forth in the Order consistent with the terms and conditions herein agreed upon. The Order will specify the Product, its quantities and Shipping Dates. In the event of any disagreement between the Order and the Agreement, the terms of the Agreement shall prevail.

6.1    Production and Shipping Dates:  The Order shall stipulate a lead time reasonably acceptable to Contractor. Contractor agrees to allocate sufficient Manufacturing capacity for the Manufacture of Products to meet Company’s production and Shipping Dates, and all Materials, including Finishing Materials, acquired by Contractor to meet Company’s production and Shipping Dates will be covered by the buy-back provisions of this Agreement as noted in Section 7 below. If applicable, Company agrees to supply Materials a minimum of one day prior to the associated starts at the Contractor.

7.     Forecast and Buy-Back Guarantee.

7.1    Forecasts:  Company shall endeavor to provide monthly a three (3) month rolling forecast and Quarterly a twelve (12) month forecast of Products to be manufactured by Contractor under this Agreement. Contractor shall acknowledge in writing acceptance of Company’s three (3) month forecast or provide notice to Company of limited Factory capacity within five (5) working days after receipt of the three (3) month forecast.

7.2    Buy Back Guarantee:  Company agrees to buy-back, at Contractor’s cost, all unused Manufacture related Materials inventory purchased by Contractor should Company fail to Order its three (3) month forecasted Product quantities and such failure to Order is in no way attributable to Contractor. Company shall not be obligated to buy back Material to the extent that the unused Material is in excess of that needed to

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Manufacture unordered Product quantities, factoring in standard or acceptable yields and line losses. The Company will not be required to buy back any Material beyond the third month of the twelve (12) month forecast. Notwithstanding the above, Contractor will attempt to divert Material to other manufacturing uses so as to minimize this excess inventory cost to Company.

7.3    Changes to Forecast:  The following Table shows the purpose of the various Purchase Orders and Forecasts, as well as the allowable variations of the Forecasts and the responsibilities of the Parties in providing these documents. Further, it indicates the magnitude of the allowable changes that Company can make to the Forecasts.

Schedules	Purpose of Schedule	Variations
Purchase Order	Authorizes Shipment (Contractor), Receiving (Company), Invoicing (Contractor) and Payment (Company)	Only by changes, in writing, from Company
Three Months Forecast	Provided for Material and labor planning.	Volume for first month is firm, but line items may change. Second month may change from previous forecast no more than ± 25%. Third month may change from previous forecast no more than ± 50%.
Twelve Month Forecast	Provided for space, equipment and labor planning.	For planning purposes only.

8.  Guaranteed Minimum Order

From time to time the Company may choose to place a Guaranteed Minimum Order (herein so called) with Contractor for the production of Company Product. Contractor must ascertain if it has the available capacity to execute Company’s Order and respond in writing to Company within five (5) working days. Company must indicate the time period for which it wishes the Guaranteed Minimum Order to be valid at the time of its submission. If appropriate, Schedules at the end of this Agreement may be amended to reflect a Guaranteed Minimum Order Quantity and the time period during which the Guaranteed Minimum Order will be in effect. Once a Guaranteed Minimum Order is in place, the variations in the Forecasts, as indicated in the above table, apply

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only to the total quantity of Product ordered that exceeds the Guaranteed Minimum Order Quantity.

9.    Deliveries

9.1    Notification of Late Delivery:  Contractor will Manufacture the Products as required by this Agreement and each Order. In the event that Contractor cannot deliver the 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 the 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) and to a freight forwarder specified by Company in its 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 shipper specified on the Order.

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 and in writing by the 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    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 the Provided Equipment that is not covered under a separate “Equipment Lease Agreement,” that the parties have entered into, during transit to and from and while located in Contractor’s facility.

9.5    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 Products in accordance with the Schedule A, Schedule A1, or other Products, Volumes and Price Schedule attached to and made a part of this Agreement through amendment, provided that any modifications, amendments and changes to the Specifications and the Manufacture of any New Product shall be at such prices mutually agreed to by Contractor and Company in paragraph 2.2 and paragraph 2.3, respectively.

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[RFM 003 – Sections 10.2, 10.2.1, 10.2.1.2,10.2.3—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.

10.3    Invoices and Payment

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10.3.1    Invoices:  With each shipment, Contractor will send Company an invoice for all services provided by Contractor under Section 2 hereof for Products 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.

10.3.2    Payment for Other Support Services:  Payment for Training 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, if the cost of said Other Support Services has been incorporated into the Product price in Schedule A, Schedule A1 or any other appropriate Schedule as provided for by amendment to this Agreement. Payment for Other Support Services associated with New Products will be invoiced separately according to negotiated parameters as described in paragraph 2.3 if they have not been incorporated into the Product price in the Schedules incorporated into this Agreement.

10.4    General Payment Terms:  All payments due hereunder shall be paid in United States of America dollars 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 Products are being Manufactured, 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 in the Factory to perform inventories of Materials, WIP Inventory and Finished Goods located at the Factory, and to otherwise support inspections by Company.

11.2    Acceptance:  All shipments of Finished Goods are subject to Company’s workmanship inspection, Electrical Test 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.

12.    Rejection

12.1    Manner of Rejection:  Company may reject any Product manufactured by the Contractor if such 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 Product if the Product is

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prejected. The Company may, at its option, (i) return the 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 Product if it cannot be reworked. If the Product is scrapped, the Contractor will reimburse the Company for the amount charged to Company for the 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 any 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 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, and each of this Agreement and the 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.

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

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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, the Products 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 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.

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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 the 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 Materials, Provided Equipment and Supplies

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. Contractor agrees to segregate and label such Provided Equipment to conspicuously indicate Company’s ownership. Contractor will not mortgage, pledge, assign or borrow against such 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, as well as the location of all Finished Goods and WIP Inventory stored outside of Contractor’s principal manufacturing and 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. Company shall maintain insurance, at its his sole discretion, for all Provided Equipment owned by or paid for by Company, while in Contractor’s Factory, except as otherwise provided in a separate “Equipment Lease Agreement” or similar agreement into which the parties have entered related to Provided Equipment being leased to Contractor.

17.    Indemnification

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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 of the 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 Section 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

This Agreement shall take effect on October 31, 2001 and shall continue in force until October 31, 2004, thereafter renewable yearly at mutually agreeable terms and reviewed yearly unless terminated earlier per paragraph 18.1 of this Agreement. Any

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amendment to this agreement that involves the production of additional Product or Product Families shall take effect on the date the amendment is signed by the parties, and shall continue in force for a period of three years, thereafter renewable yearly at mutually agreeable terms and reviewed yearly unless terminated earlier per paragraph 18.1 of this Agreement.

18.1    Early Termination:  Subject to paragraph 18.3, 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.

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 180 days prior written notice to Contractor.

18.1.4    Termination without Cause – Contractor:  Contractor may terminate this Agreement without cause upon 180 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.

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18.2.2    Materials Disposition:  In the event of termination under paragraph 18.1.3, Company will purchase from Contractor all scheduled Finished Goods and Materials inventory affected by termination. Contractor agrees, in the event of termination under paragraph 18.1.3 to, (i) immediately terminate all open purchase orders for Materials, (ii) pursue the return for refund or credit of Materials already received but not in Manufacture, and (iii) follow all reasonable instructions to minimize the cost of such termination to Company.

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.

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 nor 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

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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 the date of this Agreement 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 the date of this Agreement 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.

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 on a Product. Contractor shall not sell, distribute, cause or allow to pass from control of Contractor to a third party, or offer any Product, pursuant to this Agreement, without written 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.

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21.7    Use of Manufacturing Data:  Contractor agrees that RFM shall be entitled to receive copies of and use all Manufacturing Data. RFM affirms that Manufacturing Data that constitutes Contractor’s solely owned intellectual property shall remain Contractor’s property, subject only to RFM’s right of use provided in the preceding sentence.

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 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 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

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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:   Yu-Tung Huang

Tai-Saw Technology Co., Ltd.

No. 3, Industrial 2^nd Rd.

Ping-Chen Industrial District

Taoyuan, 324, Taiwan, R.O.C.

Facsimile: (866) 3-469-7532

E-Mail: tstcom1@ms24.hinet.net

If to Company, to:     David T Somerville

R F Monolithics

4347 Sigma Road

Dallas, TX 75244

USA

Facsimile: (972) 404-9476

E-Mail: somerville@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 and, in part, in Taiwan, and shall be governed by and construed in

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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    Section Headings:  The Section 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.

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 release to a paragraph, section or schedule shall mean a paragraph, section 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

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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, including any leased equipment for which Company holds title, Material, WIP inventory, Finished Goods, tooling, fixturing 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.

23.14    Assignment of Obligations:  Neither party may assign this Agreement without the prior written consent of the other party; provided that Company may assign this Agreement to any Person acquiring all or substantially all of Company’s assets.

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

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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 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 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 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 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 it is fair to do so. No pre-arbitration discovery shall be permitted, except that the arbitrator 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 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 it is understood that the English version of this Agreement (and the Schedules and Exhibits) 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.

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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	Yu-Tung Huang
(Printed Name)	(Printed Name)
/s/    Jon S. Prokop	/s/    Yu-Tung Huang
(Signature)	(Signature)
VP Manufacturing	President
(Title)	(Title)
December 2, 2002	November 20, 2002
(Date)	(Date)

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Schedules

Schedule A:  Filter Products, Volumes and Price

Schedule A1:  VWO Products, Volumes and Price

Schedule B:  Typical Filter Product Process Flow Chart

Schedule B1:  Typical VWO Product Process Flow Chart

Schedule C:  Typical Filter Product Test Flow Chart

Schedule C1:  Typical VWO Product Test Flow Chart

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Schedule A

Filter Products, Volumes, and Price

[RFM 004 – 1. Products and Prices.—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.

2.    Price Basis

2.1    General:  All prices are F.O.B. Taiwan.

2.2    Volume Calculation:  The total monthly volume for all parts in the Filter Product Family will determine the monthly volume for pricing purposes.

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Schedule A1—VWO Products, Volume, and Price

1.    Pricing:  All Products in the VWO Generic Product Family shall be sold to the Company at the prices indicated:

[RFM 005—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.             

2.    Price Basis

2.1    General:  All prices are F.O.B. Taiwan. Prior to completing qualification of the VWO Product Family, Company and Contractor must agree on prices to be charged to Company for qualification and evaluation Units. The total number of qualified Units of the VWO Generic Product Family ordered by Company in a month will comprise the monthly quantity for that month. After Production Start Up for any Product in the VWO Product Family, the price/unit paid for Product received in any time period will be fixed at the time of order, and determined by the total volume of Product ordered, using the price and volume table in Section 1 of this Schedule. Paragraphs 2.5.3, 10.2.1, 10.2.1.1, and 10.2.1.2 of the Agreement do not apply to this Schedule.

2.2    Consigned Materials:  RFM to initially consign all Material per paragraph 2.1.3 of the Agreement. Consignment of Material may convert to purchase of some or all of the Material by Contractor at a later date per paragraph 2.1.3 and Section 4 of the Agreement. The amount of consigned Material will be matched to the amount of Product ordered by using Company’s standard yield for Product. If an additional amount of consigned Material is needed to produce ordered amount of Product due to low yields not attributable to Company, Contractor may be required to reimburse Company for the additional amount of Material needed at the cost of the Material to Company. Alternatively, Company may offset the cost of additional Material needed against amounts paid to Contractor for Services, with Contractor consent.

3.    Specifications

Specifications for the Products in the VWO Generic Product Family have been provided separately. Units delivered must meet Specifications for the specific Product ordered.

[RFM 006 – Sections 4, 4.1, 4.2, 4.3—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.            

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5.    Provided Equipment

Contractor agrees to supply, and has supplied, Provided Equipment under a Lease Agreement, terms and conditions as specified in that agreement.

6.    Payment for Training

Contractor agrees to pay Company for Training services per Section 3 of this Agreement.

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Schedule B

[RFM 007—Typical Process Flow Chart—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.]

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Schedule B

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[RFM 008 -Typical Process Flow Chart (Cont’d)—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.

Schedule B1

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[RFM 009 -Typical VWO Product Family Process Flow Chart—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.]

Schedule B1 (Continued)

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Schedule B1 (Continued)

[RFM 010- Typical VWO Product Family Process Flow Chart—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.]

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Schedule C –

[RFM 011- Filter Products Typical Test Flow Chart - Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.]

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Schedule C1

[RFM 012- Typical VWO Products Test Flow—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.]

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EX-10.74

Exhibit 10.74

AMENDED AND RESTATED

EQUIPMENT LEASE AGREEMENT

THIS AMENDED AND RESTATED LEASE AGREEMENT (this “Agreement”), dated as of November 21, 2002, is made by and between RF Monolithics, Inc., a Delaware corporation (“Lessor”), having its principal place of business at 4347 Sigma Road, Dallas, TX, 75244, and Tai-Saw Technology Co., Ltd., (“Lessee”) a corporation duly organized and existing under the laws of Taiwan, with its principal place of business at No. 3, Industrial 2^nd Rd., Ping-Chen Industrial District, Taoyuan, 324, Taiwan, R.O.C., and amends and restates and supersedes in its entirety that certain Equipment Lease Agreement dated as of December 17, 2001, between Lessor and Lessee (the “Original Agreement”)

RECITALS

1. Lessee and Lessor entered into a separate agreement (the “Manufacturing Assembly Agreement”) pursuant to which Lessee has Manufactured and will Manufacture Product (as defined in that Agreement) for Lessor using leased Assets. Successful qualification testing of Product is a vital step which is mentioned in certain paragraphs below and which will initiate certain actions as detailed in those paragraphs.

2. Lessee has leased certain machinery and equipment from Lessor for purposes of Manufacturing of said Product pursuant to the Original Agreement.

3. The parties desire to enter into this Agreement to clarify, update and more completely set forth their agreements.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

ARTICLE 1

LEASE

1.1    Lease of Machinery and Equipment.    Upon the terms and subject to the conditions and other provisions set forth in this Agreement, Lessor hereby agrees to lease to Lessee, and Lessee hereby agrees to make lease payments to Lessor for, machinery, equipment, accessories and manuals listed on Exhibit “A” attached hereto (the “Assets”).

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(a)  Total of Lease Payments.    [RFM 013—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.

(b)  Lease Prepayment.    Lessee will pay Lessor a Lease Prepayment [RFM 014—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.] to cover the partial monthly lease payment RFM015- Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.] of the lease period including any periods of renewal. The parties agree and acknowledge that the Lease Prepayment has been paid in full pursuant to the Original Agreement.

(c)  Fair Market Purchase Option.    Lessee will have the option at the end of this lease agreement to purchase the Assets under Lease Agreement as described in subsequent paragraphs, at the then fair market value (the “Fair Market value Purchase Option”).

(d)  Lease Payments.    Monthly payments of [RFM 016- Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.] are due under this Agreement (“Lease payments”) during the Lease Term. The timing of the first monthly lease payment will be based on the date of notification of successful Product qualification testing from Lessor to Lessee. Notification can be by e-mail or other electronic transfer means. The first monthly lease payment will be due on the fifth (5^th) day of the month following notification of successful Product qualification testing unless the Lease Payments are suspended under the Guaranteed Minimum Order Quantity provisions listed below in this paragraph. Lessee shall wire transfer to Lessor a payment in immediately available funds of U.S. Dollars per Lessor’s instructions. The parties acknowledge that no Lease Payments have been made to date. Such payments shall continue to be paid in each succeeding month, due on the fifth day of each month, but with one-week grace period, thereafter until the end of the lease period described below, at which time, Lessee will have the option to purchase the Assets at the then fair market value per paragraph 1.1(c) above. Lease payments may be suspended without penalty, if the total quantity of Product Ordered by Lessor in a given month is not equal to or greater than the “Guaranteed Minimum Order Quantity” as defined in Schedule A1, paragraph 3.2 of the “Manufacturing Assembly Agreement” into which Lessor and Lessee have entered. Such suspension will continue until such time as the total quantity of Product Ordered by Lessor in a month is equal to or greater than, or returns to being equal to or greater than, the “Guaranteed Minimum Order Quantity.” If the sum of the quantities of Product Ordered by the last week of a month is equal to or greater than the “Guaranteed Minimum Order Quantity,” then the “Guaranteed Minimum Order Quantity” shall be deemed to be in effect for that month, and the lease payment for that month will be due on the fifth (5^th) day of the following month as indicated above in this paragraph.

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(e)  Term of the Lease.    The term of the lease period for the Assets is 36 months beginning from the date of the first monthly lease payment. Until and after the first monthly lease payment is made, paragraphs 1.1(i) and 3.1 apply. Lease is renewable annually in twelve (12) month increments (such term, including its extensions, if any, is referred to as the “Lease Term”).

(f)  Early Termination of the Lease.    The Lease Agreement may be terminated sooner than 36 months as follows:

(1)  If Lessee for any reason initiates early termination of the Lease Agreement, Lessee must inform Lessor at least 180 days prior to anticipated termination. Lessee and Lessor must enter into negotiation regarding the early termination of the Lease Agreement. Lessee agrees to pay any early termination fees or other special charges as negotiated between Lessee and Lessor, and will arrange for and pay for all de-installation, crating and other preparation for shipment, shipment, customs, and delivery of Assets back to Lessor, to include installation and repair of Assets at Lessor’s facility, if Lessor deems appropriate and necessary.

(2)  If (i) Lessee fails to regularly pay lease payments, (ii) Lessor is not in default under this Agreement, and (iii) Lessor is in compliance with its volume obligations set forth in paragraph 1.1(f)4 below and Lessee does not make arrangements for satisfaction of lease payments that Lessor deems appropriate and acceptable, then the Lessee will be in breach of Agreement and must return assets to Lessor at Lessee’s expense, to include de-installation at Lessee’s facility, crating and other preparation for shipment, shipment, customs charges, delivery to Lessor’s facility and installation and repair at Lessor’s facility necessary to make the Assets functional if necessary. Termination of this Agreement under this case shall in no way relieve Lessee from the obligation to make payment of all amounts then due and payable. Further, Lessor shall be entitled to recover any and all actual costs, expenses and damages, including reasonable attorneys’ fees and/or offset any amounts due to Lessor by any and actual costs and expenses incurred by Lessor as a result of the breach of this Agreement. Any remedies of this nature shall not be exclusive, but shall be cumulative of any other remedy herein or any other statute or law.

(3)  If Lessor for any reason except for a breach of this Agreement as indicated in paragraph 1.1(f)2 above, initiates early termination of the Lease Agreement, Lessor must inform Lessee at least 180 days prior to anticipated termination. Lessor and Lessee must enter into negotiation regarding the early termination of the Lease Agreement. Lessor agrees to pay any early termination fees or other special charges as negotiated between Lessor and Lessee, and will arrange for and pay for shipment and transfer of Assets back

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to Lessor, to include any installation and repair of Assets at Lessor’s facility. Early termination fees may include a prorated repayment by the Lessor to the Lessee of the Lease Prepayment amount based on the remaining months of the Lease Period divided by the Lease Period to include any renewals.

[RFM 017- Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.]

(4)  As noted in the Recitals of this Agreement, Lessor and Lessee have entered into a separate agreement (the “Manufacturing Assembly Agreement”) under which Lessee will Manufacture Product (as defined in that agreement) for Lessor using Assets. A material breach of this referenced agreement (the “Manufacturing Assembly Agreement”) regarding and involving the Product listed in Schedule A1 of that agreement shall also constitute a breach of this Agreement. Under this condition, Lessoragrees to not remove Assets from Lessee’s factory and to allow Lessee to use Assets to manufacture products for other customers until breach is corrected, or until the Lease is terminated. Lessee agrees to continue monthly lease payments for each month from the time of the breach until the breach is corrected, or until the Lease is terminated.

If the breach of the Manufacturing Assembly Agreement cannot be corrected to the satisfaction of Lessor, Lessee shall have the option of keeping the Assets and paying Lessor a negotiated Fair Market Value Purchase Price, or returning Assets to Lessor at Lessee’s expense. In either case, Lease shall be considered to be terminated at that time. If Assets are returned to Lessor, Lessee will be liable for expenses to include de-installation at Lessee’s facility, crating and other preparation for shipment, shipment, customs charges, delivery to Lessor’s facility and installation and any repairs at Lessor’s facility necessary to make the Assets functional. Further, Lessor shall be entitled to recover any and all actual costs, expenses and damages, including reasonable attorneys’ fees and/or offset any amounts due to Lessee by any and actual costs and expenses incurred by Lessor as a result of the breach of this Agreement. Any remedies of this nature shall not be exclusive, but shall be cumulative of any other remedy herein or any other statute or law.

(5)  If both parties deem that it is in their mutual best interest to terminate the Lease Agreement prior to the defined term of the program, then Assets may be purchased by Lessee or may be returned to Lessor. If Assets are to be purchased by Lessee, both parties will establish and agree on a Fair Market Value Purchase Price. However, nothing in the preceding sentence shall obligate Lessor to reduce the total of the unpaid balance of the

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remaining lease payments. Lessor will deliver to Lessee a bill of sale for the Assets after receipt of either payment of the all remaining lease payments and the Fair Market Value Purchase Price, or a Fair Market Value Purchase Price as negotiated by both parties, and this Agreement will then be considered to be terminated. If Assets are to be returned to Lessor, Lessor will be liable for expenses to include de-installation at Lessee’s facility, crating and other preparation for shipment, shipment, customs charges, delivery to Lessor’s facility and installation and any repairs at Lessor’s facility necessary to make the Assets functional.

(6)  If during the term of this Lease, a petition in bankruptcy is filed by or against Lessee, or if Lessee, as a debtor, seeks or takes the benefit of any insolvency or debtor’s relief proceedings, or if Lessee shall file or attempt to file an assignment for the benefit of creditors, or if Lessee shall apply to its creditors to compound its debts, then in any such event, Lessor may without any prejudice to any other lawful remedy, terminate this Equipment Lease Agreement, and Lessee shall, upon demand, at Lessee’s sole expense, de-install Assets from Lessee’s facility, crate and otherwise prepare the Assets for shipment, ship Assets to Lessor’s facility, pay any customs fees necessary, install Assets at Lessor’s facility and make Assets operational at Lessor’s facility.

(7)  If during the term of this Lease, a petition in bankruptcy is filed by or against Lessor, or if Lessor, as a debtor, seeks or takes the benefit of any insolvency or debtor’s relief proceedings, or if Lessor shall file or attempt to file an assignment for the benefit of creditors, or if Lessor shall apply to its creditors to compound its debts, then in any such event, Lessee may without any prejudice to any other lawful remedy, terminate this Equipment Lease Agreement. Lessee may petition the appropriate judicial body to acquire Assets at a then established Fair Market Value Purchase Price. If Lessee chooses not to petition to acquire Assets, Assets shall, at Lessor’s sole expense, be de-installed from Lessee’s facility, crated or otherwise prepared for shipment, and shipped to Lessor’s, or another otherwise designated facility. Lessor shall pay any customs fees necessary.

(g)  Deliveries of the Parties.    Upon closing of and exercise of the Fair Market Value Purchase Option, or other sale of Assets to Lessee,

(1)  Lessor shall deliver to Lessee a bill of sale with respect to the Assets (the “Bill of Sale”), duly executed by Lessor, after Lessor’s receipt of full payment of the lease payments and the Fair Market Value Purchase Price from Lessee, or the receipt of payment of the negotiated Fair Market Value Purchase Price as indicated in paragraph 1.1(f)4 or 1.1(f)5.

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(2)  Lessor will arrange for crating and/or shipment of the Assets to Lessee using Lessee’s instructions for use of a freight forwarder per paragraphs 4.6 (a) and 4.6(b).

(3)  Each party shall deliver to the other party such other documents and certificates as the other party may reasonably request.

(h)  Delivery of Assets; Title; Risk of Loss.    The parties acknowledge that the Assets leased hereunder were delivered to Lessee’s facility FOB, Dallas, Texas, U.S.A. (as defined in IncoTerms (2000) published by the International Chamber of Commerce) pursuant to the Original Agreement. Title to the Assets shall pass to Lessee upon exercise of the Fair Market Purchase Option and Lessor’s receipt of full payment of the Fair Market Value Purchase Price from Lessee. The parties acknowledge that Risk of Loss with respect to the Assets passed to Lessee upon delivery to freight forwarder at Dallas, Texas, U.S.A pursuant to the Original Agreement. Lessee agrees to procure insurance against loss and damage for leased Assets equal to the value of the Assets as shown in Exhibit A of this Agreement to be in force at the time Assets are delivered to the freight forwarder, and agrees to continue insurance against loss and damage equal to the depreciated value at any time during each subsequent 12-month period going forward until the end of the lease period, or until Lessee obtains title to the Assets.

(i)  Ownership.    Lessee understands and acknowledges that it shall under no circumstances be considered to have any ownership or proprietary interest in the Assets during the time when the Assets are under Lessee’s control. This includes the time prior to the first monthly lease payment. Lessee agrees to segregate on its company books and conspicuously label leased Assets on each piece of equipment to indicate RFM ownership until the lease is terminated. Lessee agrees that it will not mortgage, pledge, assign or borrow against the leased Assets during the time the lease is in force or that Assets are under Lessee’s control.

(j)  Use of Assets.    Lessor agrees that Lessee may use Assets to manufacture products for other customers with prior approval in writing from Lessor.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

2.1    Representations and Warranties of Lessor.    Lessor hereby represents and warrants to Lessee as follows:

(a)   Organization and Qualification.    It is a corporation duly organized, existing and in good standing under the laws of the state of its incorporation and has the corporate power to own its properties and to carry on its business as now being conducted.

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(b)  Authorization; Enforcement.    It has full legal right, power and authority to enter into and perform this Agreement; and the execution and delivery of this Agreement by it and the consummation by it of the transactions contemplated hereby have been duly authorized by it.

(c)  EXCLUSION OF WARRANTIES.    LESSOR WARRANTS THAT ALL OF THE ASSETS PERFORMED SATISFACTORILY IN THE MANUFACTURE OF LESSOR’S PRODUCTS AT THE TIME THEY WERE REMOVED FROM SERVICE TO BE CRATED FOR SHIPMENT. ALL OF THE ASSETS ARE BEING TRANSFERRED TO LESSEE “AS IS” AND THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, ARE EXCLUDED FROM THIS AGREEMENT AND SHALL NOT APPLY TO THE ASSETS TRANSFERRED AND SOLD.

If one or more individual Assets are deemed to be in need of repair prior to shipment, Lessor will conduct necessary repairs at Lessor’s expense and the individual Assets will be shipped to Lessee at a date later than the majority of Assets are shipped. If the value of the individual Assets to be repaired is less than 15% of the total value of Assets as indicated in Exhibit A, no adjustment to the Lease Prepayment will be made. If the value of such individual Assets is greater than 15% of the total value of the Assets as indicated in Exhibit A, then the Lease Prepayment will be adjusted accordingly.

(d)  LIMITATION/DISCLAIMER OF LIABILITY.    EXCEPT FOR DAMAGES CAUSED BY LESSOR’S WILLFUL MISCONDUCT, RECKLESSNESS, OR GROSS NEGLIGENCE, THE PARTIES AGREE THAT TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSOR LIMITS OR DISCLAIMS LIABILITY RELATED TO THE MANUFACTURE, DELIVERY, OR USE OF THE ASSETS AND/OR SUPPLIES USED IN CONNECTION WITH THE ASSETS, AS FOLLOWS:

(1)  FOR DIRECT DAMAGES, LESSOR’S LIABILITY IS LIMITED TO THE AMOUNTS PAID BY LESSEE FOR THE ASSETS GIVING RISE TO, OR WHICH ARE THE SUBJECT OF, THE CLAIM WHETHER SUCH CLAIM ALLEGES BREACH OF CONTRACT, TORTIOUS CONDUCT INCLUDING BUT NOT LIMITED TO NEGLIGENCE OR ANY OTHER THEORY;

(2)  LESSOR DISCLAIMS LIABILITY FOR INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOSS OF USE, REVENUE, OR PROFIT) WHETHER SUCH CLAIM ALLEGES BREACH OF CONTRACT, TORTIOUS CONDUCT INCLUDING BUT NOT LIMITED TO NEGLIGENCE, OR ANY OTHER THEORY.

2.2    Representations and Warranties of Lessee.    Lessee represents and warrants to Lessor as follows:

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(a)  Organization and Qualification.    It is a corporation duly organized, existing and in good standing under the laws of Taiwan, R.O.C., and has the corporate power to own its properties and to carry on its business as now being conducted.

(b)  Authorization; Enforcement.    It has full legal right, power and authority to enter into and perform this Agreement and the execution and delivery of this Agreement by it and the consummation by it of the transactions contemplated hereby have been duly authorized by it.

(c)  No Conflicts.    The execution, delivery and performance of this Agreement and the consummation by it of the transactions contemplated hereby will not result in a violation of its certificate of incorporation or bylaws or any law, rule, regulation, order, judgment or decree applicable to it or by which any of its properties or assets is bound or affected. No Consent, authorization or order of, or filing or registration with, any Governmental Authority or any other Person is required for the execution, delivery and performance by it of this Agreement.

ARTICLE 3

OTHER AGREEMENTS

3.1     Asset Support.    Lessee acknowledges and agrees that it shall deal directly with the respective manufacturer, or manufacturer’s representative to obtain support for operation of the Assets at Lessee’s sole cost and expense. Lessee agrees to take delivery, store, use and care for Assets to the same degree Lessee uses with respect to his own assets. Lessee agrees to perform preventative maintenance, maintenance, and repairs to Assets at his sole expense to maintain them in proper working order during the lease term. Lessee agrees to perform any preventative maintenance in accordance with recommendations of the equipment manufacturer’s recommendations, or the Lessor’s reasonable instructions. Lessee shall maintain insurance coverage at his sole discretion for the Assets while in use or in storage at Lessee’s facility.

ARTICLE 4

GENERAL

4.1    Survival of Representations and Warranties.    Each of the representations and warranties made by the parties in this Agreement shall survive until the expiration of the lease period any applicable statute of limitations.

4.2    Defined Terms.    As used herein, the terms below shall have the following meanings:

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“Governmental Authority” means any nation or government, any state, province or other political subdivision thereof or entity or agency exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Person” means an individual, a corporation, a partnership (general or limited), a limited liability company, an association, a trust or other entity or organization, including a Governmental Authority.

4.3    Entire Agreement; Amendment.    This Agreement constitutes the entire agreement of the parties and supersedes all previous proposals, oral or written, and all negotiations, conversations or discussions heretofore between the parties with respect to the subject matter hereof. This Agreement may be amended, modified or supplemented only by written agreement signed by both of the parties hereto.

4.4    Notices.    Notices, requests, permissions, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given if signed by the respective party giving them (in the case of any corporation, the signature shall be by an officer or other authorized representative thereof) and delivered by hand or by telecopy or on the date of receipt indicated on the return receipt if mailed (registered or certified, return receipt requested, properly addressed and postage prepaid):

If to Lessor:

RF Monolithics, Inc.

4347 Sigma Road

Dallas, Texas 75244

Attention: David T. Somerville, VP QA and Corporate Development

Fax: (972)-404-9476

E-Mail: somerville@rfm.com

Copy to (which shall not constitute notice):

Morton PLLC

12222 Merit Drive, #1270

Dallas, Texas 75251

Attention: Stephen Morton, Esq.

Fax: (972) 934-9299

E-Mail: smorton@mortonpllc.com

If to Lessee:

Yu Tung Huang

Tai-Saw Technology Co., Ltd.

No. 3, Industrial 2^nd Rd.

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Ping-Chen Industrial District

Taoyuan 324, Taiwan, R.O.C.

Facsimile: 886-3-469-7523

E-Mail: ythuang@mail1.taisaw.com

Copy to (which shall not constitute notice):

4.5    Governing Law.    This Agreement is performable, in part, in Dallas County, Texas 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 State of Texas. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement.

4.6    Expenses.    Each party shall bear its own expenses in connection with the execution, delivery and performance of this Agreement. Additional expenses to be paid by the Parties of this Agreement are as follows:

(a)  Crating.    The parties acknowledged that Lessor has arranged for and paid for the crating and other normal expenses required to prepare the Assets for shipping to the Lessee pursuant to the Original Agreement, and that Lessee did not request or pay for any special preparation of Assets for shipping pursuant to the Original Agreement.

(b)  Shipping.    The parties acknowledge that Lessee paid for shipping the Assets from Dallas, Texas, to Lessee’s facility per the Original Agreement, and that Lessor arranged for shipment per the Original Agreement.

4.7    Dispute Resolution.

(a)  Negotiation.    In the event of any dispute or disagreement between parties as to the interpretation of any provisions 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.

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(b)    Dispute Resolution.    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 (a) above, shall be settled exclusively by binding arbitration in Hong Kong., and in accordance with the 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 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 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 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 it is fair to do so. No pre-arbitration discovery shall be permitted, except that the arbitrator 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 shall render his or her award within 90 days of the conclusion of the arbitration hearing. Notwithstanding anything to the contrary provided in this Section 4.7 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.

4.8    Headings; References.    The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references herein to “Articles” or “Sections” shall be deemed to be references to Articles or Sections hereof unless otherwise indicated.

4.9    Counterparts.    This Agreement may be executed in counterparts and each counterpart shall be deemed to be an original, but all of which shall constitute one and the same original.

4.10    Severability.    If any provision of this Agreement or the application thereof to any person or circumstance is determined to be invalid or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon any such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

4.11    English Controlling.    For purposes of convenience, this Agreement may be translated, but

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it is understood that the English version of the Agreement (and the Exhibits) will control for all purposes. In the case of a conflict between the two versions, the parties are responsible for performing in accordance with the English version hereof.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized representatives as of the date first above written.

RF MONOLITHICS, INC.
Signature:	/s/    Jon S. Prokop
Printed Name:	Jon S. Prokop
Title:	VP Manufacturing
Date:	December 2, 2002

TAI-SAW TECHNOLOGY CO., LTD.
Signature:	/s/    Yu-Tung Huang
Printed Name:	Yu-Tung Huang
Title:	President
Date:	November 20,2002

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Exhibit A

“ASSETS”

[RFM 018—Material has been omitted pursuant to a Request for Confidential Treatment made by RFM. Material has been filed separately with the Commission.]

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EX-99.1

Exhibit 99.1

RF MONOLITHICS, INC.

CERTIFICATE PURSUANT TO SECTION 906

OF SARBANES – OXLEY ACT OF 2002

The undersigned, David M. Kirk, Chief Executive Officer and President of RF Monolithics, Inc. (the “Company”), DOES HEREBY CERTIFY that:

1. The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2002 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed this 13th day of January 2003.

        /s/ David M. Kirk

Name: David M. Kirk

Title: Chief Executive Officer and President

EX-99.2

Exhibit 99.2

RF MONOLITHICS, INC.

CERTIFICATE PURSUANT TO SECTION 906

OF SARBANES – OXLEY ACT OF 2002

The undersigned, Harley E Barnes III, Chief Financial Officer of RF Monolithics, Inc. (the “Company”), DOES HEREBY CERTIFY that:

1. The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2002 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed this 13th day of January 2003.

    /s/ Harley E Barnes III

Name: Harley E Barnes III

Title: Chief Financial Officer