Exhibit 10.26

 

SUPPLY AGREEMENT

 

 

This SUPPLY AGREEMENT (“Agreement”) is made as of this 12th day of December,
2007, but effective as of January 1, 2008 (“Effective Date”), by and between:

 

 

 

AXT, Inc.

 

 

 

4281 Technology Drive

 

 

 

Fremont, CA 94538

 

 

 

Hereinafter referred to as “AXT”

 

 

 

 

 

And

 

IQE plc

 

 

 

265 Davidson Avenue

 

 

 

Suite 215

 

 

 

Somerset, New Jersey 08873

 

 

 

Hereinafter referred to as “IQE plc”

 

 

Preamble

 

IQE plc has requirements for substrates to be used by IQE plc as raw materials
to manufacture IQE plc Epi wafers, and AXT is willing, subject to the terms and
conditions of this Agreement, to supply IQE plc with such substrates.

 

Now, therefore, in consideration of the foregoing and the mutual premises
hereinafter contained, AXT and IQE plc hereby agree as follows:

 

1.                                      Definitions.

 

1.1                               Blanket Purchase Order shall mean a binding
open purchase order identifying the Products to be purchased by Product
Identification Number, and indicating a global quantity of Products to be
delivered within the Initial Term as well as associated price, in accordance
with the Product Purchase Addendum.

 

1.2                               Inventory shall mean the inventory of Products
held at IQE plc’s premises located at IQE plc’s Somerset, New Jersey or other
inventory facility pursuant to the SMI Program.

 

1.3                               Ordering Entity shall mean an entity
controlled by, under common control with, or controlling IQE plc (with “control”
meaning ownership of more than fifty percent (50%) of the voting stock of the
entity or, in the case of a non-corporate entity, an equivalent interest), that
is authorized to make purchases hereunder by submitting Purchase Order Releases
to AXT.

 

1.4                               Products shall mean substrates to be purchased
hereunder, as identified on the Product Purchase Addendum.

 

1.5                               Product Purchase Addendum shall mean the
addendum to this Agreement attached as Appendix A, as may be modified during the
term hereof as provided in this Agreement, setting forth the Products to be
purchased hereunder together with their respective Specifications and agreed
upon purchase price.

 

1.6                               Purchase shall mean that the Products that
have been placed in Inventory have been either (i) released or pulled from
Inventory pursuant to a Purchase Order Release or Purchase Order, as

 

[***]  Indicates redacted terms for which confidential treatment has been
requested from the Securities and Exchange Commission.

 

 

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applicable, or (ii) deemed released from Inventory due to expiration of the
Shelf Life as set forth in Section 6.1 below or deemed released to satisfy the
Minimum Purchase requirement set forth in Section 2.3 below.

 

1.7                               Purchase Order shall mean an official purchase
order for Products made by IQE plc or an Ordering Entity for any Products that
are not within the Minimum Purchase.

 

1.8                               Purchase Order Release shall mean an official
purchase order release made against the Blanket Purchase Order issued by IQE plc
to AXT; to be issued a minimum of 4 weeks lead-time before the date which IQE
plc forecasts they will withdraw from Inventory the specific Products held in
Inventory under the SMI Program.

 

1.9                               Shelf Life is defined as the one hundred
eighty (180) day period from date of placement of each Product into the
Inventory.

 

1.10                        SMI Program is defined as a supplier managed
inventory program whereby a reserve Inventory of Products at IQE plc’s premises
located at IQE plc’s Somerset, New Jersey facility and others as designated by
IQE plc.

 

1.11                        Specification(s) shall mean the current Product
specifications set forth for each Product on the Product Purchase Addendum.  The
Specifications may only be changed by a writing signed by both parties.

 

2.                                      Scope of Agreement.

 

2.1                               Agreement.  The purpose of this Agreement is
to describe the terms and conditions under which the Products shall be supplied
by AXT to IQE plc and its Ordering Entities. The terms of this Agreement
represent the entire agreement between the parties regarding its subject matter
and shall prevail over the terms of any prior or contemporaneous agreements
(whether written or oral) to the extent they may be inconsistent or in conflict
with the terms of this Agreement.

 

2.2                               Ordering Entities.  IQE plc shall be
responsible for any act or omission of the Ordering Entities and of each
Ordering Entity’s compliance with all of the terms of this Agreement.  Any
action or breach by any of the Ordering Entities shall be deemed an action or
breach by IQE plc and IQE plc will indemnify and hold AXT harmless from any and
all breaches of this Agreement by its Ordering Entities.  IQE plc waives all of
those defenses that IQE plc may have as to why IQE plc should not be liable for
the Ordering Entities’ acts, omissions and noncompliance with this Agreement. 
IQE plc hereby guarantees payment for Products released pursuant to an Ordering
Entity’s Purchase Order Release.

 

2.3                               Blanket Purchase Order.  IQE plc agrees to
issue a Blanket Purchase Order within two (2) days from the Effective Date for
[***] ([***]) 4” Wafer Products (the “Minimum Purchase”). IQE plc agrees to
issue a [***] 4” Wafer Blanket Take or Pay Purchase Order at [$***]. IQE agrees
to be bound under this Agreement to Purchase the Minimum Purchase prior to
December 31, 2008.  IQE plc and Ordering Entities: (i) shall issue Purchase
Order Releases for Products against the Minimum Purchase within the Initial Term
(as defined in Section 3 below)   The Blanket Purchase Order, all Purchase
Orders and Purchase Order Releases are firm and non cancelable by IQE plc and/or
its Ordering Entities.  IQE plc is responsible for the full price of Products as
ordered in the Blanket Purchase Order, any Purchase Order or Purchase Order
Release submitted by IQE plc or an Ordering Entity.  In the event AXT fails to
deliver the Minimum Purchase per the forecast submitted by IQE plc, all
purchased quantities of competitor wafers in default of the delivery date shall
be included in the Minimum Purchase quantity.

 

 

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IQE plc will issue payment for all 4” wafers not released from the SMI inventory
within 60 days from December 31, 2008.

 

2.4                               No Additional Terms.  The acceptance of the
Blanket Purchase Order, any Purchase Order Release and/or a Purchase Order from
IQE plc and/or an Ordering Entity, whether electronically or in hard copy form,
is expressly conditioned upon IQE plc’s and each Ordering Entity’s assent
hereunder to be bound by the terms and conditions in this Agreement, in lieu of
the terms contained in any such IQE plc and/or Ordering Entity Blanket Purchase
Order, Purchase Order Release and/or a Purchase Order.  The parties hereby
reject all provisions contained in communications from either party that
conflict with or are inconsistent with the terms contained herein.  The parties’
failure to object to any of the provisions contained in either party’s
documentation shall not be deemed a waiver of the terms of this Agreement under
any circumstances.

 

3.                                      Term of Agreement.  This Agreement shall
enter into effect on the Effective Date and shall remain in effect until
December 31, 2008 (“Initial Term”), unless terminated earlier as provided in
Section 12. Thereafter, this Agreement shall automatically renew from year to
year unless a party provides the other party with at least two (2) months’ prior
written notice of its intent to terminate this Agreement.

 

4.                                      Price and Payment Terms.

 

4.1                               Purchase Price.  The purchase price(s) for the
Products shall be in United States Dollars as set forth in the Product Purchase
Addendum.

 

4.2                               Payment Terms.  AXT will issue invoices on the
date which IQE plc Purchases the corresponding Products from the Inventory and
IQE plc will pay the invoice NET sixty (60) days from the date of invoice.

 

5.                                      SMI Program and Consignment of Products.

 

5.1                               SMI Program.  Only products listed on the
Product Purchase Addendum will be managed using the SMI Program.  The Product
Purchase Addendum may be modified as mutually agreed by the parties in writing.

 

5.1.1                     Forecast of Products.

 

5.1.1.1                              Forecasts by IQE plc.  Commencing on the
Effective Date of this Agreement and on a monthly basis thereafter, IQE plc and
each Ordering Entity shall prepare and issue to AXT rolling ninety (90) day
forecasts of its requirements for Products using the then current agreed upon
format (each, a “Forecast”).  Each such Forecast shall specify the specific
Inventory facility for shipment.

 

5.1.2                     Delivery of Products to Inventory.  Products will be
delivered from AXT to the Inventory based on the Forecasts.  AXT will pay for
delivery of Products from AXT to the Inventory; provided, however, that AXT
shall not be responsible for any increased shipment costs that result from IQE
plc or an Ordering Entity’s failure to provide an accurate Forecast. 
Immediately upon delivery of Products to the Inventory, IQE plc shall inspect
the integrity of packaging, the identity of Products by comparison with the
delivery papers and notify AXT of any discrepancies within the next seven
(7) business days.

 

5.1.3                     Acceptance.  IQE plc and its Ordering Entities shall
have thirty (30) days from release of each Product from Inventory to test the
Products (the “Acceptance Period”) in accordance with

 

 

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mutually agreed upon procedures established prior to the commencement of the
Acceptance Period.  If a Product does not substantially conform to its
Specifications (a “Defect”), IQE plc shall notify AXT of the nature and
specifics of the nonconformity.

 

AXT shall work to correct nonconformities discovered during IQE plc or the
Ordering Entity’s performance of Acceptance Tests and resubmit to IQE plc or the
Ordering Entity for re-testing within a reasonable period of time.  In the event
that IQE plc or the Ordering Entity does not notify AXT of any Defects during
the Acceptance Period, such Product shall be deemed accepted subject to
Section 10 hereof.  In the event that AXT is unable to correct nonconformities
after two attempts to do so under this Section 5.1.3, all such nonconforming
Products shall be counted towards the Minimum Purchase without charge.

 

5.1.4                     Consumption of Products.  IQE plc and each Ordering
Entity shall notify AXT electronically each week on Friday of releasing Products
from Inventory in a mutually agreed upon format.  IQE plc and each Ordering
Entity will consume or release the Products held in the Inventory on a
“first-in, first-out” basis according to the delivery date into the Inventory
for that specific Product.  AXT deliveries will be used to replenish the
quantities withdrawn from this Inventory.

 

5.1.5                     IQE plc’s Responsibilities.

 

5.1.5.1                              Storage conditions.  IQE plc shall make
available free of charge sufficient space for the Products included in the SMI
Program in its warehouse(s)/stores located on its premises or off-site.  IQE plc
shall store the Products included in the SMI Program in accordance with the
applicable Specifications and shall ensure the safety and security of the
Products included in the SMI Program. Products included in the SMI Program will
be stored in such a way that it can be easily distinguished from any other
material belonging to or stored by IQE plc.

 

5.1.5.2                              Third party.  Subject to AXT’s prior
written consent, IQE plc may appoint a third party to hold Products in inventory
under the SMI Program with a different (and possibly additional) storage
facility and location.  Such third-party shall have the same duties as described
herein for IQE plc as to the Products included in the SMI Program.  IQE plc will
specify in the Blanket Purchase Order the anticipated delivery location for the
applicable Products included in the SMI Program. IQE plc is responsible for all
expenses and risks associated with using a third party storage pursuant to this
Section.

 

5.1.5.3                              Product traceability.  IQE plc shall
maintain complete traceability on all Products or packaging containing Products
which are held in Inventory showing that such Products are the property of AXT. 
IQE plc shall ensure that such Products are explicitly designated as AXT
material through assigned batch ID numbers on every incoming shipment to
Inventory.  Different batch numbers will identify different Products/part
numbers.  Tracking of Product batches from date of receipt, through storage and
then withdrawal from inventory will be reported to AXT monthly by referencing
identified batch numbers.

 

5.1.6                     AXT’s Responsibilities.

 

5.1.6.1                              Accuracy.  AXT is responsible for ensuring
accuracy of all shipment documentation.

 

5.1.6.2                              Products Packaging.  The Products will be
packaged, labelled and identified by AXT in accordance with the Specifications
agreed between IQE plc and AXT, as prevailing at the date of shipment from AXT’s
facility.

 

 

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5.2                               SMI Program Inventory Audit.

 

5.2.1                     AXT is entitled to inspect the SMI Program Inventory
and carry out a stock audit upon thirty (30) days prior notice to IQE plc. IQE
plc will provide AXT with access to IQE plc’s representatives for this purpose.

 

5.2.2                     If during such an inspection, AXT discovers any
non-compliance with the terms of this Agreement, AXT shall notify IQE plc in
writing and IQE plc shall present a corrective action plan to AXT within a
reasonable timeframe.

 

6.                                      Ownership, Risk, Shipment Term.

 

6.1                               Title Transfer.  The Purchase of the Products
shall be deemed to occur and title to the Products shall remain the sole
property of AXT until the earlier of: (x) the date which IQE plc shall withdraw
or release the Products from Inventory pursuant to a Purchase Order Release or
Purchase Order, as applicable, and (y) expiration of the Shelf Life.

 

6.2                               Risk Transfer.  Risk of loss for all Products
stored at Inventory shall pass from AXT to IQE plc on the date of delivery of
the Products to Inventory. IQE plc shall be responsible for insuring the
Products in Inventory against all risk of loss or damage. IQE plc shall bear the
cost of such insurance covering, without limitation, fire, theft and other loss
of Products.  IQE plc shall submit policies and riders to AXT together with
proof of payment of premiums and, at AXT’s request, shall cause AXT to be named
as an additional insured under such policies as its interests may appear, with
waiver of recourse as appropriate.

 

6.3                               Country of Origin.  AXT hereby agrees that
upon written request from IQE plc, AXT will identify the country of origin of
the Products and provide written notification of such country of origin for IQE
plc.

 

7.                                      Force Majeure.  Except for the payment
of fees, neither party shall be held responsible for any delay or failure in
performance of any part of this Agreement to the extent such delay or failure is
caused by an act of God or other similar causes beyond its control and without
the fault or negligence of the delayed or non-performing party (each a “Force
Majeure Event”).  In the event AXT fails to deliver 4” wafers per their
schedule, and IQE plc has no choice other than to utilize 4” wafers from another
vendor, all such 4” wafers utilized by IQE plc from other vendors shall then be
included in the total [***] take or pay contract. Delays by vendors in
manufacture or delivery of materials not caused by a Force Majeure Event, or
shortages of labor or materials resulting from general market conditions
(including price increases), shall not constitute a Force Majeure Event.  A
party who is delayed or fails to perform as a result of a Force Majeure Event
(“Affected Party”) shall use its best efforts to mitigate and minimize any
resulting delay in the performance of the suspended obligation.  The Affected
Party shall provide written notice to the other party within forty eight (48)
hours of learning of a Force Majeure Event stating the nature and cause of the
event, the anticipated length of the delay, the measures proposed or taken by
the Affected Party to minimize the delay, and the timetable for implementation
of such measures.  If a Force Majeure Event occurs, neither party may
(i) suspend this Agreement in whole or in part for the duration of the delay;
(ii) conduct business elsewhere and deduct such business from any committed
quantities; and/or (iii) extend the term of this Agreement up to the length of
time of the delay.  If the AXT is the Affected Party, IQE plc may terminate this
Agreement or any part hereof without penalty if the delay or failure in
performance continues beyond twenty (20) days. Likewise, if IQE plc is the
Affected Party, AXT may terminate this Agreement or any part hereof without
penalty if the delay of failure in performance continues beyond twenty (20)
days.

 

 

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8.             Quality Assurance.  AXT shall maintain a “documented quality
system,” such as an ISO 9001:2000, or equivalent, at each AXT plant supplying
Product or services to IQE plc, and shall make such documented quality system
available for IQE plc’s review.  AXT’s documented quality system shall include,
but is not limited to, programs for monitoring AXT’s manufacturing and,
improving AXT’s material and procurement process, and implementing corrective
and preventative actions.  Upon IQE plc’s written request, AXT shall provide
data verifying AXT’s compliance with such quality system, including but not
limited to process capability data and SPC charts for key product parameters as
agreed between IQE plc and AXT and identified in the Specifications. IQE plc
will have the right to audit AXT during 2008 and any renewal term hereof with
thirty (30) days written notice.

 

9.                                      Changes.

 

9.1                               AXT Changes.  No major Product or process
changes, design changes, or other alterations affecting the performance, the
mechanical form or fit, the compatibility or characteristics, or the life
reliability of Product that will impact or potentially impact the intrinsic
characteristics of the wafer being fabricated or of the resulting customer
device (collectively “Major Changes”) shall be made or incorporated in the
Product without the prior written approval of IQE plc.  AXT shall provide
written notice of any proposed Major Change at least ninety (90) days prior to
the implementation of the proposed Major Change. AXT shall provide to IQE plc
sufficient information describing the proposed Major Change in detail so as to
allow IQE plc to properly evaluate the impact of the proposed Major Change. The
following are examples of changes that are considered to be Major Changes, and
require IQE plc’s prior written approval:

 

(i)                                     changes in manufacturing processes
including locations and subcontractors;

 

(ii)                                  changes in final product control
specifications and testing methods;

 

(iii)                               changes in raw materials or raw materials
source for direct key materials;

 

(iv)                              changes in Product containers or packaging;

 

(v)                                 changes in final inspection procedures or
sample plans; and

 

(vi)                              changes to raw materials or raw materials
source, including each of the types of changes listed above. The parties will
update this list from time to time.

 

10.                               Warranty, Remedies, Return and Disclaimers.

 

10.1                        Warranty.  AXT represents and warrants that all
Products for a period of six (6) months from the date of delivery to the
Inventory: (i) meet current industry standards, i.e., ISO 9001:2000, with
respect to materials and workmanship and (ii) substantially conform to the
Specifications.  The foregoing warranty is subject to IQE plc storing the
Products in accordance with any AXT recommendations and the Specifications and
is invalidated if IQE does not comply with such AXT recommendations and the
Specifications.

 

10.2                        Remedies for Breach of Warranty.  If any Products do
not meet the warranties specified herein, AXT may, at AXT’s option;

 

(i)                                     replace or correct at no cost to IQE plc
any defective or nonconforming Products pursuant to the Product return
procedures set forth in Section 10.3 below,

 

 

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(ii)                                  Replace nonconforming substrates on which
epi was grown on a “1 for 1” ratio for the first 2% and a “2 for 1” ratio for
all non conforming substrates on which epi was grown that exceed 2%. For IQE RF
only, AXT, Inc shall provide a 1 for 1 replacement on the first 1% of haze
issues and 2 for 1 for haze issues over 1%.

 

(iii)                               Allow IQE plc to return any nonconforming
Products to AXT at AXT’s expense and recover from AXT the full sales price and
any packaging or shipping costs thereof.

 

Return of Products.  In the event that IQE plc returns nonconforming Products
(including yield loss >1%) to AXT pursuant to Sections 10.2(i) or 10.2(iii), IQE
plc will notify AXT of the nonconformity and of IQE plc’s intent to return the
nonconforming Products.  Upon receipt of IQE plc’s notification to AXT of the
nonconformity, AXT will provide a Return Material Authorization number (RMA#)
within 48 hours after receipt of notification unless otherwise agreed in writing
by both parties.  AXT shall provide all the assistance and authorization
required to return the nonconforming Products to AXT within 72 hours of the
original notification, and shall promptly deliver replacement Products.  The
nonconforming Products shall be returned to AXT at AXT’s expense, and AXT shall
be liable and shall assume all title and responsibility for all Products during
return transport, including liability caused by hazardous substance releases
during such transport.  AXT shall promptly investigate to determine the cause of
the nonconformity and shall notify IQE plc of its findings.  Notwithstanding any
contrary statement or requirement in this paragraph, in the event that IQE plc
believes, in its sole but reasonable discretion, that AXT has delivered
nonconforming Products and that IQE plc is in jeopardy of curtailing production
or shutting down its facility as a result, IQE plc will notify AXT of such
condition in writing (e-mail shall suffice for such notice), and AXT shall
exercise all reasonable efforts to immediately ship replacement Products to IQE
plc. IQE plc will not ship to AXT any nonconforming products that have epi grown
on them. AXT will have the right to inspect such nonconforming products at IQE
plc’s facilities within thirty (30) days.

 

10.3                        No Waiver.  No inspection or acceptance, approval or
acquiescence by IQE plc with respect to Products shall relieve AXT from any
portion of its warranty obligation nor shall waiver by IQE plc of any
Specification requirement for one or more items constitute a waiver of such
requirements for remaining items unless expressly agreed by IQE plc in writing.

 

10.4                        Disclaimer of Warranty.  EXCEPT AS EXPRESSLY SET
FORTH IN SECTION 10 ABOVE, AXT DOES NOT MAKE ANY OTHER WARRANTIES, WHETHER
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE.  ALL IMPLIED WARRANTIES AS TO
SATISFACTORY QUALITY, PERFORMANCE, MERCHANTABILITY, FITNESS FOR PARTICULAR
PURPOSE OR NON INFRINGEMENT ARE EXPRESSLY DISCLAIMED.  EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED IN THIS SECTION 10, AXT DOES NOT WARRANT THAT THE PRODUCTS
ARE ERROR-FREE OR THAT THEIR USE WILL BE UNINTERRUPTED.

 

11.                               Limitation of Liability.

 

11.1                        Disclaimer of Consequential Damages.  IN NO EVENT
SHALL EITHER PARTY BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT,
EXEMPLARY, PUNITIVE, SPECIAL OR OTHER DAMAGES WHATSOEVER RESULTING FROM AXT’
PERFORMANCE OR FAILURE TO PERFORM UNDER THIS AGREEMENT OR THE FURNISHING,
PERFORMANCE OR USE OF ANY GOODS SOLD PURSUANT HERETO, WHETHER DUE TO BREACH OF
CONTRACT, BREACH OF WARRANTY, STRICT LIABILITY, PRODUCT LIABILITY, THE
NEGLIGENCE OF AXT OR OTHERWISE.

 

 

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11.2                        Limitation on Liability.  IN NO EVENT SHALL EITHER
PARTY’S LIABILITY EXCEED THE U.S. DOLLAR AMOUNT EQUAL TO THE AMOUNT PAID BY IQE
plc FOR THE COST OF THE PRODUCTS PAID BY IQE plc UNDER THIS AGREEMENT.  THE
DAMAGE LIMITATIONS PROVIDED IN THIS AGREEMENT AND THE REMEDIES STATED HEREIN
SHALL BE EXCLUSIVE AND SHALL BE A PARTY’S SOLE REMEDY.  THIS LIMITATION ON
LIABILITY SHALL SURVIVE FAILURE OF ANY ESSENTIAL PURPOSE.

 

12.                               Termination.

 

12.1                        In the event that either party commits any breach of
any provision of this Agreement and does not rectify such default within a
period of thirty (30) days after having received written notice, specifying the
default, the other party may terminate this Agreement immediately. Further,
should either party (i) be adjudged or become insolvent; (ii) have any
proceedings instituted by or against it in bankruptcy, under insolvency laws, or
for the party’s reorganization, receivership, dissolution, or liquidation;
(iii) make an assignment for the benefit of creditors or any general arrangement
with creditors; or (iv) discontinue business or adopt a resolution calling for
same, the other party may terminate this Agreement for cause upon 24-hours
written notice.  Notwithstanding the above, either party shall have the right to
seek any other remedy that may be available at law or in equity.

 

12.2                        Effect of Termination/Survival.  Upon the expiration
or termination of this Agreement (i) provided that this Agreement was not
terminated for IQE plc’s breach of this Agreement and except for the Products
subject to the Minimum Purchase requirements specified in Section 2.3 above, IQE
plc will have the right with respect to any Products remaining in Inventory as
of the date of termination to withdraw such Products in Inventory immediately
pursuant to the SMI Program and pay for them subject to payment being made
within thirty (30) days end of month, or to return the Products to AXT at AXT’s
expense.  IQE plc shall notify AXT of its selection of one of the foregoing
options within five (5) days of the expiration or termination date; (ii) if this
Agreement was terminated for IQE plc’s breach of this Agreement, then AXT shall
have the right to require IQE plc to return all Products remaining in Inventory
(except for the Products subject to the Minimum Purchase requirements specified
in Section 2.3) to AXT at IQE plc’s expense; and (iii) the following Sections
shall survive: Sections 1, 2.4, 4, 6, 7, 10, 11, 12, 13, 14 and 15. In the event
of the termination of this Agreement as a result of a breach by AXT, IQE plc
shall have no further obligation under this Agreement except with respect to
Section 4 for payments that accrued prior to the effective date of termination
and Section 13 with respect to ongoing confidentiality obligations.

 

13.                               Confidentiality.

 

13.1                        Confidential Information.  Each party acknowledges
that, in the course of performing its duties under this Agreement, it may
receive information relating to the other party, which the receiving party
knows, or has reason to know, is confidential or proprietary information of the
other party or is identified as confidential and/or proprietary nature
(“Confidential Information”).  The receiving party shall at all times both
during the term of this Agreement and for a period of five (5) years thereafter,
keep and hold such Confidential Information in confidence, and shall not use
such Confidential Information for any purpose, other than as may be reasonably
necessary for the performance of its duties pursuant to this Agreement.  The
receiving party shall not disclose any Confidential Information to any person or
entity, other than to the receiving party’s employees or consultants as may be
reasonably necessary for purposes of performing its duties hereunder; provided
that such employees and consultants have first entered into agreements at least
as protective of the Confidential Information as the terms and conditions of
this Section 13.

 

 

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13.2                        Exceptions.  The parties’ obligation under
Section 13.1 with respect to any portion of Confidential Information, shall not
apply to any such portion that the receiving party can document:  (a) was
lawfully in the public domain at or subsequent to the time such portion was
communicated to the receiving party by the disclosing party through no fault of
the receiving party; (b) was rightfully in the receiving party’s possession free
of any obligation of confidence at or subsequent to the time such portion was
communicated to the receiving party by the disclosing party; or (c) was
developed by employees or agents of the receiving party independently of and
without reference to any information communicated to the receiving party by the
disclosing party.  A disclosure of any portion of Confidential Information,
either: (a) in response to a valid order by a court or other governmental body;
or (b) otherwise as required by law, shall not be considered to be a breach of
this Agreement or a waiver of confidentiality for other purposes; provided,
however, that the party being required to disclose the information shall provide
prompt prior written notice thereof to the other party to enable the other party
to seek a protective order or otherwise prevent such disclosure.

 

13.3                        Advertising.  Each party agrees that it shall not
publish or cause to be disseminated through any press release, public statement,
or marketing or selling effort any information that relates to the other party
or this Agreement without the prior written approval of the other party.

 

14.                               General Terms and Conditions.

 

14.1                        Modifications, Appendices, Addenda.

 

14.1.1              No modification of this Agreement shall be valid unless in
writing, signed by an authorized representative of each party.

 

14.1.2              Each Addendum hereto is an integral part of this Agreement.
In the event of any conflict between the contents of this Agreement and any
Addendum the regulations of this Agreement shall prevail.

 

14.2                        Severability.  If any provision of this Agreement is
declared void, invalid, or illegal by any governmental, judicial or arbitral
authority, the validity or legality of any of the other provisions and of the
entire Agreement shall not be affected thereby and the parties shall replace
such provision with one as near in substance as possible to the original
provision.

 

14.3                        Notices.  All notices relating to this Agreement
shall be in writing and shall be deemed given (i) in the case of mail, on the
date deposited in the mail, postage prepaid, either registered or certified,
with return receipt requested (or its equivalent); (ii) in the case of personal
delivery to an authorized representative or officer of the party, or in the case
of express courier service or overnight delivery service of national standing,
on the date of delivery or attempted delivery (if receipt is refused); or
(iii) in the case of facsimile, 24 hours after it has been sent provided that a
duplicate copy of such notice is also promptly sent pursuant to (i) or
(ii) above.  Notices shall be addressed to the parties as set forth on the first
page hereof, but each party may change its address by written notice in
accordance with this section.

 

14.4                        Compliance With Law.  In the performance of this
Agreement, each party shall at all times comply with all applicable governmental
laws, statutes, ordinances, rules, regulations, orders, and other requirements,
including, without limitation, such governmental requirements applicable to
environmental protection, health, safety, wages, hours, equal employment
opportunity, nondiscrimination, working conditions, import or export control,
customs, and transportation.

 

 

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15.                               Applicable Law. Except for the right of either
party to apply to a court of competent jurisdiction for a temporary restraining
order, a preliminary injunction, or other equitable relief to preserve the
status quo or prevent irreparable harm pending the appointment of one or more
arbitrators, any dispute between IQE plc and AXT under this Agreement involving
its interpretation or the obligations of a party hereto, shall be determined by
binding arbitration conducted in English.  Arbitration shall be held in
accordance with the Rules of the London Court of International Arbitration in
the City of London in the United Kingdom (“LCIA”).  Arbitration may be conducted
by one (1) attorney arbitrator by mutual agreement or by three (3) arbitrators
if the parties are unable to agree on a single arbitrator within thirty (30)
days of first demand for arbitration.  All arbitrators are to be selected from a
panel provided by the LCIA.  In the case of a three-arbitrator panel being
necessary, the chairman and one other arbitrator shall be attorneys at law, and
the third arbitrator shall have a background or training in either computer law,
computer science, computer engineering, or marketing of computer industry
products.  The arbitrators shall have the authority to permit discovery, to the
extent deemed appropriate by the arbitrators, upon request of a party.  The
arbitrators shall have no power or authority to add to or detract from the
agreements of the parties.  The costs of the arbitration shall be borne equally
pending the arbitrator’s award.  The arbitrator shall have the authority to
grant any temporary, preliminary, or permanent injunctive or other equitable
relief in a form substantially similar to that would otherwise be granted by a
court.  The arbitrators shall have no authority to award punitive or
consequential damages.  The resulting arbitration award may be enforced by all
lawful remedies, including without limitation injunctive or other equitable
relief in any court of competent jurisdiction.  The trial courts of the United
Kingdom are courts of competent jurisdiction.  The parties agree to submit to
the jurisdiction of those courts, as applicable, for all purposes concerning any
arbitration. This Agreement shall be governed by the laws of USA and the State
of California.

 

16.                               Binding Effect. Neither party shall assign
this Agreement without the prior written consent of the other party.  Subject to
the foregoing, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.

 

 

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Date: December 12, 2007

 

 

AXT, Inc.

 

IQE plc

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Robert Ochrym

 

By:

/s/ Alex Ceruzzi

 

 

 

Authorized Signature

 

Authorized Signature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert G. Ochrym

 

Alex Ceruzzi

 

 

 

Print Name

 

Print Name

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VP Business Development

 

VP and General Manager

 

 

 

Print Title

 

Print Title

 

 

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Appendix A:

 

PRODUCT PURCHASE ADDENDUM

 

Product

 

Price

 

Specifications

4” Wafer

 

·      For Products within the Minimum Purchase-[$***] per Product

 

IQE Inc P/Ns 0046-12EU-FXV

 

IQE RF P/N’s

 

F10017Q7

 

MBE P/N’s

 

4EJ-DP-LB-2D

 

4-US-DP-LF-2D,MOB>4500

 

4-US-DP-LF-2D,RES:>6E7

 

 

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