Exhibit 10.25

 

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 [***] ([***]) 6”
Wafer Products (the “Minimum Purchase”). IQE plc agrees to issue an [***] 6”
Wafer Blanket Take or Pay Purchase Order at [$***]. IQE agrees to be bound under
this Agreement to Purchase the Minimum Purchase prior to December 31, 2008.  IQE
plc and Ordering Entities: (i) shall issue Purchase Order Releases for Products
against the Minimum Purchase within the Initial Term (as defined in Section 3
below) and (ii) provided, that IQE plc and/or the Ordering Entities have
Purchased and paid for the Minimum Purchase, may issue Purchase Orders for up to
an aggregate of [***] ([***]) Products in addition to the Minimum Purchase at
[$***] per 6” wafer.  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,

 

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all purchased quantities of competitor wafers in default of the delivery date
shall be included in the Minimum Purchase quantity. IQE plc will issue payment
for all 6” 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.

 

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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 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.

 

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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.

 

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 6” wafers per their schedule, and IQE plc has no
choice other than to utilize 6” wafers from another vendor, all such 6” 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

 

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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.

 

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;

 

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(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,

 

(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%.

 

(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.

 

                Notwithstanding any other provision herein to the contrary, in
the event that any of the Products are found not to substantially conform to
those “Specific Specifications” set forth on Appendix A attached hereto within
the time required therein by one of IQE plc’s customers (such period of time not
to exceed six (6) months from the date of delivery to IQE), AXT shall and hereby
agrees to be responsible for all such customer material costs incurred as a
result of the Product’s failure to substantially conform to such Specific
Specifications; provided, that AXT’s maximum cumulative liability for any such
customer direct material costs shall be limited to nine hundred and fifty
dollars ($950.00) per non-conforming Product.  Notwithstanding the foregoing,
AXT shall have the right to replace a non-conforming Product with a conforming
Product for the first two percent (2%) of the production at IQE of IQE products
incorporating the Products that are non-conforming due to Haze (and to replace a
non-conforming Product with two (2) conforming Products for any IQE products
incorporating the non-conforming Product that are non-conforming due to Haze
exceeding two percent (2%) of the production at IQE of IQE products
incorporating the non-conforming Products), in which case, AXT shall not have
any liability for customer material costs under this Section.  For the purposes
of this Section, Haze means a visible defect that is visual on the surface of
the wafer after a thin epitaxial film is place on it and is visible to the naked
eye.

 

10.3            Return of Products.  In the event that IQE plc returns
nonconforming Products (including yield loss >2%) 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.

 

10.4            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.

 

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10.5            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.

 

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

 

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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.

 

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.

 

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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.

 

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

 

 

6” Wafer

 

·

For Products

within the

Minimum

 

IQE Inc P/Ns

 

 

 

 

00A8-14D4-

 

 

 

 

FXW and

 

 

 

 

Purchase-[$***]

per Product

 

0068-1454-

 

 

 

 

FXW

 

 

 

 

 

 

 

 

 

·

For additional

 

IQE RF P/N

 

 

 

 

Products above

 

F10012Q4,

 

 

 

 

the Minimum

 

Rev Q

 

 

 

 

Purchase-[$***]

 

 

 

 

 

 

per Product

 

MBE P/N 6-

 

 

 

 

 

DP-Lan-2D-

 

 

 

 

 

VGF

 

 

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