Exhibit
10.22


 


[AXT
LETTERHEAD]


 


January
8, 2007


PRIVATE
AND CONFIDENTIAL


VIA
EMAIL AND FACSIMILE


 


Mr. Mark Tindale


Vice President


Recapture Metals Limited


625 Neal Drive


Peterborough, Ontario


Canada K9J 6X7


 


Re:          Purchase of 7N Gallium Metal


Dear Mark:


 


In this letter (the “Agreement”) we are
entering into an agreement between AXT, Inc., a Delaware corporation (“AXT” or “the
Company”) and Recapture Metals Limited (“Recapture”), regarding the purchase by
the Company of 7N gallium metal (the “Gallium”) from Recapture during calendar
years 2007 and 2008.  This letter sets
forth the terms and conditions of the Company’s agreement to purchase the
Gallium, and supercedes any and all prior verbal and written agreements or
expressions of interest from the Company concerning the subject matter hereof.


 


The Company and Recapture agree and acknowledge that
Recapture is in the business of producing the Gallium, and the Company wishes
to purchase such Gallium for use in its own products on the terms and
conditions of this Agreement. 
Accordingly, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows.


 


1.             Purchase of Gallium.


 


1.1           Product.  All
Gallium purchased pursuant to this Agreement shall be 7N Gallium.  The Company shall purchase the Gallium for
use in its products and for distribution to third parties.  The Company shall not purchase the Gallium
for resale.


 


1.2           Volume.  The
Company shall purchase up to 18,000 kg of Gallium pursuant to this Agreement,
as such amount may be increased or decreased as set forth below.  Recapture shall be obligated to deliver the
full 18,000 kg according to this Agreement.


 


1.3           Delivery. 
Recapture shall deliver 1,000 kg of Gallium per month to the Company,
beginning July 1, 2007.  All Gallium
shall be shipped by Recapture to the Company’s facilities in Beijing, People’s
Republic of China.  All Gallium shall be
packed and shipped in accordance with instructions or specifications provided
by the Company, or, in the absence of such instructions, Recapture shall comply
with the best practices to ensure safe arrival at destination at the lowest
possible cost.  If Gallium is not
delivered in accordance with the agreed monthly schedule, the Company may
terminate, without further liability, this Agreement as to Gallium not yet
shipped, by notice effective upon receipt by Recapture.


 



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









 


2.             Price.


 


2.1           Price.  For
all deliveries of Gallium made by Recapture to the Company during the period
beginning on July 1, 2007 and ending on March 31, 2008, representing delivery
of at least 9,000 kg of Gallium, the purchase price shall be [$***]per kg.  For all deliveries of Gallium made by
Recapture to the Company during the period beginning on April 1, 2008 and
ending on December 31, 2008, representing delivery of at least 9,000 kg of
Gallium, the purchase price shall be [$***] per kg.  The period from July 1, 2007 through December
31, 2008 shall be referred to herein as the “Delivery Term.”  Delivery shall be made FOB Blanding,
Utah.  In the event of any changes to the
delivery dates, the parties agree that the first 9,000 kg of Gallium delivered
by Recapture to the Company shall be at [$***] per kg, no matter when
delivered, and the second 9,000 kg shall be at [$***] per kg, no matter when
delivered.


 


3.             Payment.


 


3.1           Due Date. 
Except as provided below, payment shall be due thirty (30) days after
the receipt of the invoice by the Company. 
Recapture may invoice each shipment separately and each shipment shall
be considered a separate and individual contract.


 


3.2           Shipping Costs. 
Shipment costs will be paid initially by Recapture, but billed as a
separate item on the same invoice to the Company.  The carrier will be selected by Recapture in
the absence of specific instructions by the Company.  In no event shall Recapture be liable for any
delay in delivery, or assume any liability in connection with shipment, nor
shall the carrier be deemed an agent of Recapture.


 


4.             Increase or Decrease in Orders.


 


4.1           Guaranteed Delivery.  Subject to any changes made by the Company pursuant
to this section, Recapture shall guarantee the delivery of 1,000 kg of Gallium
to the Company per month, during the Delivery Term, up to a total of 18,000
kg.  The Company shall be committed to
purchase 18,000 kg of Gallium, unless this agreement is terminated prior to the
end of the Delivery Term, as set forth below.


 


4.2           Increase or Decrease in Monthly Delivery.  Upon agreement of the Company and Recapture,
the Company may increase or decrease the amount of Gallium delivered in any
particular month from the guaranteed 1,000 kg per month during the Delivery
Period, upon thirty (30) days prior notice to Recapture, up to an amount equal
to 2,000 kg.  Any increase or decrease in
a particular monthly delivery shall not change Recapture’s obligation to supply,
and the Company’s obligation to purchase, a total of 18,000 kg at the purchase
prices agreed, during the Delivery Period, and the deferment of a shipment from
a previous month shall not affect the Company’s purchase obligation or
Recapture’s supply obligation in any subsequent month.  Adjustment to future monthly deliveries
caused by an increase or decrease in a delivery in a particular month shall be
made upon mutual agreement of Recapture and the Company.


 


5.             Special Orders.


 


5.1           Procedure. 
An additional order above the scheduled deliveries set forth herein that
is placed by the Company shall be deemed to be a “Special Order.”  The Special Order procedure should be used by
the Company solely to fill unexpected needs. 
All Special Orders must be in writing,


 



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or, if given verbally, confirmed in writing.  Each Special Order shall be subject to
written acceptance by Recapture at its headquarters.


 


5.2           Price.  Such
Special Order, if accepted by Recapture, shall be at a purchase price of [$***]
per kg or [$***] per kg of Gallium, whichever is the then applicable purchase
price for shipments made in accordance with this Agreement as set forth in
Section 2.1 above.


 


6.             Shipments. 
All shipments will be made F.O.B. Recapture’s distribution center in
Blanding, Utah.  Delivery will be deemed
complete and risk of loss or damage to the Gallium will pass to the Company
upon delivery to the carrier.


 


7.             Acceptance. 
The Gallium shall be deemed accepted by the Company unless notice of
defect is received within thirty (30) days of shipping thereof and the Gallium
is returned to Recapture within sixty (60) days of shipping.  In the event of discovery of Gallium that
does not qualify as 7N, the Company’s sole remedy shall be to exchange such
Gallium for a new shipment of Gallium.


 


8.             Warranties.


 


8.1           Limited Warranty. 
Recapture warrants to Company that the Gallium will be 7N Gallium.  Recapture’s exclusive obligation with respect
to non-conforming Gallium shall be (a) to replace that Gallium with Gallium
that conforms to the specifications, or (b) to refund to Company the
purchase price paid for the Gallium.  The
Company shall notify Recapture of any nonconformance during the warranty
period, obtain a return authorization for the nonconforming Gallium from
Recapture, and return the nonconforming Gallium to Recapture’s designated
facility, freight prepaid, with a statement describing the nonconformity.  THE FOREGOING IS COMPANY’S SOLE AND EXCLUSIVE
REMEDY FOR BREACH OF WARRANTY BY RECAPTURE.


 


8.2           Recapture warrants that all Gallium supplied pursuant to
this Agreement will have been produced and supplied in compliance with all
applicable federal, state, foreign, and local laws, orders, rules and
regulations, including any laws relating to the production, sale, storage or shipment
of hazardous materials, toxic substances, or other environmental
regulations.  Recapture shall indemnify
the Company against any liability caused by any non-compliance with this
provision.


 


8.3           Disclaimer of Warranties.  THE FOREGOING WARRANTIES ARE THE SOLE
WARRANTIES, EXPRESS OR IMPLIED, GIVEN BY RECAPTURE IN CONNECTION WITH THE
GALLIUM AND RECAPTURE DISCLAIMS ALL OTHER WARRANTIES, INCLUDING WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT OF THIRD
PARTY RIGHTS.


 


9.             Recapture’s Indemnification.


 


9.1           Scope of Warranty. 
Recapture agrees to indemnify and hold harmless the Company, and its
subsidiaries, and all of their officers, directors and employees against any
claims, actions or demands alleging that the manufacture or distribution of the
Gallium infringes any copyrights, patents, trade secrets or mask works rights
of any third parties arising under United States law.  To terminate such obligation, Recapture may,
at its option, (a) replace or modify the Gallium with product that is
functionally equivalent and non-infringing, (b) obtain a license for the
Company to continue the use and distribution of the Gallium or (c) accept
the return of the Gallium held by Company and return the purchase price paid by
Company for the Gallium.


 



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9.2           Contingencies. 
This obligation is contingent upon (a) the Company giving prompt
written notice to Recapture of any such claim, action or demand, (b) the
Company allowing Recapture to control the defense and related settlement
negotiations and (c) the Company fully assisting, at Recapture’s expense,
in the defense.


 


9.3           Limitations. 
Recapture shall have no obligation hereunder for any such claims,
actions or demands which result from:


 


(a)           The Company’s use of the Gallium in a combination which
violates the rights of third parties or in a combination with materials or
products not supplied by Recapture; or


 


(b)           The modification or attempted modification of the Gallium
by parties other than Recapture or the use or distribution of such modified
products.


 


10.           Company’s Indemnification.


 


10.1         Scope of Indemnity.


 


(a)           Unless the manufacture or distribution of the Gallium by
Recapture directly infringes the patent rights of such third parties and
Recapture has agreed to indemnify Company under Section 9.3 above, the Company
agrees to indemnify and hold harmless Recapture, and its officers, directors
and employees against any claims, actions or demands alleging that Recapture is
liable for infringement of patents of any third parties due to the actions of
the Company.  This obligation extends to
liability arising under any theory including, but not limited to, contributory
infringement, inducement of infringement and unfair competition.


 


(b)           The Company agrees to indemnify and hold harmless Recapture,
and its officers, directors and employees against any claims, actions or
demands alleging that the development, manufacture or distribution of the
Gallium infringes any copyrights, patents, trade secrets, mask works or other
third party proprietary rights based on:


 


(1)           The Company’s use of the Gallium in a combination which
violates the rights of third parties or in a combination with materials or
products not supplied by Recapture; or


 


(2)           The modification or attempted modification of the Gallium by
parties other than Recapture or the use of distribution of such modified
products.


 


10.2         Contingencies. 
The obligation under Sections 10.1 and 10.2 is contingent upon
(a) Recapture giving prompt written notice to the Company of any such
claim, action or demand, and (b) Recapture fully assisting, at the Company’s
expense, in the defense.


 


11.           Consequential Damages.  NEITHER PARTY SHALL BE LIABLE FOR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING UNDER THIS AGREEMENT, EVEN
IF RECAPTURE HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND REGARDLESS
OF THE LEGAL THEORY ON WHICH SUCH DAMAGES MAY BE BASED.


 



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12.           Confidential Information.


 


12.1         Confidential Information.  Recapture agrees to maintain in confidence
what it knows or has reason to know is regarded as confidential by the Company
(“Confidential Information”). 
Confidential Information will include, but will not be limited to, the
proprietary information and trade secrets of the Company, the processes used by
the Company in the development and manufacture of its products, including but
not limited to its processes for crystal growth, and further production and
manufacture of its products, marketing plans, blueprints, techniques,
processes, procedures and formulae.


 


12.2         Limitations on Use. 
Recapture will not disclose the Confidential Information to any
person.  Recapture agrees that the
Confidential Information will be disclosed or made available only to those of
its employees or consultants who have agreed to receive it under terms at least
as restrictive as those specified in this Agreement.  Recapture will take reasonable measures to
maintain the confidentiality of the Confidential Information, but not less than
the measures it uses for its confidential information of similar type.  Recapture will immediately give notice to the
Company of any unauthorized use or disclosure of the Confidential
Information.  Recapture agrees to assist
the Company in remedying any such unauthorized use or disclosure of the
Confidential Information.  This obligation
will not apply to the extent that Recapture can demonstrate:


 


(a)           the disclosed information at the time of disclosure is
part of the public domain;


 


(b)           the disclosed information became part of the public
domain, by publication or otherwise, except by breach of the provisions of this
Agreement;


 


(c)           the disclosed information is received from a third party
without similar restrictions and without breach of this Agreement; or


 


(d)           the disclosed information is required to be disclosed by a
government agency to further the objectives of this Agreement or by a proper
court of competent jurisdiction; provided however that Recapture will use its
best efforts to minimize the disclosure of such information and will consult
with the Company prior to such disclosure.


 


12.3         Publicity. 
Neither party shall make public information concerning the terms of this
Agreement nor the supplies or services provided hereunder without the prior
written consent of the other party except as may be required by law or pursuant
to a lawful request of a governmental agency, or as may be necessary or
advisable by the Company to fulfill its disclosure obligations under applicable
United States securities laws.


 


13.           Termination.


 


13.1         Term.  This
Agreement shall commence on the Effective Date and shall continue through the
Delivery Term, unless earlier terminated pursuant to this Agreement.


 


13.2         Causes for Termination.  This Agreement will terminate:


 


(a)           On the conclusion of the Delivery Term;


 



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(b)           By the Company, upon thirty (30) day’s prior written
notice to Recapture, if Recapture is unable to meet the agreed monthly delivery
schedule set forth in this Agreement;


 


(c)           On the thirtieth (30th) day after either party gives the
other notice of a material breach by the other of any term or condition of this
Agreement, unless the breach is cured before that day; provided that any breach
of Section 12.1 or 12.2 will be deemed a material breach of this Agreement that
cannot be cured and the Agreement may be terminated immediately; or


 


(d)           Upon notice by a party, immediately, if


 


(1)           a receiver is appointed for the other party or its
property;


 


(2)           the other party becomes insolvent or unable to pay its
debts as they mature in the ordinary course of business or makes an assignment
for the benefit of its creditors; or


 


(3)           any proceedings are commenced against the other party
under any bankruptcy, insolvency or debtor’s relief law and such proceedings
are not vacated or set aside within sixty (60) days from the date of
commencement thereof.


 


13.3         Effect of Termination.  After termination:


 


(a)           Except as provided in Section 13.3(b), all orders not
shipped upon the date of termination shall be cancelled;


 


(b)           The Company will be entitled to have delivered, at its
sole discretion, the Gallium ordered prior to termination on a letter of
credit, C.O.D., or cash-in-advance basis;


 


(c)           All sums owed to Recapture by the Company shall become due
and payable within thirty (30) days upon the effective date of termination; and


 


(d)           Neither party will be liable for damages of any kind as a
result of exercising its right to terminate this Agreement according to its
terms, and termination will not affect any other right or remedy at law or in
equity of either party.


 


14.           General.


 


14.1         Waiver.  No
term or provision hereof will be considered waived by either party, and no
breach excused by either party, unless such waiver or consent is in writing
signed on behalf of the party against whom the waiver is asserted.  No consent by either party to, or waiver of,
a breach by either party, whether express or implied, will constitute a consent
to, waiver of, or excuse of any other, different, or subsequent breach by
either party.


 


14.2         Severability. 
If any part of this Agreement is found invalid or unenforceable, that part
will be amended to achieve as nearly as possible the same economic effect as
the original provision and the remainder of this Agreement will remain in full
force.


 


14.3         Choice of Law. 
This Agreement will be governed by and construed in accordance with the
laws of the United States and the State of California as applied to agreements
entered into and to be performed entirely within California between California
residents.  The parties agree that 



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the United Nations Convention on Contracts for the
International Sale of Goods (1980) is specifically excluded from application to
this Agreement.


 


14.4         Choice of Forum. 
The parties hereby submit to the jurisdiction of, and waive any venue
objections against, the United States District Court for the Northern District
of California, and the Superior and Municipal Courts of the State of
California, Alameda County, in any litigation arising out of the Agreement.


 


14.5         Notices.  Any
notice provided for or permitted under this Agreement will be treated as having
been given when (a) delivered personally, (b) sent by confirmed telex
or telecopy, (c) sent by commercial overnight courier with written
verification of receipt, or (d) mailed postage prepaid by certified or
registered mail, return receipt requested, to the party to be notified, at the
address set forth below, or at such other place of which the other party has
been notified in accordance with the provisions of this Section.


 


	
  If to Recapture:

  	
   

  	
  AXT

  
	
   

  	
   

  	
  4281 Technology Drive

  
	
   

  	
   

  	
  Fremont,
  California 94538

  
	
   

  	
   

  	
  Attention: Mr.
  Wilson Cheung

  
	
   

  	
   

  	
  Facsimile: 510-438-4793

  
	
   

  	
   

  	
   

  
	
  If to Company:

  	
   

  	
  Recapture Metals Limited

  
	
   

  	
   

  	
  625 Neal Drive

  
	
   

  	
   

  	
  Peterborough,
  Ontario

  
	
   

  	
   

  	
  Canada K9J 6X7

  
	
   

  	
   

  	
  Attention: Mr.
  Mark Tindale

  
	
   

  	
   

  	
  Facsimile: (705)
  755-0163

  



 


Such notice will be treated as having been received upon the earlier of
actual receipt or five (5) days after posting.


 


14.6         Entire Agreement.  This Agreement constitutes the entire
agreement between the parties relating to this subject matter and supersedes
all prior or simultaneous representations, discussions, negotiations, and
agreements, whether written or oral.  Any
purchase orders issued by the Company for the Gallium shall be for
informational and scheduling purposes only. 
The terms and conditions of such purchase orders shall be governed by
the terms of this Agreement.


 


14.7         Amendment. 
This Agreement may be amended or supplemented only by a writing that
refers explicitly to this Agreement and that is signed on behalf of both
parties.


 


14.8         Allocation of Risk. 
The sections on limitation of liability, warranties and disclaimer of
warranties allocate the risks in the Agreement between the parties.  This allocation is reflected in the pricing
of the Gallium and is an essential element of the basis of the bargain between
the parties.


 


14.9         Arbitration. 
Any claim, dispute or controversy arising out of or in connection with
or relating to this Agreement or the breach or alleged breach thereof shall be
submitted by the parties to arbitration by the American Arbitration Association
in the City of San Francisco, State of California, United States of America
under the commercial rules then in effect for that Association except as
provided herein.  All proceedings shall
be held in English and a transcribed record shall be prepared in English.  Each party shall choose one arbitrator within
thirty (30) days of receipt of notice of the intent to 



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arbitrate. 
Within sixty (60) days of receipt of the notice of the intent to
arbitrate the two arbitrators shall choose a neutral third arbitrator who shall
act as chairman.  If no arbitrator is
appointed within the times herein provided or any extension of time which is
mutually agreed upon, the Association shall make such appointment within thirty
(30) days of such failure.  The award
rendered by the arbitrators shall include costs of arbitration, reasonable
attorneys’ fees and reasonable costs for expert and other witnesses, and
judgment on such award may be entered in any court having jurisdiction thereof;
provided, however, that nothing in this Section shall be deemed as preventing
either party from seeking relief from the courts as necessary to protect either
party’s name, proprietary information, trade secrets, know how or any other
appropriate provisional remedy.  The
parties shall be entitled to discovery as provided in Sections 1283.05 and
1283.1 of the Code of Civil Procedure of the State of California, whether or
not the California Arbitration Act, is deemed to apply to said arbitration.


 


14.10       Survival. 
Sections 3 (“Payment”), 8 (“Warranties”), 9 (“Recapture’s
Indemnification”), 10 (“Company’s Indemnification”), 11 (“Consequential Images”),
12 (“Confidential Information”), 13.3 (“Effect of Termination”) and 14 (“General”)
will survive the termination of this Agreement.


 


14.11       Statute of Limitations. 
No action by either party arising under this Agreement may be brought at
any time more than twelve (12) months after the facts occurred upon which the
cause of action arose.


 


14.12       Force Majeure. 
Except for the payment of money, neither party will be liable for any
failure or delay in performance under this Agreement which might be due, in
whole or in part, directly or indirectly, to any contingency, delay, failure,
or cause of, any nature beyond the reasonable control of such party, including,
without in any way limiting the generality of the foregoing, fire, explosion,
earthquake, storm, flood or other weather, unavailability of necessary
utilities or raw materials, strike, lockout, unavailability of components,
activities of a combination of workmen or other labor difficulties, war,
insurrection, riot, act of God or the public enemy, law, act, order, export
control regulation, proclamation, decree, regulation, ordinance, or
instructions of Government or other public authorities, or judgment or decree
of a court of competent jurisdiction (not arising out of breach by such party
of this Agreement).  In the event of the
happening of such a cause, the party whose performance is so affected will give
prompt, written notice to the other party, stating the period of time the same
is expected to continue.  Such delay will
not be excused under this Section for more than one hundred eighty (180) days.  If Recapture’s production is curtailed for
any of the reasons set forth in this section, Recapture may allocate its
production among its customers in a manner Recapture deems, in its sole
discretion, to be fair and reasonable.


 


14.13       Export Control. 
In exercising its rights under this Agreement, the Company agrees to
comply with all export controls imposed on the Gallium, by any country or
organization or nations within whose jurisdiction the Company operates or does
business.


 


14.14       Assignment. 
Recapture may assign this Agreement to any person to whom it transfers all
or substantially all of its proprietary rights in the Gallium.  Otherwise, neither party may assign,
voluntarily, by operation of law, or otherwise, any rights or delegate any
duties under this Agreement (other than the right to receive payments) without
the other party’s prior written consent, and any attempt to do so without that
consent will be void.  This Agreement
will bind and inure to the benefit of the parties and their respective
successors and permitted assigns.


 


14.15       Counterparts. 
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.



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We are excited about this opportunity to work
with you further.  If you have any
questions, please do not hesitate to contact me at (510) 438-4703 direct or by
email at minsheng.lin@axt.com.


 


If the foregoing sets forth the terms and
conditions of the Agreement, please sign below and return to us an originally
executed counterpart at your earliest convenience.


 


Yours truly,


 


/s/ 
MinSheng Lin


 


MinSheng
Lin


Chief Operating Officer


 


Cc:          Phil
Yin


Wilson
Cheung


Bob
Ochrym


 


IN WITNESS WHEREOF, we hereby agree to the foregoing terms and
conditions of the Agreement:


 


	
  RECAPTURE METALS LIMITED

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  By

  	
  /s/ J. Mark Tindale

  	
   

  	
   

  	
   

  
	
   

  
	
  Name 

  	
   J. Mark Tindale

  	
   

  	
   

  	
   

  
	
   

  
	
  Title 

  	
   Vice President

  	
   

  
	
   

  
	
  Date

  	
   February 27, 2007

  	
   

  
													



 



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