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.


 


 

















 


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. 


 


 

















 


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 


 


 

















 


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.


 


 

















 


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.


 


 

















 


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,


 


 

















 


(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.


 


 

















 


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.


 


 

















 


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.


 


 

















 


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.


 


 

















 


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

  
					






 


 

















 


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