Exhibit 10.20

 

AXT, INC.

RESTRICTED STOCK AGREEMENT

 

AXT, Inc. has granted to the Participant named in the Notice of Grant of
Restricted Stock Award (the “Grant Notice”) to which this Restricted Stock
Agreement (together with the Grant Notice, the “Agreement”) is attached an Award
consisting of Shares subject to the terms and conditions set forth in the Grant
Notice and this Agreement. The Award has been granted pursuant to and shall in
all respects be subject to the terms and conditions of the AXT, Inc. 2007 Equity
Incentive Plan (the “Plan ”), as amended to the Date of Grant, the provisions of
which are incorporated herein by reference. By signing the Grant Notice, the
Participant: (a) acknowledges receipt of and represents that the Participant has
read and is familiar with the Grant Notice, this Agreement, the Plan and a
prospectus for the Plan in the form most recently registered with the Securities
and Exchange Commission (the “Plan Prospectus ”), (b) accepts the Award subject
to all of the terms and conditions of the Grant Notice, this Agreement and the
Plan, and (c) agrees to accept as binding, conclusive and final all decisions or
interpretations of the Committee upon any questions arising under the Grant
Notice, this Agreement or the Plan.

 

1.                                       DEFINITIONS AND CONSTRUCTION.

 

1.1.                              Definitions. Unless otherwise defined in the
Grant Notice, defined terms not explicitly defined in this Agreement but defined
in the Plan shall have the same definitions as in the Plan.

 

1.2.                              Construction. Captions and titles contained
herein are for convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement. Except when otherwise
indicated by the context, the singular shall include the plural and the plural
shall include the singular. Use of the term “or” is not intended to be
exclusive, unless the context clearly requires otherwise.

 

2.                                      ADMINISTRATION.

 

All questions of interpretation concerning the Grant Notice and this Agreement
shall be determined by the Committee. All determinations by the Committee shall
be final and binding upon all persons having an interest in the Award. Any
Officer shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the Officer has apparent
authority with respect to such matter, right, obligation, or election.

 

3.                                      THE AWARD.

 

3.1.                              Grant and Issuance of Shares. On the Date of
Grant, the Participant will acquire and the Company will issue, subject to the
provisions of this Agreement, a number of Shares equal to the Total Number of
Shares set forth in the Grant Notice. As a condition to the issuance of the
Shares, the Participant shall execute and deliver to the Company along with the

 

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Grant Notice (a) the Joint Escrow Instructions in the form attached to the Grant
Notice and (b) the Assignment Separate from Certificate duly endorsed (with date
and number of shares blank) in the form attached to the Grant Notice.

 

3.2.                              No Monetary Payment Required. The Participant
is not required to make any monetary payment (other than applicable tax
withholding, if any) as a condition to receiving the Shares, the consideration
for which shall be past services actually rendered and/or future services to be
rendered to the Company or for its benefit.

 

3.3.                              Certificate Registration. The certificate for
the Shares shall be registered in the name of the Participant, or, if
applicable, in the names of the heirs of the Participant.

 

3.4.                              Issuance of Shares in Compliance with Law. The
issuance of the Shares shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to such securities.
No Shares shall be issued hereunder if their issuance would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system
upon which the Stock may then be listed. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority, if any, deemed by
the Company’s legal counsel to be necessary to the lawful issuance of any Shares
shall relieve the Company of any liability in respect of the failure to issue
such Shares as to which such requisite authority shall not have been obtained.
As a condition to the issuance of the Shares, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.

 

4.                                       VESTING CONDITIONS.

 

4.1.                              Normal Vesting. Except as provided in
Section 4.2, the Shares shall vest and become Vested Shares as provided in the
Grant Notice. No additional Shares will become Vested Shares following the
Participant’s termination of Service for any reason. Shares that are not Vested
Shares (“Un vested Shares”) shall be subject to the reacquisition rights set
forth in Section 5.1 below.

 

4.2.                              Acceleration of Vesting Upon a Change in
Control. In the event of a Change in Control, the Participant shall be fully and
immediately vested in one hundred percent (100%) of the Shares subject to this
Award on the effective date of the Change in Control, so long as the
Participant’s Service has not terminated prior to the effective date of the
Change in Control. The vesting of any Shares and the lapsing of the Company
Reacquisition Right as to any Shares solely by reason of this Section 4.2 shall
be conditioned upon the consummation of the Change in Control.

 

5.                                       COMPANY REACQUISITION RIGHT.

 

5.1.                              Grant of Company Reacquisition Right. In the
event that (a) the Participant’s Service terminates for any reason or no reason,
with or without cause, or (b) the

 

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Participant, the Participant’s legal representative, or other holder of the
Shares, attempts to sell, exchange, transfer, pledge, or otherwise dispose of
(other than pursuant to an Ownership Change Event), including, without
limitation, any transfer to a nominee or agent of the Participant, any Unvested
Shares, the Company shall automatically reacquire the Unvested Shares (the
number of which shall be determined as of the earlier to occur of either the
event described above in clause (a) or the event described above in clause (b)),
and the Participant shall not be entitled to any payment therefor (the “Company
Reacquisition Right”).

 

5.2.                              Ownership Change Event. Upon the occurrence of
an Ownership Change Event, any and all new, substituted or additional securities
or other property to which the Participant is entitled by reason of the
Participant’s ownership of Unvested Shares shall be Immediately subject to the
Company Reacquisition Right and included in the terms “Shares,” “Stock,” and
“Unvested Shares” for all purposes of the Company Reacquisition Right with the
same force and effect as the Unvested Shares immediately prior to the Ownership
Change Event.

 

6.                                       TAX MATTERS.

 

6.1.                           Tax Withholding. At the time the Grant Notice is
executed, or at any time thereafter as requested by the Company, the Participant
hereby authorizes withholding from any amounts payable to the Participant, and
otherwise agrees to make adequate provision for, any sums required to satisfy
the federal, state, local and foreign tax withholding obligations of the
Company, if any, which arise in connection with the Award, including, without
limitation, obligations arising upon (a) the transfer of Shares to the
Participant, (b) the lapsing of any Vesting Conditions with respect to any
Shares, (c) the filing of an election to recognize tax liability, or (d) the
transfer by the Participant of any Shares. The Company shall have no obligation
to deliver the Shares or to release any Shares from an escrow established
pursuant to this Agreement until the tax withholding obligations of the Company
have been satisfied by the Participant.

 

6.2.                              Election Under Section 83(b) of the Code.

 

(a)                                  The Participant understands that Section 83
of the Code taxes as ordinary income the difference between the amount paid for
the Shares, if anything, and the fair market value of the Shares as of the date
on which the Shares are “substantially vested,” within the meaning of
Section 83. In this context, “substantially vested” means that the right of the
Company to reacquire the Shares pursuant to the Company Reacquisition Right has
lapsed. The Participant understands that he or she may elect to have his or her
taxable income determined at the time he or she acquires the Shares rather than
when and as the Company Reacquisition Right lapses by filing an election under
Section 83(b) of the Code with the Internal Revenue Service no later than thirty
(30) days after the date of acquisition of the Shares. The Participant
understands that failure to make a timely filing under Section 83(b) will result
in his or her recognition of ordinary income, as the Company Reacquisition Right
lapses, on the difference between the purchase price, if anything, and the fair
market value of the Shares at the time such restrictions lapse, The Pm1icipant
further understands, however, that if Shares with respect to which an election
under Section 83(b) has been made are forfeited to the Company pursuant to its
Company Reacquisition Right, such forfeiture will be treated as a sale on which
there is realized

 

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a loss equal to the excess (if any) of the amount paid (if any) by the
Participant for the forfeited Shares over the amount realized (if any) upon
their forfeiture. If the Participant has paid nothing for the forfeited Shares
and has received no payment upon their forfeiture, the Participant understands
that he or she will be unable to recognize any loss on the forfeiture of the
Shares even though the Participant incurred a tax liability by making an
election under Section 83(b).

 

(b)                                 The Participant understands that he or she
should consult with his or her tax advisor regarding the advisability of filing
with the Internal Revenue Service an election under Section 83(b) of the Code,
which must be filed no later than thirty (30) days after the date of the
acquisition of the Shares pursuant to this Agreement. Failure to file an
election under Section 83(b), if appropriate, may result in adverse tax
consequences to the Participant. The Participant acknowledges that he or she has
been advised to consult with a tax advisor regarding the tax consequences to the
Participant of the acquisition of Shares hereunder. ANY ELECTION UNDER
SECTION 83(b) THE PARTICIPANT WISHES TO MAKE MUST BE FILED NO LATER THAN 30 DAYS
AFTER THE DATE ON WHICH THE PARTICIPANT ACQUIRES THE SHARES. THIS TIME PERIOD
CANNOT BE EXTENDED. THE PARTICIPANT ACKNOWLEDGES THAT TIMELY FILING OF A
SECTION 83(b) ELECTION IS THE PARTICIPANT’S SOLE RESPONSIBILITY, EVEN IF THE
PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON
HIS OR HER BEHALF.

 

(c)                                  The Participant will notify the Company in
writing if the Participant files an election pursuant to Section 83(b) of the
Code. The Company intends, in the event it does not receive from the Participant
evidence of such filing, to claim a tax deduction for any amount which would
otherwise be taxable to the Participant in the absence of such an election.

 

7.                                       ESCROW.

 

7.1.                              Establishment of Escrow.  To ensure that
Shares subject to the Company Reacquisition Right will be available for
reacquisition, the Participant agrees to deliver to and deposit with an escrow
agent designated by the Company the ‘certificate evidencing the Shares, together
with an Assignment Separate from Certificate with respect to such certificate
duly endorsed (with date and number of shares blank) in the form attached to the
Grant Notice, to be held by the agent under the terms and conditions of the
Joint Escrow Instructions in the form attached to the Grant Notice (the
“Escrow”). The Company shall bear the expenses of the Escrow.

 

7.2.                              Delivery of Shares to Participant. The Company
shall, to the extent described in the Joint Escrow Instructions, give to the
escrow agent a written notice directing the escrow agent to deliver such Shares
to the Participant. As soon as practicable after receipt of such notice, the
escrow agent shall deliver to the Participant the Shares specified in such
notice, and the Escrow shall terminate with respect to such Shares.

 

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8.                                       ADJUSTMENTS FOR CHANGES IN CAPITAL
STRUCTURE.

 

In the event of any stock dividend, stock split, reverse stock split,
recapitalization, merger, combination, exchange of shares, reclassification, or
similar change in the capital structure of the Company, appropriate adjustments
shall be made in the number and class of shares subject to this Agreement. Any
and all new, substituted or additional securities or other property to which
Participant is entitled by reason of his or her ownership of the Shares will be
immediately subject to the provisions of this Agreement and the Escrow on the
same basis as all Shares originally acquired hereunder and will be included in
the terms “Shares” and “Stock” for all purposes of this Agreement and the Escrow
with the same force and effect as the Shares presently subject thereto. The
adjustments determined by the Board pursuant to this Section 7 shall be final,
binding and conclusive.

 

9.                                       LEGENDS.

 

The Company may at any time place legends referencing the Company Reacquisition
Right and any applicable federal, state or foreign securities law restrictions
on all certificates representing the Shares. The Pm1icipant shall, at the
request of the Company, promptly present to the Company any and all certificates
representing the Shares in the possession of the Participant in order to carry
out the provisions of this Section.

 

10.                                 TRANSFERS IN VIOLATION OF AGREEMENT.

 

No Shares may be sold, exchanged, transferred (including, without limitation,
any transfer to a nominee or agent of the Pm1icipant), assigned, pledged,
hypothecated or otherwise disposed of, including by operation of law, in any
manner which violates any of the provisions of this Agreement and, except
pursuant to an Ownership Change Event, until the date on which such shares
become Vested Shares, and any such attempted disposition shall be void. The
Company shall not be required (a) to transfer on its books any Shares which will
have been transferred in violation of any of the provisions set forth in this
Agreement or (b) to treat as owner of such Shares or to accord the right to vote
as such owner or to pay dividends to any transferee to whom such Shares will
have been so transferred. In order to enforce its rights under this Section, the
Company shall be authorized to give a stop trm1sfer instruction with respect to
the Shares to the Company’s transfer agent.

 

11.                                 RIGHTS AS A STOCKHOLDER.

 

The Participant shall have no rights as a stockholder with respect to any Shares
subject to the Award until the date of the issuance of a certificate for such
Shares (as evidenced by the appropriate entry on the books of the Compm1Y or of
a duly authorized transfer agent of the Company). No adjustment shall be made
for dividends, distributions or other rights for which the record date is prior
to the date such certificate is issued, except as provided in Section 7. Subject
to the provisions of this Agreement, the Participant shall be entitled to all
rights and privileges of a stockholder of the Company with respect to Shares
deposited in the Escrow pursuant to Section 6.

 

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12.                                 RIGHT TO CONTINUED SERVICE WITH THE COMPANY.

 

Nothing in this Agreement shall confer upon the Participant any right to
continue in the Service of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Participant’s
Service at any time.

 

13.                                 MISCELLANEOUS PROVISIONS.

 

13.1.                        Amendment. The Board may terminate or amend the
Plan or this Agreement at any time; provided, however, that except as provided
in Section 4 in connection with a Change in Control, no such termination or
amendment may adversely affect the Participant’s rights under this Agreement
unless such termination or amendment is necessary to comply with any applicable
law or government regulation. No amendment or addition to this Agreement shall
be effective unless in writing. Notwithstanding any other provision of this
Agreement to the contrary, the Board may, in its sole and absolute discretion
and without the consent of the Participant, amend this Agreement, to take effect
retroactively or otherwise, as it deems necessary or advisable for the purpose
of conforming this Agreement to any present or future law, regulation or
rule applicable to this Agreement, including, but not limited to, Section 409 A
of the Code and all applicable guidance promulgated thereunder.

 

13.2.                        Nontransferability of the Award. The right to
acquire Shares pursuant to the Award may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. During the
lifetime of the Participant, all rights with respect to this Award shall be
exercisable only by the Participant.

 

13.3.                        Further Instruments. The parties hereto agree to
execute such further instruments and to take such further action as may
reasonably be necessary to carry out the intent of this Agreement.

 

13.4.                        Binding Effect. Subject to the restrictions on
transfer set forth herein, this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.

 

13.5.                        Delivery of Documents and Notices. Any document
relating to participation in the Plan or any notice required or permitted
hereunder shall be given in writing and shall be deemed effectively given
(except to the extent that this Agreement provides for effectiveness only upon
actual receipt of such notice) upon personal delivery, electronic delivery at
the e-mail address, if any, provided for the Participant by a Participating
Company, or upon deposit in the U.S. Post Office or foreign postal service, by
registered or certified mail, or with a nationally recognized overnight courier
service, with postage and fees prepaid, addressed to the other party at the
address of such party set forth in the Grant Notice or at such other addressed
as such party may designate in writing from time to time to the other party.

 

(a)                                  Description of Electronic Delivery. The
Plan documents, which may include but do not necessarily include: the Plan, the
Grant Notice, this Agreement, the Plan Prospectus, and any reports of the
Company provided generally to the Company’s stockholders,

 

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may be delivered to the Participant electronically. Such means of electronic
delivery may include but do not necessarily include the delivery of a link to a
Company intranet or the internet site of a third party involved in administering
the Plan, the delivery of the document via e-mail or such other means of
electronic delivery specified by the Company.

 

(b)                                 Consent to Electronic Delivery. The
Participant acknowledges that the Participant has read Section 13.5(a) of this
Agreement and consents to the electronic delivery of the Plan documents, as
described in Section 13.5(a). The Participant acknowledges that he or she may
receive from the Company a paper copy of any documents delivered electronically
at no cost to the Participant by contacting the Chief Financial Officer of the
Company by telephone or in writing. The Participant further acknowledges that
the Participant will be provided with a paper copy of any documents if the
attempted electronic delivery of such documents fails. Similarly, the
Participant understands that the Participant must provide the Company or any
designated third party administrator with a paper copy of any documents if the
attempted electronic delivery of such documents fails. The Participant may
revoke his or her consent to the electronic delivery of documents described in
Section 13.S(a) or may change the electronic mail address to which such
documents are to be delivered (if Participant has provided an electronic mail
address) at any time by notifying the Company of such revoked consent or revised
e-mail address by telephone, postal service or electronic mail. Finally, the
Participant understands that he or she is not required to consent to electronic
delivery of documents described in Section 13.5(a).

 

13.6.                        Integrated Agreement. The Grant Notice, this
Agreement and the Plan, together with any employment, service or other agreement
between the Participant and a Participating Company referring to the Award,
shall constitute the entire understanding and agreement of the Participant and
the Participating Company Group with respect to the subject matter contained
herein and supersede any prior agreements, understandings, restrictions,
representations, or warranties among the Participant and the Participating
Company Group with respect to such subject matter. To the extent contemplated
herein, the provisions of the Grant Notice, the Agreement and the Plan shall
remain in full force and effect at all times in respect of this Award.

 

13.7.                        Applicable Law. This Agreement shall be governed by
the laws of the State of Delaware as such laws are applied to agreements between
Delaware residents entered into and to be performed entirely within the State of
Delaware.

 

13.8.                        Counterparts. The Grant Notice may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

 

Accepted by:

 

 

 

 

 

 

 

 

Date:

 

 

 

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AXT, INC.

STOCK OPTION AGREEMENT

 

AXT, Inc. has granted to the individual (the “Optionee”) named in the Notice of
Grant of Stock Option (the “Notice”) to which this Stock Option Agreement (the
“Option Agreement”) is attached an option (the “Option”) to purchase certain
shares of Stock upon the terms and conditions set forth in the Notice and this
Option Agreement.  The Option has been granted pursuant to and shall in all
respects be subject to the terms and conditions of the AXT, Inc. 2007 Equity
Incentive Plan as set forth in the Notice (the “Plan”), as amended to the Date
of Option Grant, the provisions of which are incorporated herein by reference. 
By signing the Notice, the Optionee: (a) represents that the Optionee has read
and is familiar with the terms and conditions of the Notice, the Plan and this
Option Agreement, including the Effect of Termination of Service set forth in
Section 7, (b) accepts the Option subject to all of the terms and conditions of
the Notice, the Plan and this Option Agreement, (c) agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under the Notice, the Plan or this Option Agreement, and
(d) acknowledges receipt of a copy of the Notice, the Plan and this Option
Agreement.

 

1.             DEFINITIONS AND CONSTRUCTION.

 

1.1           DEFINITIONS.  UNLESS OTHERWISE DEFINED HEREIN, CAPITALIZED TERMS
SHALL HAVE THE MEANINGS ASSIGNED TO SUCH TERMS IN THE NOTICE OR THE PLAN.

 

1.2           CONSTRUCTION.  CAPTIONS AND TITLES CONTAINED HEREIN ARE FOR
CONVENIENCE ONLY AND SHALL NOT AFFECT THE MEANING OR INTERPRETATION OF ANY
PROVISION OF THIS OPTION AGREEMENT.  EXCEPT WHEN OTHERWISE INDICATED BY THE
CONTEXT, THE SINGULAR SHALL INCLUDE THE PLURAL AND THE PLURAL SHALL INCLUDE THE
SINGULAR.  USE OF THE TERM “OR” IS NOT INTENDED TO BE EXCLUSIVE, UNLESS THE
CONTEXT CLEARLY REQUIRES OTHERWISE.

 

2.             TAX CONSEQUENCES.

 

2.1           TAX STATUS OF OPTION.  THIS OPTION IS INTENDED TO HAVE THE TAX
STATUS DESIGNATED IN THE NOTICE.

 

(A)           INCENTIVE STOCK OPTION.  IF THE NOTICE SO DESIGNATES, THIS OPTION
IS INTENDED TO BE AN INCENTIVE STOCK OPTION WITHIN THE MEANING OF
SECTION 422(B) OF THE CODE, BUT THE COMPANY DOES NOT REPRESENT OR WARRANT THAT
THIS OPTION QUALIFIES AS SUCH.  THE OPTIONEE SHOULD CONSULT WITH THE OPTIONEE’S
OWN TAX ADVISOR REGARDING THE TAX EFFECTS OF THIS OPTION AND THE REQUIREMENTS
NECESSARY TO OBTAIN FAVORABLE INCOME TAX TREATMENT UNDER SECTION 422 OF THE
CODE, INCLUDING, BUT NOT LIMITED TO, HOLDING PERIOD REQUIREMENTS.  (NOTE TO
OPTIONEE: IF THE OPTION IS EXERCISED MORE THAN THREE (3) MONTHS AFTER THE DATE
ON WHICH YOU CEASE TO BE AN EMPLOYEE (OTHER THAN BY REASON OF YOUR DEATH OR
PERMANENT AND TOTAL DISABILITY AS DEFINED IN SECTION 22(E)(3) OF THE CODE), THE
OPTION WILL BE TREATED AS A NONSTATUTORY STOCK OPTION AND NOT AS AN INCENTIVE
STOCK OPTION TO THE EXTENT REQUIRED BY SECTION 422 OF THE CODE.)

 

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(B)           NONSTATUTORY STOCK OPTION.  IF THE NOTICE SO DESIGNATES, THIS
OPTION IS INTENDED TO BE A NONSTATUTORY STOCK OPTION AND SHALL NOT BE TREATED AS
AN INCENTIVE STOCK OPTION WITHIN THE MEANING OF SECTION 422(B) OF THE CODE.

 

2.2           ISO FAIR MARKET VALUE LIMITATION.  IF THE NOTICE DESIGNATES THIS
OPTION AS AN INCENTIVE STOCK OPTION, THEN TO THE EXTENT THAT THE OPTION
(TOGETHER WITH ALL INCENTIVE STOCK OPTIONS GRANTED TO THE OPTIONEE UNDER ALL
STOCK OPTION PLANS OF THE PARTICIPATING COMPANY GROUP, INCLUDING THE PLAN)
BECOMES EXERCISABLE FOR THE FIRST TIME DURING ANY CALENDAR YEAR FOR SHARES
HAVING A FAIR MARKET VALUE GREATER THAN ONE HUNDRED THOUSAND DOLLARS ($100,000),
THE PORTION OF SUCH OPTIONS WHICH EXCEEDS SUCH AMOUNT WILL BE TREATED AS
NONSTATUTORY STOCK OPTIONS.  FOR PURPOSES OF THIS SECTION 2.2, OPTIONS
DESIGNATED AS INCENTIVE STOCK OPTIONS ARE TAKEN INTO ACCOUNT IN THE ORDER IN
WHICH THEY WERE GRANTED, AND THE FAIR MARKET VALUE OF STOCK IS DETERMINED AS OF
THE TIME THE OPTION WITH RESPECT TO SUCH STOCK IS GRANTED.  IF THE CODE IS
AMENDED TO PROVIDE FOR A DIFFERENT LIMITATION FROM THAT SET FORTH IN THIS
SECTION 2.2, SUCH DIFFERENT LIMITATION SHALL BE DEEMED INCORPORATED HEREIN
EFFECTIVE AS OF THE DATE REQUIRED OR PERMITTED BY SUCH AMENDMENT TO THE CODE. 
IF THE OPTION IS TREATED AS AN INCENTIVE STOCK OPTION IN PART AND AS A
NONSTATUTORY STOCK OPTION IN PART BY REASON OF THE LIMITATION SET FORTH IN THIS
SECTION 2.2, THE OPTIONEE MAY DESIGNATE WHICH PORTION OF SUCH OPTION THE
OPTIONEE IS EXERCISING.  IN THE ABSENCE OF SUCH DESIGNATION, THE OPTIONEE SHALL
BE DEEMED TO HAVE EXERCISED THE INCENTIVE STOCK OPTION PORTION OF THE OPTION
FIRST.  SEPARATE CERTIFICATES REPRESENTING EACH SUCH PORTION SHALL BE ISSUED
UPON THE EXERCISE OF THE OPTION.  (NOTE TO OPTIONEE: IF THE AGGREGATE EXERCISE
PRICE OF THE OPTION (THAT IS, THE EXERCISE PRICE MULTIPLIED BY THE NUMBER OF
OPTION SHARES) PLUS THE AGGREGATE EXERCISE PRICE OF ANY OTHER INCENTIVE STOCK
OPTIONS YOU HOLD (WHETHER GRANTED PURSUANT TO THE PLAN OR ANY OTHER STOCK OPTION
PLAN OF THE PARTICIPATING COMPANY GROUP) IS GREATER THAN $100,000, YOU SHOULD
CONTACT THE CHIEF FINANCIAL OFFICER OF THE COMPANY TO ASCERTAIN WHETHER THE
ENTIRE OPTION QUALIFIES AS AN INCENTIVE STOCK OPTION.)

 

3.             ADMINISTRATION.

 

All questions of interpretation concerning this Option Agreement shall be
determined by the Committee.  All determinations by the Committee shall be final
and binding upon all persons having an interest in the Option.  Any Officer
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the Officer has
apparent authority with respect to such matter, right, obligation, determination
or election.

 

4.             EXERCISE OF THE OPTION.

 

4.1           RIGHT TO EXERCISE.  EXCEPT AS OTHERWISE PROVIDED HEREIN, THE
OPTION SHALL BE EXERCISABLE ON AND AFTER THE DATE OF OPTION GRANT (OR IF LATER,
THE OPTIONEE’S SERVICE COMMENCEMENT DATE) AND PRIOR TO THE TERMINATION OF THE
OPTION (AS PROVIDED IN SECTION 6) IN AN AMOUNT NOT TO EXCEED THE NUMBER OF
VESTED SHARES LESS THE NUMBER OF SHARES PREVIOUSLY ACQUIRED UPON EXERCISE OF THE
OPTION.

 

4.2           METHOD OF EXERCISE.  EXERCISE OF THE OPTION SHALL BE BY ELECTRONIC
OR WRITTEN NOTICE (THE “EXERCISE NOTICE”) IN A FORM AUTHORIZED BY THE COMPANY. 
AN ELECTRONIC EXERCISE NOTICE MUST BE DIGITALLY SIGNED OR AUTHENTICATED BY THE
OPTIONEE IN SUCH MANNER AS

 

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REQUIRED BY THE NOTICE AND TRANSMITTED TO THE COMPANY OR AN AUTHORIZED
REPRESENTATIVE OF THE COMPANY (INCLUDING A THIRD-PARTY ADMINISTRATOR DESIGNATED
BY THE COMPANY).  IN THE EVENT THAT THE OPTIONEE IS NOT AUTHORIZED OR IS UNABLE
TO PROVIDE AN ELECTRONIC EXERCISE NOTICE, THE OPTION SHALL BE EXERCISED BY A
WRITTEN EXERCISE NOTICE ADDRESSED TO THE COMPANY, WHICH SHALL BE SIGNED BY THE
OPTIONEE AND DELIVERED IN PERSON, BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED, BY CONFIRMED FACSIMILE TRANSMISSION, OR BY SUCH OTHER MEANS
AS THE COMPANY MAY PERMIT, TO THE COMPANY, OR AN AUTHORIZED REPRESENTATIVE OF
THE COMPANY (INCLUDING A THIRD-PARTY ADMINISTRATOR DESIGNATED BY THE COMPANY). 
EACH EXERCISE NOTICE, WHETHER ELECTRONIC OR WRITTEN, MUST STATE THE OPTIONEE’S
ELECTION TO EXERCISE THE OPTION, THE NUMBER OF WHOLE SHARES OF STOCK FOR WHICH
THE OPTION IS BEING EXERCISED AND SUCH OTHER REPRESENTATIONS AND AGREEMENTS AS
TO THE OPTIONEE’S INVESTMENT INTENT WITH RESPECT TO SUCH SHARES AS MAY BE
REQUIRED PURSUANT TO THE PROVISIONS OF THIS OPTION AGREEMENT.  FURTHER, EACH
EXERCISE NOTICE MUST BE RECEIVED BY THE COMPANY PRIOR TO THE TERMINATION OF THE
OPTION AS SET FORTH IN SECTION 6 AND MUST BE ACCOMPANIED BY FULL PAYMENT OF THE
AGGREGATE EXERCISE PRICE FOR THE NUMBER OF SHARES OF STOCK BEING PURCHASED.  THE
OPTION SHALL BE DEEMED TO BE EXERCISED UPON RECEIPT BY THE COMPANY OF SUCH
ELECTRONIC OR WRITTEN EXERCISE NOTICE AND THE AGGREGATE EXERCISE PRICE.

 

4.3           PAYMENT OF EXERCISE PRICE.

 

(A)           FORMS OF CONSIDERATION AUTHORIZED.  EXCEPT AS OTHERWISE PROVIDED
BELOW, PAYMENT OF THE AGGREGATE EXERCISE PRICE FOR THE NUMBER OF SHARES OF STOCK
FOR WHICH THE OPTION IS BEING EXERCISED SHALL BE MADE (I) IN CASH, BY CHECK, OR
CASH EQUIVALENT, (II) BY TENDER TO THE COMPANY, OR ATTESTATION TO THE OWNERSHIP,
OF WHOLE SHARES OF STOCK OWNED BY THE OPTIONEE HAVING A FAIR MARKET VALUE (AS
DETERMINED BY THE COMPANY WITHOUT REGARD TO ANY RESTRICTIONS ON TRANSFERABILITY
APPLICABLE TO SUCH STOCK BY REASON OF FEDERAL OR STATE SECURITIES LAWS OR
AGREEMENTS WITH AN UNDERWRITER FOR THE COMPANY) NOT LESS THAN THE AGGREGATE
EXERCISE PRICE, (III) BY MEANS OF A CASHLESS EXERCISE, AS DEFINED IN
SECTION 4.3(B), OR (IV) BY ANY COMBINATION OF THE FOREGOING.

 

(B)           LIMITATIONS ON FORMS OF CONSIDERATION.

 

(I)            TENDER OF STOCK.  NOTWITHSTANDING THE FOREGOING, THE OPTION MAY
NOT BE EXERCISED BY TENDER TO THE COMPANY, OR ATTESTATION TO THE OWNERSHIP, OF
SHARES OF STOCK TO THE EXTENT SUCH TENDER OR ATTESTATION WOULD CONSTITUTE A
VIOLATION OF THE PROVISIONS OF ANY LAW, REGULATION OR AGREEMENT RESTRICTING THE
REDEMPTION OF THE COMPANY’S STOCK.  THE OPTION MAY NOT BE EXERCISED BY TENDER TO
THE COMPANY OF SHARES OF STOCK UNLESS SUCH SHARES EITHER HAVE BEEN OWNED BY THE
OPTIONEE FOR MORE THAN SIX (6) MONTHS OR WERE NOT ACQUIRED, DIRECTLY OR
INDIRECTLY, FROM THE COMPANY.

 

(II)           CASHLESS EXERCISE.  A “CASHLESS EXERCISE” MEANS THE DELIVERY OF A
PROPERLY EXECUTED NOTICE TOGETHER WITH IRREVOCABLE INSTRUCTIONS TO A BROKER IN A
FORM ACCEPTABLE TO THE COMPANY PROVIDING FOR THE ASSIGNMENT TO THE COMPANY OF
THE PROCEEDS OF A SALE OR LOAN WITH RESPECT TO SOME OR ALL OF THE SHARES OF
STOCK ACQUIRED UPON THE EXERCISE OF THE OPTION PURSUANT TO A PROGRAM OR
PROCEDURE APPROVED BY THE COMPANY (INCLUDING, WITHOUT LIMITATION, THROUGH AN
EXERCISE COMPLYING WITH THE PROVISIONS OF REGULATION T AS PROMULGATED FROM TIME
TO TIME BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM).  THE COMPANY
RESERVES, AT ANY AND ALL TIMES, THE RIGHT, IN THE COMPANY’S SOLE AND ABSOLUTE
DISCRETION, TO

 

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ESTABLISH, DECLINE TO APPROVE OR TERMINATE ANY SUCH PROGRAM OR PROCEDURE,
INCLUDING WITH RESPECT TO THE OPTIONEE NOTWITHSTANDING THAT SUCH PROGRAM OR
PROCEDURES MAY BE AVAILABLE TO OTHERS.

 

4.4           TAX WITHHOLDING.

 

(A)           IN GENERAL.  AT THE TIME THE OPTION IS EXERCISED, IN WHOLE OR IN
PART, OR AT ANY TIME THEREAFTER AS REQUESTED BY THE COMPANY, THE OPTIONEE HEREBY
AUTHORIZES WITHHOLDING FROM PAYROLL AND ANY OTHER AMOUNTS PAYABLE TO THE
OPTIONEE, AND OTHERWISE AGREES TO MAKE ADEQUATE PROVISION FOR (INCLUDING BY
MEANS OF A CASHLESS EXERCISE TO THE EXTENT PERMITTED BY THE COMPANY), ANY SUMS
REQUIRED TO SATISFY THE FEDERAL, STATE, LOCAL AND FOREIGN TAX WITHHOLDING
OBLIGATIONS OF THE PARTICIPATING COMPANY GROUP, IF ANY, WHICH ARISE IN
CONNECTION WITH THE OPTION.  THE COMPANY SHALL HAVE NO OBLIGATION TO DELIVER
SHARES OF STOCK UNTIL THE TAX WITHHOLDING OBLIGATIONS OF THE PARTICIPATING
COMPANY GROUP HAVE BEEN SATISFIED BY THE OPTIONEE.

 

(B)           WITHHOLDING IN SHARES.  THE COMPANY MAY PERMIT OR REQUIRE THE
OPTIONEE TO SATISFY ALL OR ANY PORTION OF A PARTICIPATING COMPANY’S TAX
WITHHOLDING OBLIGATIONS UPON EXERCISE OF THE OPTION BY DEDUCTING FROM THE SHARES
OF STOCK OTHERWISE ISSUABLE TO THE OPTIONEE UPON SUCH EXERCISE A NUMBER OF WHOLE
SHARES HAVING A FAIR MARKET VALUE, AS DETERMINED BY THE COMPANY AS OF THE DATE
OF EXERCISE, NOT IN EXCESS OF THE AMOUNT OF SUCH TAX WITHHOLDING OBLIGATIONS
DETERMINED BY THE APPLICABLE MINIMUM STATUTORY WITHHOLDING RATES.  ANY ADVERSE
CONSEQUENCES TO THE OPTIONEE RESULTING FROM THE PROCEDURE PERMITTED UNDER THIS
SECTION, INCLUDING, WITHOUT LIMITATION, TAX CONSEQUENCES, SHALL BE THE SOLE
RESPONSIBILITY OF THE OPTIONEE.

 

4.5           BENEFICIAL OWNERSHIP OF SHARES; CERTIFICATE REGISTRATION.  THE
OPTIONEE HEREBY AUTHORIZES THE COMPANY, IN ITS SOLE DISCRETION, TO DEPOSIT FOR
THE BENEFIT OF THE OPTIONEE WITH ANY BROKER WITH WHICH THE OPTIONEE HAS AN
ACCOUNT RELATIONSHIP OF WHICH THE COMPANY HAS NOTICE ANY OR ALL SHARES ACQUIRED
BY THE OPTIONEE PURSUANT TO THE EXERCISE OF THE OPTION.  EXCEPT AS PROVIDED BY
THE PRECEDING SENTENCE, A CERTIFICATE FOR THE SHARES AS TO WHICH THE OPTION IS
EXERCISED SHALL BE REGISTERED IN THE NAME OF THE OPTIONEE, OR, IF APPLICABLE, IN
THE NAMES OF THE HEIRS OF THE OPTIONEE.

 

4.6           RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.  THE
GRANT OF THE OPTION AND THE ISSUANCE OF SHARES OF STOCK UPON EXERCISE OF THE
OPTION SHALL BE SUBJECT TO COMPLIANCE WITH ALL APPLICABLE REQUIREMENTS OF
FEDERAL, STATE OR FOREIGN LAW WITH RESPECT TO SUCH SECURITIES.  THE OPTION MAY
NOT BE EXERCISED IF THE ISSUANCE OF SHARES OF STOCK UPON EXERCISE WOULD
CONSTITUTE A VIOLATION OF ANY APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES
LAWS OR OTHER LAW OR REGULATIONS OR THE REQUIREMENTS OF ANY STOCK EXCHANGE OR
MARKET SYSTEM UPON WHICH THE STOCK MAY THEN BE LISTED.  IN ADDITION, THE OPTION
MAY NOT BE EXERCISED UNLESS (I) A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT SHALL AT THE TIME OF EXERCISE OF THE OPTION BE IN EFFECT WITH RESPECT TO THE
SHARES ISSUABLE UPON EXERCISE OF THE OPTION OR (II) IN THE OPINION OF LEGAL
COUNSEL TO THE COMPANY, THE SHARES ISSUABLE UPON EXERCISE OF THE OPTION MAY BE
ISSUED IN ACCORDANCE WITH THE TERMS OF AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. 
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED.  THE INABILITY OF THE COMPANY TO OBTAIN FROM
ANY

 

4

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REGULATORY BODY HAVING JURISDICTION THE AUTHORITY, IF ANY, DEEMED BY THE
COMPANY’S LEGAL COUNSEL TO BE NECESSARY TO THE LAWFUL ISSUANCE AND SALE OF ANY
SHARES SUBJECT TO THE OPTION SHALL RELIEVE THE COMPANY OF ANY LIABILITY IN
RESPECT OF THE FAILURE TO ISSUE OR SELL SUCH SHARES AS TO WHICH SUCH REQUISITE
AUTHORITY SHALL NOT HAVE BEEN OBTAINED.  AS A CONDITION TO THE EXERCISE OF THE
OPTION, THE COMPANY MAY REQUIRE THE OPTIONEE TO SATISFY ANY QUALIFICATIONS THAT
MAY BE NECESSARY OR APPROPRIATE, TO EVIDENCE COMPLIANCE WITH ANY APPLICABLE LAW
OR REGULATION AND TO MAKE ANY REPRESENTATION OR WARRANTY WITH RESPECT THERETO AS
MAY BE REQUESTED BY THE COMPANY.

 

4.7           FRACTIONAL SHARES.  THE COMPANY SHALL NOT BE REQUIRED TO ISSUE
FRACTIONAL SHARES UPON THE EXERCISE OF THE OPTION.

 

5.             NONTRANSFERABILITY OF THE OPTION.

 

During the lifetime of the Optionee, the Option shall be exercisable only by the
Optionee or the Optionee’s guardian or legal representative.  The Option shall
not be subject in any manner to anticipation, alienation, sale, exchange,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Optionee or the Optionee’s beneficiary, except transfer by will or by the laws
of descent and distribution.  Following the death of the Optionee, the Option,
to the extent provided in Section 7, may be exercised by the Optionee’s legal
representative or by any person empowered to do so under the deceased Optionee’s
will or under the then applicable laws of descent and distribution.

 

6.             TERMINATION OF THE OPTION.

 

The Option shall terminate and may no longer be exercised on the first to occur
of (a) the Option Expiration Date, (b) the last date for exercising the Option
following termination of the Optionee’s Service as described in Section 7, or
(c) a Change in Control to the extent provided in Section 8.

 

7.             EFFECT OF TERMINATION OF SERVICE.

 

7.1           OPTION EXERCISABILITY.  THE OPTION SHALL TERMINATE IMMEDIATELY
UPON THE OPTIONEE’S TERMINATION OF SERVICE TO THE EXTENT THAT IT IS THEN
UNVESTED AND SHALL BE EXERCISABLE AFTER THE OPTIONEE’S TERMINATION OF SERVICE TO
THE EXTENT IT IS THEN VESTED ONLY DURING THE APPLICABLE TIME PERIOD AS
DETERMINED BELOW AND THEREAFTER SHALL TERMINATE.

 

(A)           DISABILITY.  IF THE OPTIONEE’S SERVICE WITH THE PARTICIPATING
COMPANY GROUP TERMINATES BECAUSE OF THE DISABILITY OF THE OPTIONEE, THE OPTION,
TO THE EXTENT UNEXERCISED AND EXERCISABLE ON THE DATE ON WHICH THE OPTIONEE’S
SERVICE TERMINATED, MAY BE EXERCISED BY THE OPTIONEE (OR THE OPTIONEE’S GUARDIAN
OR LEGAL REPRESENTATIVE) AT ANY TIME PRIOR TO THE EXPIRATION OF TWELVE (12)
MONTHS AFTER THE DATE ON WHICH THE OPTIONEE’S SERVICE TERMINATED, BUT IN ANY
EVENT NO LATER THAN THE OPTION EXPIRATION DATE.

 

(B)           DEATH.  IF THE OPTIONEE’S SERVICE WITH THE PARTICIPATING COMPANY
GROUP TERMINATES BECAUSE OF THE DEATH OF THE OPTIONEE, THE OPTION, TO THE EXTENT
UNEXERCISED AND EXERCISABLE ON THE DATE ON WHICH THE OPTIONEE’S SERVICE
TERMINATED, MAY BE EXERCISED BY THE OPTIONEE’S LEGAL REPRESENTATIVE OR OTHER
PERSON WHO ACQUIRED THE RIGHT TO EXERCISE THE OPTION BY REASON OF THE OPTIONEE’S
DEATH AT ANY TIME PRIOR TO THE EXPIRATION OF TWELVE (12) MONTHS AFTER THE

 

5

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DATE ON WHICH THE OPTIONEE’S SERVICE TERMINATED, BUT IN ANY EVENT NO LATER THAN
THE OPTION EXPIRATION DATE.  THE OPTIONEE’S SERVICE SHALL BE DEEMED TO HAVE
TERMINATED ON ACCOUNT OF DEATH IF THE OPTIONEE DIES WITHIN THREE (3) MONTHS
AFTER THE OPTIONEE’S TERMINATION OF SERVICE.

 

(C)           OTHER TERMINATION OF SERVICE.  IF THE OPTIONEE’S SERVICE WITH THE
PARTICIPATING COMPANY GROUP TERMINATES FOR ANY REASON, EXCEPT DISABILITY OR
DEATH, THE OPTION, TO THE EXTENT UNEXERCISED AND EXERCISABLE BY THE OPTIONEE ON
THE DATE ON WHICH THE OPTIONEE’S SERVICE TERMINATED, MAY BE EXERCISED BY THE
OPTIONEE AT ANY TIME PRIOR TO THE EXPIRATION OF THREE (3) MONTHS (OR SUCH OTHER
LONGER PERIOD OF TIME AS DETERMINED BY THE BOARD, IN ITS DISCRETION) AFTER THE
DATE ON WHICH THE OPTIONEE’S SERVICE TERMINATED, BUT IN ANY EVENT NO LATER THAN
THE OPTION EXPIRATION DATE.

 

7.2           EXTENSION IF EXERCISE PREVENTED BY LAW.  NOTWITHSTANDING THE
FOREGOING, OTHER THAN TERMINATION OF SERVICE FOR CAUSE, IF THE EXERCISE OF THE
OPTION WITHIN THE APPLICABLE TIME PERIODS SET FORTH IN SECTION 7.1 IS PREVENTED
BY THE PROVISIONS OF SECTION 4.6 OR A SALE OF SHARES PURSUANT TO A CASHLESS
EXERCISE OF THE OPTION WOULD VIOLATE THE PROVISIONS OF THE COMPANY’S INSIDER
TRADING POLICY, THE OPTION SHALL REMAIN EXERCISABLE UNTIL THREE (3) MONTHS AFTER
THE DATE SUCH EXERCISE OR SALE, AS THE CASE MAY BE, WOULD NO LONGER BE PREVENTED
BY SUCH PROVISIONS, BUT IN ANY EVENT NO LATER THAN THE OPTION EXPIRATION DATE.

 

7.3           EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(B).  NOTWITHSTANDING
THE FOREGOING, IF A SALE WITHIN THE APPLICABLE TIME PERIODS SET FORTH IN
SECTION 7.1 OF SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION WOULD SUBJECT THE
OPTIONEE TO SUIT UNDER SECTION 16(B) OF THE EXCHANGE ACT, THE OPTION SHALL
REMAIN EXERCISABLE UNTIL THE EARLIEST TO OCCUR OF (I) THE TENTH (10TH) DAY
FOLLOWING THE DATE ON WHICH A SALE OF SUCH SHARES BY THE OPTIONEE WOULD NO
LONGER BE SUBJECT TO SUCH SUIT, (II) THE ONE HUNDRED AND NINETIETH (190TH) DAY
AFTER THE OPTIONEE’S TERMINATION OF SERVICE, OR (III) THE OPTION EXPIRATION
DATE.

 

7.4           TERMINATION FOR CAUSE.  EXCEPT AS OTHERWISE PROVIDED IN A CONTRACT
OF EMPLOYMENT OR SERVICE BETWEEN A PARTICIPATING COMPANY AND THE OPTIONEE, AND
NOTWITHSTANDING ANY OTHER PROVISION OF THIS OPTION AGREEMENT TO THE CONTRARY, IF
THE OPTIONEE’S SERVICE WITH THE PARTICIPATING COMPANY GROUP IS TERMINATED FOR
CAUSE, THE OPTION SHALL TERMINATE AND CEASE TO BE EXERCISABLE IMMEDIATELY UPON
SUCH TERMINATION OF SERVICE.

 

8.             CHANGE IN CONTROL.

 

8.1           DEFINITIONS:

 

(A)           AN “OWNERSHIP CHANGE EVENT” SHALL BE DEEMED TO HAVE OCCURRED IF
ANY OF THE FOLLOWING OCCURS WITH RESPECT TO THE COMPANY:  (I) THE DIRECT OR
INDIRECT SALE OR EXCHANGE IN A SINGLE OR SERIES OF RELATED TRANSACTIONS BY THE
STOCKHOLDERS OF THE COMPANY OF MORE THAN FIFTY PERCENT (50%) OF THE VOTING STOCK
OF THE COMPANY; (II) A MERGER OR CONSOLIDATION IN WHICH THE COMPANY IS A PARTY;
OR (III) THE SALE, EXCHANGE, OR TRANSFER OF ALL OR SUBSTANTIALLY ALL, AS
DETERMINED BY THE BOARD IN ITS DISCRETION, OF THE ASSETS OF THE COMPANY.

 

(B)           “CHANGE IN CONTROL” MEANS, UNLESS SUCH TERM OR AN EQUIVALENT TERM
IS OTHERWISE DEFINED WITH RESPECT TO AN AWARD BY THE OPTIONEE’S AWARD AGREEMENT
OR WRITTEN CONTRACT OF EMPLOYMENT OR SERVICE, THE OCCURRENCE OF ANY OF THE
FOLLOWING:

 

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(I)            AN OWNERSHIP CHANGE EVENT OR A SERIES OF RELATED OWNERSHIP CHANGE
EVENTS (COLLECTIVELY, A “TRANSACTION”) IN WHICH THE STOCKHOLDERS OF THE COMPANY
IMMEDIATELY BEFORE THE TRANSACTION DO NOT RETAIN IMMEDIATELY AFTER THE
TRANSACTION, IN SUBSTANTIALLY THE SAME PROPORTIONS AS THEIR OWNERSHIP OF SHARES
OF THE COMPANY’S VOTING STOCK IMMEDIATELY BEFORE THE TRANSACTION, DIRECT OR
INDIRECT BENEFICIAL OWNERSHIP OF MORE THAN FIFTY PERCENT (50%) OF THE TOTAL
COMBINED VOTING POWER OF THE OUTSTANDING VOTING SECURITIES OF THE COMPANY OR, IN
THE CASE OF AN OWNERSHIP CHANGE EVENT DESCRIBED IN SECTION 8.1(A)(III), THE
ENTITY TO WHICH THE ASSETS OF THE COMPANY WERE TRANSFERRED (THE “TRANSFEREE”),
AS THE CASE MAY BE; OR

 

(II)           THE LIQUIDATION OR DISSOLUTION OF THE COMPANY.

 

For purposes of the preceding sentence, indirect beneficial ownership shall
include, without limitation, an interest resulting from ownership of the voting
securities of one or more corporations or other business entities which own the
Company or the Transferee, as the case may be, either directly or through one or
more subsidiary corporations or other business entities.  The Board shall have
the right to determine whether multiple sales or exchanges of the voting
securities of the Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive.

 

8.2           EFFECT OF CHANGE IN CONTROL ON OPTION.  IN THE EVENT OF A CHANGE
IN CONTROL, THE SURVIVING, CONTINUING, SUCCESSOR, OR PURCHASING CORPORATION OR
OTHER BUSINESS ENTITY OR PARENT CORPORATION THEREOF, AS THE CASE MAY BE (THE
“ACQUIRING CORPORATION”), MAY, WITHOUT THE CONSENT OF THE OPTIONEE, EITHER
ASSUME THE COMPANY’S RIGHTS AND OBLIGATIONS UNDER THE OPTION OR SUBSTITUTE FOR
THE OPTION A SUBSTANTIALLY EQUIVALENT OPTION FOR THE ACQUIRING CORPORATION’S
STOCK.  FOR PURPOSES OF THIS SECTION 8.2, THE OPTION SHALL BE DEEMED ASSUMED IF,
FOLLOWING THE CHANGE IN CONTROL, THE OPTION CONFERS THE RIGHT TO PURCHASE IN
ACCORDANCE WITH ITS TERMS AND CONDITIONS, FOR EACH SHARE OF STOCK SUBJECT TO THE
OPTION IMMEDIATELY PRIOR TO THE CHANGE IN CONTROL, THE CONSIDERATION (WHETHER
STOCK, CASH OR OTHER SECURITIES OR PROPERTY) TO WHICH A HOLDER OF A SHARE OF
STOCK ON THE EFFECTIVE DATE OF THE CHANGE IN CONTROL WAS ENTITLED.  THE OPTION
SHALL TERMINATE AND CEASE TO BE OUTSTANDING EFFECTIVE AS OF THE DATE OF THE
CHANGE IN CONTROL TO THE EXTENT THAT THE OPTION IS NEITHER ASSUMED OR
SUBSTITUTED FOR BY THE ACQUIRING CORPORATION IN CONNECTION WITH THE CHANGE IN
CONTROL NOR EXERCISED AS OF THE DATE OF THE CHANGE IN CONTROL.  NOTWITHSTANDING
THE FOREGOING, SHARES ACQUIRED UPON EXERCISE OF THE OPTION PRIOR TO THE CHANGE
IN CONTROL AND ANY CONSIDERATION RECEIVED PURSUANT TO THE CHANGE IN CONTROL WITH
RESPECT TO SUCH SHARES SHALL CONTINUE TO BE SUBJECT TO ALL APPLICABLE PROVISIONS
OF THIS OPTION AGREEMENT EXCEPT AS OTHERWISE PROVIDED HEREIN.  FURTHERMORE,
NOTWITHSTANDING THE FOREGOING, IF THE CORPORATION THE STOCK OF WHICH IS SUBJECT
TO THE OPTION IMMEDIATELY PRIOR TO AN OWNERSHIP CHANGE EVENT DESCRIBED IN
SECTION 8.1(A)(I) CONSTITUTING A CHANGE IN CONTROL IS THE SURVIVING OR
CONTINUING CORPORATION AND IMMEDIATELY AFTER SUCH OWNERSHIP CHANGE EVENT LESS
THAN FIFTY PERCENT (50%) OF THE TOTAL COMBINED VOTING POWER OF ITS VOTING STOCK
IS HELD BY ANOTHER CORPORATION OR BY OTHER CORPORATIONS THAT ARE MEMBERS OF AN
AFFILIATED GROUP WITHIN THE MEANING OF SECTION 1504(A) OF THE CODE WITHOUT
REGARD TO THE PROVISIONS OF SECTION 1504(B) OF THE CODE, THE OPTION SHALL NOT
TERMINATE UNLESS THE BOARD OTHERWISE PROVIDES IN ITS SOLE DISCRETION.

 

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9.             ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.

 

Subject to any required action by the stockholders of the Company and the
requirements of Section 409A and 424 of the Code to the extent applicable, in
the event of any change in the Stock effected without receipt of consideration
by the Company, whether through merger, consolidation, reorganization,
reincorporation, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, split-up, split-off, spin-off, combination of
shares, exchange of shares, or similar change in the capital structure of the
Company, or in the event of payment of a dividend or distribution to the
stockholders of the Company in a form other than Stock (excepting normal cash
dividends) that has a material effect on the Fair Market Value of shares of
Stock, appropriate adjustments shall be made in the number and kind of shares
subject to the Option, and in the exercise per share, in order to prevent
dilution or enlargement of the Optionees’ rights under the Option.  For purposes
of the foregoing, conversion of any convertible securities of the Company shall
not be treated as “effected without receipt of consideration by the Company.” 
If a majority of the shares which are of the same class as the shares that are
subject to outstanding Awards are exchanged for, converted into, or otherwise
become (whether or not pursuant to an Ownership Change Event) shares of another
corporation (the “New Shares”), the Committee may unilaterally amend the
outstanding Options to provide that such Options are exercisable for New
Shares.  In the event of any such amendment, the number of shares subject to,
and the exercise price per share of, the Option shall be adjusted in a fair and
equitable manner as determined by the Board, in its discretion.  Any fractional
share resulting from an adjustment pursuant to this Section 9 shall be rounded
down to the nearest whole number.  The Committee in its sole discretion, may
also make such adjustments in the terms of the Option to reflect, or related to,
such changes in the capital structure of the Company or distributions as it
deems appropriate.  The adjustments determined by the Committee pursuant to this
Section 9 shall be final, binding and conclusive.

 

10.           RIGHTS AS A STOCKHOLDER, EMPLOYEE OR CONSULTANT.

 

The Optionee shall have no rights as a stockholder with respect to any shares
covered by the Option until the date of the issuance of a certificate for the
shares for which the Option has been exercised (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company).  No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 9.  If the Optionee is an Employee, the
Optionee understands and acknowledges that, except as otherwise provided in a
separate, written employment agreement between a Participating Company and the
Optionee, the Optionee’s employment is “at will” and is for no specified term. 
Nothing in this Option Agreement shall confer upon the Optionee any right to
continue in the Service of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee’s Service
as an Employee or Consultant, as the case may be, at any time.

 

11.           NOTICE OF SALES UPON DISQUALIFYING DISPOSITION.

 

The Optionee shall dispose of the shares acquired pursuant to the Option only in
accordance with the provisions of this Option Agreement.  In addition, if the
Notice designates this Option as an Incentive Stock Option, the Optionee shall
(a) promptly notify the Chief

 

8

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Financial Officer of the Company if the Optionee disposes of any of the shares
acquired pursuant to the Option within one (1) year after the date the Optionee
exercises all or part of the Option or within two (2) years after the Date of
Option Grant and (b) provide the Company with a description of the circumstances
of such disposition.  Until such time as the Optionee disposes of such shares in
a manner consistent with the provisions of this Option Agreement, unless
otherwise expressly authorized by the Company, the Optionee shall hold all
shares acquired pursuant to the Option in the Optionee’s name (and not in the
name of any nominee) for the one-year period immediately after the exercise of
the Option and the two-year period immediately after Date of Option Grant.  At
any time during the one-year or two-year periods set forth above, the Company
may place a legend on any certificate representing shares acquired pursuant to
the Option requesting the transfer agent for the Company’s stock to notify the
Company of any such transfers.  The obligation of the Optionee to notify the
Company of any such transfer shall continue notwithstanding that a legend has
been placed on the certificate pursuant to the preceding sentence.

 

12.           LEGENDS.

 

THE COMPANY MAY AT ANY TIME PLACE LEGENDS REFERENCING ANY APPLICABLE FEDERAL,
STATE OR FOREIGN SECURITIES LAW RESTRICTIONS, AND, IF APPLICABLE, THAT THE
SHARES WERE ACQUIRED UPON EXERCISE OF AN INCENTIVE STOCK OPTION ON ALL
CERTIFICATES REPRESENTING SHARES OF STOCK SUBJECT TO THE PROVISIONS OF THIS
OPTION AGREEMENT.  THE OPTIONEE SHALL, AT THE REQUEST OF THE COMPANY, PROMPTLY
PRESENT TO THE COMPANY ANY AND ALL CERTIFICATES REPRESENTING SHARES ACQUIRED
PURSUANT TO THE OPTION IN THE POSSESSION OF THE OPTIONEE IN ORDER TO CARRY OUT
THE PROVISIONS OF THIS SECTION.

 

13.           MISCELLANEOUS PROVISIONS.

 

13.1         BINDING EFFECT.  SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH
HEREIN, THIS OPTION AGREEMENT SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON
THE PARTIES HERETO AND THEIR RESPECTIVE HEIRS, EXECUTORS, ADMINISTRATORS,
SUCCESSORS AND ASSIGNS.

 

13.2         TERMINATION OR AMENDMENT.  THE BOARD MAY TERMINATE OR AMEND THE
PLAN OR THE OPTION AT ANY TIME; PROVIDED, HOWEVER, THAT EXCEPT AS PROVIDED IN
SECTION 8 IN CONNECTION WITH A CHANGE IN CONTROL, NO SUCH TERMINATION OR
AMENDMENT MAY ADVERSELY AFFECT THE OPTION OR ANY UNEXERCISED PORTION HEREOF
WITHOUT THE CONSENT OF THE OPTIONEE UNLESS SUCH TERMINATION OR AMENDMENT IS
NECESSARY TO COMPLY WITH ANY APPLICABLE LAW OR GOVERNMENT REGULATION, INCLUDING,
BUT NOT LIMITED TO, SECTION 409A, OR IS REQUIRED TO ENABLE THE OPTION, IF
DESIGNATED AN INCENTIVE STOCK OPTION IN THE NOTICE, TO QUALIFY AS AN INCENTIVE
STOCK OPTION.  NO AMENDMENT OR ADDITION TO THIS OPTION AGREEMENT SHALL BE
EFFECTIVE UNLESS IN WRITING.

 

13.3         FURTHER INSTRUMENTS.  THE PARTIES HERETO AGREE TO EXECUTE SUCH
FURTHER INSTRUMENTS AND TO TAKE SUCH FURTHER ACTION AS MAY REASONABLY BE
NECESSARY TO CARRY OUT THE INTENT OF THIS OPTION AGREEMENT.

 

13.4         DELIVERY OF DOCUMENTS AND NOTICES.  ANY DOCUMENT RELATING TO
PARTICIPATION IN THE PLAN OR ANY NOTICE REQUIRED OR PERMITTED HEREUNDER SHALL BE
GIVEN IN WRITING AND SHALL BE DEEMED EFFECTIVELY GIVEN (EXCEPT TO THE EXTENT
THAT THIS OPTION AGREEMENT PROVIDES

 

9

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FOR EFFECTIVENESS ONLY UPON ACTUAL RECEIPT OF SUCH NOTICE) UPON PERSONAL
DELIVERY, ELECTRONIC DELIVERY AT THE E-MAIL ADDRESS, IF ANY, PROVIDED FOR THE
OPTIONEE BY A PARTICIPATING COMPANY, OR UPON DEPOSIT IN THE U.S. POST OFFICE OR
FOREIGN POSTAL SERVICE, BY REGISTERED OR CERTIFIED MAIL, OR WITH A NATIONALLY
RECOGNIZED OVERNIGHT COURIER SERVICE, WITH POSTAGE AND FEES PREPAID, ADDRESSED
TO THE OTHER PARTY AT THE ADDRESS OF SUCH PARTY SET FORTH IN THE GRANT NOTICE OR
AT SUCH OTHER ADDRESS AS SUCH PARTY MAY DESIGNATE IN WRITING FROM TIME TO TIME
TO THE OTHER PARTY.

 

(A)           DESCRIPTION OF ELECTRONIC DELIVERY.  THE PLAN DOCUMENTS, WHICH MAY
INCLUDE BUT DO NOT NECESSARILY INCLUDE: THE PLAN, THE GRANT NOTICE, THIS OPTION
AGREEMENT, THE PLAN PROSPECTUS, AND ANY REPORTS OF THE COMPANY PROVIDED
GENERALLY TO THE COMPANY’S STOCKHOLDERS, MAY BE DELIVERED TO THE OPTIONEE
ELECTRONICALLY.  IN ADDITION, THE OPTIONEE MAY DELIVER ELECTRONICALLY THE GRANT
NOTICE AND EXERCISE NOTICE CALLED FOR BY SECTION 4.2 TO THE COMPANY OR TO SUCH
THIRD PARTY INVOLVED IN ADMINISTERING THE PLAN AS THE COMPANY MAY DESIGNATE FROM
TIME TO TIME.  SUCH MEANS OF ELECTRONIC DELIVERY MAY INCLUDE BUT DO NOT
NECESSARILY INCLUDE THE DELIVERY OF A LINK TO A COMPANY INTRANET OR THE INTERNET
SITE OF A THIRD PARTY INVOLVED IN ADMINISTERING THE PLAN, THE DELIVERY OF THE
DOCUMENT VIA E-MAIL OR SUCH OTHER MEANS OF ELECTRONIC DELIVERY SPECIFIED BY THE
COMPANY.

 

(B)           CONSENT TO ELECTRONIC DELIVERY.  THE OPTIONEE ACKNOWLEDGES THAT
THE OPTIONEE HAS READ SECTION 13.4(A) OF THIS OPTION AGREEMENT AND CONSENTS TO
THE ELECTRONIC DELIVERY OF THE PLAN DOCUMENTS AND THE DELIVERY OF THE GRANT
NOTICE AND EXERCISE NOTICE, AS DESCRIBED IN SECTION 13.4(A).  THE OPTIONEE
ACKNOWLEDGES THAT HE OR SHE MAY RECEIVE FROM THE COMPANY A PAPER COPY OF ANY
DOCUMENTS DELIVERED ELECTRONICALLY AT NO COST TO THE OPTIONEE BY CONTACTING THE
COMPANY BY TELEPHONE OR IN WRITING.  THE OPTIONEE FURTHER ACKNOWLEDGES THAT THE
OPTIONEE WILL BE PROVIDED WITH A PAPER COPY OF ANY DOCUMENTS IF THE ATTEMPTED
ELECTRONIC DELIVERY OF SUCH DOCUMENTS FAILS.  SIMILARLY, THE OPTIONEE
UNDERSTANDS THAT THE OPTIONEE MUST PROVIDE THE COMPANY OR ANY DESIGNATED THIRD
PARTY ADMINISTRATOR WITH A PAPER COPY OF ANY DOCUMENTS IF THE ATTEMPTED
ELECTRONIC DELIVERY OF SUCH DOCUMENTS FAILS.  THE OPTIONEE MAY REVOKE HIS OR HER
CONSENT TO THE ELECTRONIC DELIVERY OF DOCUMENTS DESCRIBED IN SECTION 13.4(A) OR
MAY CHANGE THE ELECTRONIC MAIL ADDRESS TO WHICH SUCH DOCUMENTS ARE TO BE
DELIVERED (IF OPTIONEE HAS PROVIDED AN ELECTRONIC MAIL ADDRESS) AT ANY TIME BY
NOTIFYING THE COMPANY OF SUCH REVOKED CONSENT OR REVISED E-MAIL ADDRESS BY
TELEPHONE, POSTAL SERVICE OR ELECTRONIC MAIL.  FINALLY, THE OPTIONEE UNDERSTANDS
THAT HE OR SHE IS NOT REQUIRED TO CONSENT TO ELECTRONIC DELIVERY OF DOCUMENTS
DESCRIBED IN SECTION 13.4(A).

 

13.5         INTEGRATED AGREEMENT.  THE NOTICE, THIS OPTION AGREEMENT AND THE
PLAN CONSTITUTE THE ENTIRE UNDERSTANDING AND AGREEMENT OF THE OPTIONEE AND THE
PARTICIPATING COMPANY GROUP WITH RESPECT TO THE SUBJECT MATTER CONTAINED HEREIN
OR THEREIN AND SUPERSEDES ANY PRIOR AGREEMENTS, UNDERSTANDINGS, RESTRICTIONS,
REPRESENTATIONS, OR WARRANTIES AMONG THE OPTIONEE AND THE PARTICIPATING COMPANY
GROUP WITH RESPECT TO SUCH SUBJECT MATTER OTHER THAN THOSE AS SET FORTH OR
PROVIDED FOR HEREIN OR THEREIN.  TO THE EXTENT CONTEMPLATED HEREIN OR THEREIN,
THE PROVISIONS OF THE NOTICE AND THE OPTION AGREEMENT SHALL SURVIVE ANY EXERCISE
OF THE OPTION AND SHALL REMAIN IN FULL FORCE AND EFFECT.

 

13.6         APPLICABLE LAW.  THIS OPTION AGREEMENT SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF DELAWARE AS SUCH LAWS ARE APPLIED TO AGREEMENTS BETWEEN
DELAWARE RESIDENTS ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN THE STATE OF
DELAWARE.

 

13.7         COUNTERPARTS.  THE NOTICE MAY BE EXECUTED IN COUNTERPARTS, EACH OF
WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE
ONE AND THE SAME INSTRUMENT.

 

10

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¨ Incentive Stock Option

Optionee:

 

¨ Nonstatutory Stock Option

 

 

 

Date:

 

 

STOCK OPTION EXERCISE NOTICE

 

AXT, Inc.

Attention: Chief Financial Officer

4281 Technology Drive
Fremont, California 94538

 

Ladies and Gentlemen:

 

1.             Option.  I was granted an option (the “Option”) to purchase
shares of the common stock (the “Shares”) of AXT, Inc. (the “Company”) pursuant
to the Company’s equity incentive plan identified below  (the “Plan”), my Notice
of Grant of Stock Option (the “Notice”) and my Stock Option Agreement (the
“Option Agreement”) as follows:

 

Company Equity Incentive Plan:

 

2007 Equity Incentive Plan

 

 

 

Grant Number:

 

 

 

 

 

Date of Option Grant:

 

 

 

 

 

Number of Option Shares:

 

 

 

 

 

Exercise Price per Share:

 

$

 

2.             Exercise of Option.  I hereby elect to exercise the Option to
purchase the following number of Shares:

 

Total Shares Purchased:

 

 

 

 

 

Total Exercise Price (Total Shares X Price per Share)

 

$

 

3.             Payments.  I enclose payment in full of the total exercise price
for the Shares in the following form(s), as authorized by my Option Agreement:

 

¨ Cash:

 

$

 

 

 

¨ Check:

 

$

 

 

 

¨ Tender of Company Stock:

 

Contact Plan Administrator

 

 

 

¨ Cashless exercise (same-day sale)

 

Contact Plan Administrator

 

4.             Tax Withholding.  Subject to the Option Agreement, I authorize
payroll withholding and otherwise will make adequate provision for the federal,
state, local and foreign tax withholding obligations of the Company, if any, in
connection with the Option.  If I am exercising a Nonstatutory Stock Option, I
enclose payment in full of my withholding taxes, if any, as follows:

 

1

--------------------------------------------------------------------------------

 

(Contact Plan Administrator for amount of tax due.)

 

¨ Cash:

 

$

 

 

 

¨ Check:

 

$

 

 

 

 

¨ Tender of Company Stock:

 

Contact Plan Administrator

 

 

 

¨ Cashless Exercise (same-day sale)

 

Contact Plan Administrator

 

5.             Optionee Information.

 

My address is:

 

 

My Social Security Number is:

 

6.             Notice of Disqualifying Disposition.  If the Option is an
Incentive Stock Option, I agree that I will promptly notify the Chief Financial
Officer of the Company if I transfer any of the Shares within one (1) year from
the date I exercise all or part of the Option or within two (2) years of the
Date of Option Grant.

 

7.             Binding Effect.  I agree that the Shares are being acquired in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, to all of which I hereby expressly assent.  This Agreement
shall inure to the benefit of and be binding upon the my heirs, executors,
administrators, successors and assigns.

 

I understand that I am purchasing the Shares pursuant to the terms of the Plan,
the Notice and my Option Agreement, copies of which I have received and
carefully read and understand.

 

 

Very truly yours,

 

 

 

 

 

 

 

 

(Signature)

 

Receipt of the above is hereby acknowledged.

 

AXT, INC.

 

By:

 

 

 

Title:

 

 

 

Dated:

 

 

 

2

--------------------------------------------------------------------------------

 

AXT, INC.

2007 EQUITY INCENTIVE PLAN

JOINT ESCROW INSTRUCTIONS

(Restricted Stock Award)

 

These Joint Escrow Instructions are entered into as of
                              , 200    .

 

RECITALS

 

AXT, Inc., a Delaware corporation (the “Company”), and
                                         (the “Participant”) desire to appoint
the Secretary of the Company as their agent (the “Agent”) with respect to
certain certificate(s) evidencing shares of the Company’s common stock (the
“Stock”) acquired pursuant to the Notice of Grant of Restricted Stock and
Restricted Stock Agreement attached hereto as Exhibit A (collectively the
“Agreement”).

 

ESCROW INSTRUCTIONS

 

The Company and the Participant hereby authorize and direct the Agent to hold
the documents and certificate(s) delivered to the Agent pursuant to these Escrow
Instructions and to take the following actions with respect thereto, and the
Company and the Participant hereby agree as follows:

 

(A)           THE PARTICIPANT HEREBY DELIVERS AND/OR AGREES TO DELIVER TO THE
AGENT THE PARTICIPANT’S CERTIFICATE(S) EVIDENCING THE STOCK AND AN ASSIGNMENT
SEPARATE FROM CERTIFICATE EXECUTED IN BLANK.  THE PARTICIPANT IRREVOCABLY
AUTHORIZES THE COMPANY TO DEPOSIT WITH THE AGENT ANY CERTIFICATE(S) EVIDENCING
SHARES OF THE COMPANY’S COMMON STOCK ACQUIRED BY THE PARTICIPANT PURSUANT TO THE
AGREEMENT WHICH THE COMPANY MAY FROM TIME TO TIME ISSUE TO THE PARTICIPANT
DURING THE TERM OF THESE ESCROW INSTRUCTIONS.

 

(B)           THE PROVISIONS OF THESE ESCROW INSTRUCTIONS SHALL APPLY FOR SO
LONG AS THE STOCK IS SUBJECT TO THE COMPANY REACQUISITION RIGHT SET FORTH IN THE
AGREEMENT (THE “REACQUISITION RIGHT”).  UPON TERMINATION OF THE COMPANY’S
REACQUISITION RIGHT, THIS ESCROW SHALL TERMINATE.

 

(C)           IN THE EVENT THE COMPANY SHALL ELECT TO EXERCISE ANY OF THE
REACQUISITION RIGHT, THE COMPANY SHALL GIVE TO THE PARTICIPANT AND THE AGENT A
WRITTEN NOTICE (THE “REACQUISITION NOTICE”) WHICH STATES (A) THE TERMS AND
CONDITIONS OF SUCH REACQUISITION, DETERMINED IN ACCORDANCE WITH THE PROVISIONS
OF THE AGREEMENT, AND (B) A TIME AND DATE FOR A CLOSING HEREUNDER AT THE
PRINCIPAL OFFICE OF THE COMPANY.  THE PARTICIPANT AND THE COMPANY HEREBY
IRREVOCABLY AUTHORIZE AND DIRECT THE AGENT TO CLOSE THE TRANSACTION CONTEMPLATED
BY THE REACQUISITION NOTICE IN ACCORDANCE WITH THE TERMS OF THE REACQUISITION
NOTICE.  AT THE CLOSING, THE AGENT SHALL DELIVER THE CERTIFICATE(S) EVIDENCING
THE SHARES OF STOCK TO BE TRANSFERRED TO THE COMPANY.  THE BALANCE OF ANY SUCH
SHARES OF STOCK SHALL BE RETAINED BY THE AGENT AND HELD IN ACCORDANCE WITH THESE
ESCROW INSTRUCTIONS.

 

(D)           THE COMPANY MAY AT ANY TIME RELEASE SOME OR ALL OF THE STOCK FROM
THE PROVISIONS OF THESE ESCROW INSTRUCTIONS BY GIVING WRITTEN NOTICE TO THE
PARTICIPANT AND THE AGENT DIRECTING DELIVERY TO THE PARTICIPANT OF THE SHARES OF
STOCK TO BE RELEASED.  THE PARTICIPANT MAY

 

1

--------------------------------------------------------------------------------

 

REQUEST THAT THE COMPANY DIRECT THE AGENT TO RELEASE FROM THE PROVISIONS OF
THESE ESCROW INSTRUCTIONS THE SHARES OF STOCK WHICH ARE NO LONGER SUBJECT TO THE
COMPANY’S REACQUISITION RIGHT, AND THE COMPANY SHALL GIVE TO THE PARTICIPANT AND
THE AGENT WRITTEN NOTICE DIRECTING DELIVERY TO THE PARTICIPANT OF THE SHARES OF
STOCK TO BE RELEASED.  THE AGENT SHALL USE ITS BEST EFFORTS TO CAUSE THE
CERTIFICATE(S) EVIDENCING THE STOCK HELD BY THE AGENT TO BE DELIVERED TO THE
PARTICIPANT PURSUANT TO SUCH NOTICE WITHIN TEN (10) DAYS FROM RECEIPT OF SUCH
NOTICE.

 

(E)           TO FACILITATE THE EXERCISE OF ANY OF THE REACQUISITION RIGHT, AND
THE PERFORMANCE OF THESE INSTRUCTIONS, THE PARTICIPANT DOES HEREBY CONSTITUTE
AND APPOINT THE AGENT AS THE PARTICIPANT’S ATTORNEY-IN-FACT AND AGENT FOR THE
TERM OF THIS ESCROW TO EXECUTE WITH RESPECT TO SUCH SECURITIES ALL STOCK
CERTIFICATES, STOCK ASSIGNMENTS, OR OTHER INSTRUMENTS WHICH SHALL BE NECESSARY
OR APPROPRIATE TO MAKE SUCH SECURITIES NEGOTIABLE AND COMPLETE ANY TRANSACTION
HEREIN CONTEMPLATED.  THE PARTICIPANT UNDERSTANDS THAT SUCH APPOINTMENT IS
COUPLED WITH AN INTEREST AND IS IRREVOCABLE.  SUBJECT TO THE PROVISIONS OF THESE
ESCROW INSTRUCTIONS, THE PARTICIPANT SHALL EXERCISE ALL RIGHTS AND PRIVILEGES OF
A STOCKHOLDER OF THE COMPANY WHILE THE STOCK IS HELD BY THE AGENT; PROVIDED,
HOWEVER, THE PARTICIPANT MAY NOT SELL, TRANSFER, DISPOSE OF, OR IN ANY MANNER
ENCUMBER ANY SHARES OF THE STOCK WHILE SUCH SHARES OF STOCK ARE HELD BY AGENT
HEREUNDER.

 

(F)            IF AT THE TIME OF TERMINATION OF THIS ESCROW, THE AGENT SHALL
HAVE IN ITS POSSESSION ANY DOCUMENTS, SECURITIES, OR OTHER PROPERTY BELONGING TO
THE PARTICIPANT, THE AGENT SHALL DELIVER ALL OF SAME TO THE PARTICIPANT AND
SHALL BE DISCHARGED OF ALL FURTHER OBLIGATIONS HEREUNDER.

 

(G)           THE AGENT’S DUTIES HEREUNDER MAY BE ALTERED, AMENDED, MODIFIED, OR
REVOKED ONLY BY A WRITING SIGNED BY THE COMPANY AND THE PARTICIPANT, AND
APPROVED BY THE AGENT.

 

(H)           THE AGENT SHALL NOT BE PERSONALLY LIABLE FOR ANY ACT THE AGENT MAY
DO OR OMIT TO DO HEREUNDER AS ESCROW AGENT, AGENT FOR THE COMPANY, OR ATTORNEY
IN FACT FOR THE PARTICIPANT WHILE ACTING IN GOOD FAITH AND IN THE EXERCISE OF
THE AGENT’S OWN GOOD JUDGMENT, AND ANY ACT DONE OR OMITTED BY THE AGENT PURSUANT
TO THE ADVICE OF THE AGENT’S OWN ATTORNEYS SHALL BE CONCLUSIVE EVIDENCE OF SUCH
GOOD FAITH.

 

(I)            THE AGENT IS HEREBY EXPRESSLY AUTHORIZED TO DISREGARD ANY AND ALL
WARNINGS BY ANY OF THE PARTIES HERETO OR BY ANY OTHER PERSON, FIRM, CORPORATION,
OR OTHER ENTITY, EXCEPTING ONLY ORDERS OR PROCESS OF COURTS OF LAW, AND IS
HEREBY EXPRESSLY AUTHORIZED TO COMPLY WITH AND OBEY ORDERS, JUDGMENTS, OR
DECREES OF ANY COURT.  IN THE EVENT THE AGENT OBEYS OR COMPLIES WITH ANY SUCH
ORDER, JUDGMENT, OR DECREE OF ANY COURT, THE AGENT SHALL NOT BE LIABLE TO ANY OF
THE PARTIES HERETO OR TO ANY OTHER PERSON, FIRM, CORPORATION, OR OTHER ENTITY BY
REASON OF SUCH COMPLIANCE NOTWITHSTANDING THAT ANY SUCH ORDER, JUDGMENT, OR
DECREE SHALL BE SUBSEQUENTLY REVERSED, MODIFIED, ANNULLED, SET ASIDE, VACATED,
OR FOUND TO HAVE BEEN ENTERED WITHOUT JURISDICTION.

 

(J)            THE AGENT SHALL NOT BE LIABLE IN ANY RESPECT ON ACCOUNT OF THE
IDENTITY, AUTHORITIES, OR RIGHTS OF THE PARTIES EXECUTING OR DELIVERING OR
PURPORTING TO EXECUTE OR DELIVER ANY AGREEMENTS OR DOCUMENTS CALLED FOR BY THE
AGREEMENT OR ANY DOCUMENTS OR PAPERS DEPOSITED OR CALLED FOR HEREUNDER.

 

(K)           THE AGENT SHALL NOT BE LIABLE FOR THE BARRING OF ANY RIGHTS UNDER
THE STATUTE OF LIMITATIONS WITH RESPECT TO THESE ESCROW INSTRUCTIONS OR ANY
DOCUMENTS DEPOSITED WITH THE AGENT.

 

2

--------------------------------------------------------------------------------

 

(L)            BY SIGNING THESE ESCROW INSTRUCTIONS, THE AGENT BECOMES A PARTY
HERETO ONLY FOR THE PURPOSE OF SAID ESCROW INSTRUCTIONS.  THE AGENT SHALL NOT BE
CONSIDERED A PARTY TO THE AGREEMENT OR TO ANY DOCUMENTS OR AGREEMENTS CALLED FOR
BY THE AGREEMENT.

 

(M)          THE AGENT MAY RESIGN FROM ITS DUTIES HEREUNDER AT ANY TIME UPON
WRITTEN NOTICE TO THE COMPANY AND THE PARTICIPANT AND DELIVERY OF ALL DOCUMENTS
AND CERTIFICATES HELD IN THIS ESCROW TO THE SUCCESSOR ESCROW AGENT.  IF A
SUCCESSOR ESCROW AGENT HAS NOT BEEN APPOINTED WITHIN THIRTY (30) DAYS, THE AGENT
MAY DELIVER ALL SUCH DOCUMENTS AND CERTIFICATES TO THE COMPANY, AT WHICH TIME,
ALL FURTHER RESPONSIBILITIES AND DUTIES OF THE AGENT SHALL CEASE.

 

(N)           IF PRIOR TO THE TERMINATION OF THESE ESCROW INSTRUCTIONS THE AGENT
SHALL RESIGN OR OTHERWISE CEASE TO OPERATE AS ESCROW AGENT, A SUCCESSOR ESCROW
AGENT SHALL BE DESIGNATED BY THE BOARD OF DIRECTORS OF THE COMPANY.  THE BOARD
OF DIRECTORS OF THE COMPANY MAY, AT ANY TIME, SUBSTITUTE ANOTHER PARTY IN THE
AGENT’S PLACE AS ESCROW AGENT HEREUNDER, AND THE PARTICIPANT HEREBY EXPRESSLY
ACCEPTS SUCH SUBSTITUTION.

 

(O)           ALL NOTICES AND OTHER COMMUNICATIONS HEREUNDER SHALL BE IN WRITING
AND SHALL BE DEEMED GIVEN IF DELIVERED PERSONALLY OR MAILED BY REGISTERED OR
CERTIFIED MAIL (RETURN RECEIPT REQUESTED) TO THE PARTIES AT THE FOLLOWING
ADDRESSES (OR AT SUCH OTHER ADDRESS FOR A PARTY AS SHALL BE SPECIFIED BY LIKE
NOTICE):

 

(1)           IF TO THE COMPANY, TO:

 

AXT, Inc.

4281 Technology Drive

Fremont, California 94538

Attn:  Chief Financial Officer

 

(2)           IF TO THE PARTICIPANT, TO THE ADDRESS SET FORTH BELOW THE
PARTICIPANT’S SIGNATURE BELOW.

 

(3)           IF TO THE AGENT, TO:

 

Corporate Secretary

AXT, Inc.

4281 Technology Drive

Fremont, California 94538

 

(P)           THE PROVISIONS OF THESE ESCROW INSTRUCTIONS SHALL INURE TO THE
BENEFIT OF AND BE BINDING UPON THE PARTIES HERETO AND THEIR RESPECTIVE HEIRS,
EXECUTORS, ADMINISTRATORS, SUCCESSORS AND ASSIGNS.

 

(Q)           THESE ESCROW INSTRUCTIONS SHALL BE GOVERNED, TO THE FULLEST EXTENT
POSSIBLE, BY THE LAWS CONTAINED IN THE CALIFORNIA COMMERCIAL CODE, INCLUDING ANY
REGULATIONS OR JUDICIAL INTERPRETATIONS WITH RESPECT THERETO.  TO THE EXTENT
THAT ANY MATTER IS NOT GOVERNED BY THE LAWS CONTAINED IN THE CALIFORNIA
COMMERCIAL CODE, SUCH MATTER SHALL BE GOVERNED BY THE LAWS OF THE STATE OF THE
PARTICIPANT’S RESIDENCE AS SUCH LAWS ARE APPLIED TO AGREEMENTS BETWEEN RESIDENTS
OF SUCH STATE ENTERED INTO AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.

 

3

--------------------------------------------------------------------------------

 

(R)            THE TERMS AND CONDITIONS OF THESE ESCROW INSTRUCTIONS, INCLUDING
ALL TERMS AND CONDITIONS INCORPORATED BY REFERENCE HEREIN, SHALL SURVIVE THE
EXERCISE OF THE OPTION GRANTED PURSUANT TO THE AGREEMENT AND SHALL CONTINUE IN
FULL FORCE AND EFFECT THEREAFTER.

 

(S)         THESE ESCROW INSTRUCTIONS AND THE AGREEMENT CONTAIN THE ENTIRE
UNDERSTANDING OF THE COMPANY AND THE PARTICIPANT WITH RESPECT TO THE SUBJECT
MATTER CONTAINED HEREIN, AND THERE ARE NO OTHER CONTRACTS, AGREEMENTS,
UNDERSTANDINGS, REPRESENTATIONS, WARRANTIES, OR COVENANTS WITH RESPECT TO THE
SUBJECT MATTER CONTAINED HEREIN.

 

IN WITNESS WHEREOF, the Company and the Participant have executed these Escrow
Instructions as of the date first above written.

 

 

AXT, INC.

 

 

 

 

 

By:

 

 

 

 

Title:

 

 

 

 

 

 

PARTICIPANT:

 

 

 

 

 

 

 

Signature

 

 

 

 

 

Address

ESCROW AGENT:

 

 

 

 

 

 

 

By

 

 

 

 

4

--------------------------------------------------------------------------------

 

ASSIGNMENT SEPARATE FROM CERTIFICATE

 

FOR VALUE RECEIVED the undersigned does hereby sell, assign and transfer unto

 

(                          ) shares of the                              Capital
Stock of AXT, Inc. standing in the undersigned’s name on the books of said
corporation represented by Certificate No.                             herewith
and does hereby irrevocably constitute and appoint
                                                                 Attorney to
transfer the said stock on the books of said corporation with full power of
substitution in the premises.

 

 

Dated:

 

 

 

 

Signature

 

 

 

 

 

Print Name

 

Instructions:  Please do not fill in any blanks other than the signature line. 
The purpose of this assignment is to enable the Company to exercise its
Reacquisition Right set forth in the Agreement without requiring additional
signatures on the part of the Participant.

 

--------------------------------------------------------------------------------

 

 

AXT, INC.

NOTICE OF GRANT OF RESTRICTED STOCK AWARD

 

                                          (the “Participant”) has been granted
an award (the “Award”) pursuant to the AXT, Inc. 2007 Equity Incentive Plan (the
“Plan”) of certain shares of Common Stock (the “Shares”) of AXT, Inc., as
follows:

 

Grant Number:

 

 

 

 

 

Date of Grant:

 

 

 

 

 

Total Number of Shares:

 

 

 

 

 

Initial Vesting Date:

 

The one-year anniversary of the Date of Grant.

 

 

 

Vested Shares:

 

Except as provided in the Restricted Stock Agreement, the number of Vested
Shares (disregarding any resulting fractional share) as of any date is
determined by multiplying the Total Number of Shares by the “Vested Ratio”
determined as of such date as follows:

 

 

 

 

 

 

 

Vested Ratio

 

 

Prior to Initial Vesting Date

 

0%

 

 

 

 

 

 

 

On Initial Vesting Date, provided the Participant’s Service has not terminated
prior to such date

 

33%

 

 

 

 

 

 

 

On each subsequent anniversary of the Initial Vesting Date, provided the
Participant’s Service has not terminated prior to such date

 

33%

 

By their signatures below, the Company and the Participant agree that the Award
is governed by this Grant Notice and by the provisions of the Plan and the
Restricted Stock Agreement attached to and made a part of this document.  The
Participant acknowledges receipt of a copy of the Plan and the Restricted Stock
Agreement, and represents that the Participant has read and is familiar with the
provisions of the Plan, this Grant Notice and the Restricted Stock Agreement,
and hereby accepts the Award subject to all applicable terms and conditions.

 

AXT, INC.

 

PARTICIPANT

 

 

 

 

 

 

By:

 

 

 

 

 

Signature

Its:

 

 

 

 

 

Date

 

 

 

Address

 

Address

 

 

 

 

ATTACHMENTS:               AXT, Inc. 2007 Equity Incentive Plan, Restricted
Stock Agreement; Joint Escrow Instructions; Assignment Separate from Certificate

 

--------------------------------------------------------------------------------

 

AXT, INC.

 

TIME SENSITIVE MATERIAL

YOUR IMMEDIATE ATTENTION IS REQUIRED

 

TO:

[Employee Name]

 

 

FROM:

[Company Officer]

 

 

DATE:

 

 

 

RE:

Section 83(b) Election in Connection with Your Receipt of a Restricted Stock
Award

 

 

YOUR RESTRICTED STOCK AWARD GRANT DATE:

 

 

SEC. 83(b) ELECTION POSTMARK DEADLINE(1):

 

 

On the grant date above, you acquired unvested shares of the company’s stock
pursuant to a restricted stock award.  The income tax consequences of your
receipt of unvested shares of stock and the subsequent vesting of those shares
are quite complex, and we strongly urge you to consult with a tax or financial
advisor knowledgeable regarding your financial circumstances and restricted
stock award.

 

As described in the attached memorandum prepared by our legal counsel, you may
derive significant tax benefits by filing with the Internal Revenue Service an
election under Section 83(b) of the Internal Revenue Code (a
“Section 83(b) Election”).  However, if you wish to make a
Section 83(b) Election, it must be filed with the IRS no later than 30 days
after the date on which you acquired your restricted stock.  THEREFORE, YOUR
PROMPT ATTENTION TO THIS MATTER IS REQUIRED.

 

Please review the attached memorandum.  If you decide to file a
Section 83(b) Election, a sample form of Section 83(b) Election is enclosed for
your convenience.  However, as the taxpayer, you are solely responsible for the
timely filing of your Section 83(b) Election.  Please follow the filing
instructions contained in the memorandum.

 

The attached memorandum is intended only as a general guide.  Neither the
company nor our legal counsel is providing you with tax or other legal advice. 
We strongly recommend that you consult with your personal tax or financial
advisor to determine whether filing a Section 83(b) Election is appropriate for
you.

 

Enclosures

 

--------------------------------------------------------------------------------

(1) The date 30 days after the date of grant of your restricted stock award.  If
the deadline falls on Saturday, Sunday or a legal holiday, the filing will be
timely if the U.S. mail postmark is on the next day that is not a Saturday,
Sunday or a legal holiday.

 

--------------------------------------------------------------------------------

 

[g358622kh09i001.gif]

 

MEMORANDUM

 

TO:

AXT, Inc.

 

 

FROM:

DLA Piper US LLP

 

 

DATE:

June 12, 2007

 

 

RE:

Election under Section 83(b) of the Internal Revenue Code upon Receipt of
Unvested Shares of Stock

 

 

As counsel to AXT, Inc. (the “Company”), we have prepared this memorandum to
assist you to alert participants who receive awards of restricted stock that are
subject to the Company Reacquisition Right of the potential application of an
election under Section 83(b) (a “Section 83(b) Election”) of the Internal
Revenue Code of 1986.  A participant who wishes to make a Section 83(b) Election
must file the election with the Internal Revenue Service (the “IRS”) no later
than thirty (30) days after the date on which the unvested shares were
acquired.  ACCORDINGLY, PROMPT ATTENTION TO THIS MATTER IS REQUIRED.

 

This information is intended to be a general summary of the issues involved for
federal income tax purposes as of the date set forth above.  A participant’s
particular circumstances may result in consequences different from those
described.  In addition, the application of state, local, and foreign tax
consequences is beyond the scope of this memorandum.  Participants are advised,
therefore, to consult their own tax advisor regarding the tax consequences to
the participant of the acquisition and vesting of shares of restricted stock and
subsequent sale of the stock.

 

A participant who acquires unvested shares of stock (“Unvested Shares”) is
subject to the Company Reacquisition Right (the “Reacquisition Right”) set forth
in the participant’s restricted stock agreement.  The Reacquisition Right grants
the Company the right to automatically reacquire without any monetary payment to
the participant (i.e., the participant will forfeit) any shares remaining
unvested on the participant’s termination of service with the Company.  By
filing a Section 83(b) Election with the IRS no later than thirty (30) days
after the acquisition of the Unvested Shares, the participant may change the
amount of ordinary income recognized and the characterization of any gain
recognized on a subsequent sale of the Unvested Shares.

 

1.             Section 83 and Treatment of Restricted Stock.  If a participant
acquires, without payment of any purchase price, unvested shares of stock of his
employer that is subject to a Reacquisition Right, then the fair market value of
the stock on the date or dates the

 

1

--------------------------------------------------------------------------------

 

Reacquisition Right lapses (i.e., when the shares vest) is includable in the
gross income of the participant in the year such Reacquisition Right lapses.

 

To avoid the potential characterization of post-acquisition appreciation as
ordinary income and to defer the payment of tax on such appreciation until the
stock is sold, the participant may file a Section 83(b) Election with the IRS no
later than 30 days after the date on which the restricted stock is transferred
to the participant (i.e., the date on which the award is granted).  The
Section 83(b) Election details the terms of the transaction, and, by making the
election, the participant agrees to report as ordinary income in the year of
acquisition the excess, if any, of the fair market value of the Unvested Shares
on the date the participant acquires them (without regard to the Reacquisition
Right) over the purchase price, if any, actually paid for the Unvested Shares.

 

A Section 83(b) Election will result in immediate recognition of ordinary income
equal to the fair market value of the Unvested Shares as of the date on which
they are awarded to you.  Although the Section 83(b) Election states what the
participant believes to be the fair market value of the stock, neither the
participant’s nor the Company’s determination of the stock’s fair market value
is binding on the taxing authorities, who might assert that the stock had a
higher fair market value on the grant date than stated on the
Section 83(b) Election.  By filing a Section 83(b) Election, any gain recognized
by the participant on the stock attributable to post-exercise appreciation will
be treated as a capital gain and will only be taxed at such time as the
participant sells the stock.

 

2.             Making the Section 83(b) Election.

 

(a)           Federal.  To make a Section 83(b) Election, the participant must
file the election with the IRS Service Center where the participant files his or
her Form 1040 return no later than thirty (30) days after the date on which the
participant acquires Unvested Shares.  A sample form of Section 83(b) Election
is attached to this memorandum.  To complete the form, the participant should:

 

·                                          Enter the participant’s name, address
and Social Security Number in Item 1.

 

·                                          Enter the number of Unvested Shares
acquired in Item 2.

 

·                                          Enter the date and calendar year of
the acquisition of Unvested Shares in Item 3.

 

·                                          Enter the total fair market value of
the Unvested Shares as of the date of the award, the number of Unvested Shares
acquired and their fair market value per share in Item 5.

 

·                                          Enter the total purchase price, if
any, actually paid for the Unvested Shares the number of Unvested Shares
purchased and the purchase price per share

 

2

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in Item 6.  If you did not pay cash consideration, then the amount paid will be
zero.

 

·                                          Sign and date the form.

 

The participant should mail the fully completed, signed and dated original and
one photocopy of the Section 83(b) Election to the IRS office where the
participant files his or her federal income tax return.  We recommend that the
Section 83(b) Election be sent by certified mail, return receipt requested and
that the letter transmitting the election request that the IRS acknowledge
receipt of the election by signing and dating or received-stamping the enclosed
photocopy of the Section 83(b) Election.  A self-addressed, stamped envelope
must be enclosed for return of the acknowledgment copy.

 

To be timely filed, the Section 83(b) Election must be postmarked by the U.S.
Postal Service no later than 30 days after the date on which the participant
acquired the Unvested Shares.  This is an absolute deadline.  There is no grace
period, and no extension is available.  If the deadline falls on Saturday,
Sunday or a legal holiday, the filing will be timely if the
Section 83(b) Election is postmarked on the next day that is not a Saturday,
Sunday or a legal holiday.

 

If the participant files the Section 83(b) Election, he or she must send a
photocopy of the election to the Company for its records.  The participant
should also retain a copy of the Section 83(b) Election.

 

Finally, the participant must file an additional copy of the
section 83(b) Election with his or her federal income tax return for the taxable
year in which the shares were purchased.

 

(b)           State.  Participants should consult with their personal tax or
financial advisor to determine the state and local tax consequences with respect
to the acquisition of Unvested Shares.

 

3.             Consultation with Tax Advisors.  DLA Piper US LLP is legal
counsel to the Company and not to any individual affiliated with the Company. 
This memorandum is intended only as a general guide.  It must not be construed
as providing tax or other legal advice.  The tax consequences of restricted
stock awards are complex and subject to change.  In addition, the circumstances
of a particular participant may result in some variation of the above-described
rules, and the application of state, local, or foreign taxes not described in
this memorandum may affect a participant’s situation.  Accordingly, participants
are urged to consult with their own personal tax or financial advisor prior to
acquiring any restricted stock and prior to the sale of any such shares.

 

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SAMPLE

 

Internal Revenue Service

 

 

[IRS Service Center

where Form 1040 is Filed]

 

Re:          Section 83(b) Election

 

Dear Sir or Madam:

 

The following information is submitted pursuant to section 1.83-2 of the
Treasury Regulations in connection with this election by the undersigned under
section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

1.             The name, address and taxpayer identification number of the
taxpayer are:

 

Name:

 

 

 

Address:

 

 

 

 

 

 

 

 

 

Social Security Number:

 

 

 

2.                                       The following is a description of each
item of property with respect to which the election is made:

 

shares of common stock of AXT, Inc. (the “Shares”), acquired from AXT, Inc. (the
“Company”).

 

3.                                       The property was transferred to the
undersigned on:

 

Restricted stock grant date:

 

 

 

The taxable year for which the election is made is:

 

Calendar Year

 

4.                                       The nature of the restriction to which
the property is subject:

 

The Shares are subject to reacquisition by the Company upon the occurrence of
certain events.  This reacquisition right lapses with regard to a portion of the
Shares based upon the continued performance of services by the taxpayer over
time.

 

1

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5.                                       The following is the fair market value
at the time of transfer (determined without regard to any restriction other than
a restriction which by its terms will never lapse) of each property with respect
to which the election is made:

 

$                                     (                           Shares at
$                     per share).

 

The property was transferred to the taxpayer pursuant to the grant of a
restricted stock award.

 

6.                                       The following is the amount paid for
the property:

 

None.

 

7.                                       A copy of this election has been
furnished to the Company, the corporation for which the services were performed
by the undersigned.

 

Please acknowledge receipt of this election by date or received-stamping the
enclosed copy of this letter and returning it to the undersigned.  A
self-addressed stamped envelope is provided for your convenience.

 

 

Very truly yours,

 

 

 

 

Date:

 

 

 

Enclosures

cc:  AXT, Inc.

 

2

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SAMPLE

 

 

Date:

 

 

 

 

CERTIFIED MAIL

RETURN RECEIPT REQUESTED

 

Internal Revenue Service

 

 

[IRS Service Center

where Form 1040 is Filed]

 

Re:          Section 83(b) Election

Name of Taxpayer:

SSN:

 

Dear Sir or Madam:

 

Enclosed please find an original and one copy of an election under
section 83(b) of the Internal Revenue Code of 1986, as amended.

 

Please acknowledge receipt of the enclosed by date- or receive-stamping the
enclosed copy of the election and returning it to the undersigned.  A
self-addressed stamped envelope is enclosed for your convenience.

 

Very truly yours,

 

 

 

 

 

 

Enclosures

 

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ACKNOWLEDGMENT OF RECEIPT

OF SECTION 83(b) MATERIALS

 

The undersigned participant (“Participant”) hereby acknowledges receipt of a
sample form for making an election pursuant to section 83(b) of the Internal
Revenue Code of 1986, as amended, and a memorandum regarding such election in
connection with the Participant’s receipt of a restricted stock award under the
AXT, Inc. 2007 Equity Incentive Plan.

 

 

Dated:

 

 

 

 

 

Signature

 

 

 

 

 

 

 

 

 

 

 

Name printed

 

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